‘America’s Tariff Trouble’

Chinese COSCO Freighter (Fletcher6)

Received the following in an email several hours ago:

America’s Tariff Trouble

By Jeff D. Opdyke, Editor of Total Wealth Insider

New Tariffs on Foreign-Made Goods

Tariffs might seem a viable way to create jobs, as Trump believes, but they are an inefficient job generator because of the knock-on effects they have.

First, the facts, as laid out by Trump and his team:

Trump is looking to impose a 10% across-the-board tariff on any foreign product coming into America.

He wants to slap tariffs of as much as 45% on Chinese products.

He wants 35% tariffs on Mexican-made products coming into America.

This strategy is raw protectionism that, according to Trumponomics, will encourage companies to relocate their production plants to America, thus creating jobs … and encourage Americans to buy American-made products, which are priced more competitively when foreign goods carry the cost burden of tariffs.

Alas, not so much…

Start wrapping all these foreign-made goods in tariffs, however, and life will change for the worse for American consumers, American business and their workers, and for the U.S. economy and stock market.

Squeezing the American Consumer

At the end of the day, tariffs are a tax on consumers. Period.

If a Trump tariff adds 35% to the cost of a Mexican-made TV — or if it adds 45% to a Chinese-made TV or 10% to a Korean TV — then the cost of that TV will rise by a similar amount in Wal-Mart and Best Buy. You and I cover that cost. (And for a variety of reasons, it’s not like LG or Sony or Samsung are going to rush to build TV production plants in America, because that would require access to electronic parts that are all made overseas, which necessitates paying the tariffs and shipping costs to import those goods, leading to high-priced TVs here at home … and, for similar reasons, it’s not like those parts-makers are going to start opening plants all over America. Taken to the extreme, we end up in a closed economy, in which everything we want is produced locally, including all the component inputs, and that’s just illogical, impractical, highly inflationary and only a step or two removed from a Soviet-style economy.)

With the new tariffs, we end up with inflation that causes the Federal Reserve to raise interest rates. Both of those realities — inflation and higher rates — sap the consumer’s ability to spend, which cuts off the most important fuel in our consumer-oriented economy.

It also breeds retaliation as Mexico, China, Canada and others impose tariffs on American products. That hits U.S. multinationals, shrinking their sales and profits, which leads Wall Street to demand layoffs and cost cutting. Stock prices fall, and the stock market retreats.

Trade wars have causalities and tariffs increase prices and can cause inflation.

Various nations will not like the policies that Donald Trump has advocated.

Trade wars have been listed as part of the Twelve ‘grey swan’ events to watch for in 2017?

Trade disputes are likely to be a factor that will lead to World War III.

The idea that we could be looking at a coming trade war is not a new one. Part of the reason for World War II was essentially a trade war, that turned into an actual war between the USA and Japan.

Over thirty years ago, Gene Hogberg of the old Worldwide Church of God wrote the following:

Prepare for Trade War

THE Free World’s 40-year period of unprecedented prosperity may soon come to a crashing halt. Support in the United States — the West’s leading trading nation — for maintaining free trade is crumbling fast.

Instead, there reverberate in the halls of Congress warnings to trade partners to open markets or face the retaliation of heightened tariffs and quotas. …

Mr. Reagan is painfully aware of where unbridled protectionism could lead. In recently rejecting a protectionist plea from one industry, the President evoked memories of the Depression — era Smoot-Hawley Tariff Act. “Some of us remember the 1930s, when the most destructive trade bill in history, the Smoot-Hawley Tariff Act, helped plunge this nation and the world into a decade of depression and despair,” he told a radio audience. “From now on, if the ghost of Smoot-Hawley rears its ugly head in Congress, if Congress creates a depression — making bill, I’ll fight it.”

But the ghost is rising, and support for the President’s trade policy is waning, even from those within his own party.

What Smoot-Hawley Did

Just how disastrous was the Smoot-Hawley bill? The devastating role it played in the Great Depression was explained in the September 5 issue of The Wall Street Journal, in an article written by its editor, Robert L. Bartley. “The stock-market crash of 1929 came in the midst of debate in Congress over the tariff,” wrote Mr. Bartley. “It had spent the year adding item after item to the protection list. In mid — 1930 the Smoot-Hawley Bill became law, with the highest tariffs in the nation’s history.” What might have been an ordinary correction, continued Mr. Bartley, “turned into the Great Depression…. As the international accounts closed down, the world economy choked.” …

Dangerous Security Changes

Other experts warn that American political leaders — responding to calls for immediate competitive relief from their constituents — may be ignoring another lesson of the Great Depression: that the severe contraction of world trade gave added impetus to imperialist surges in Asia and Europe, specifically Japan and Germany.

Since 1945 Japan has chosen the mercantile road as its path to power, prestige and national restoration. Germany, specifically the Federal Republic of Germany, is heavily dependent upon world trade, exporting a full third of its manufactured goods.

Access to the U.S. market is central to the economies of Japan and the other nations of the Pacific Basin, writes National Review executive editor John McLaughlin, “and hence perhaps to their stability.” If protectionism takes hold, what would happen to Japan and to Western Europe, whose economic heart is in Germany? Protectionism, leading to a full-blown trade war, would likely break the extensive joint defense relationships between the U.S. and its primary World War II foes, now allies for the past 40 years.

Americans should then prepare to witness the emergence of a nuclear — armed Japan as well as a nuclear — armed united Europe with Germany at its core. It’s doubtful whether the American public and its elected representatives have thought out the likely end results of actions now under way.

Former Senate majority leader Howard H. Baker Jr. sounded this warning: “The disastrous Smoot-Hawley Tariff Act of 1930 was rushed through Congress… and it took 14 years and a world war to straighten out the mess.” (Hogberg G. Prepare for Trade War! Plain Truth, January 1986)

Back in 1971, the late Herbert W. Armstrong wrote the following:

Trade War Looming to Trigger World War III?

Either we start raising high tariff barriers against other countries, starting a TRADE WAR which in time will trigger the nuclear war that will DESTROY US – or, American workers are going to have to MEET the competition of the workers in other countries , by lowering living standards. Obviously American workers are not going to choose to do the latter. And if they don’t – well, THE HANDWRITING IS ON OUR NATIONAL WALL. (Armstrong HW. Trade War Looming to Trigger World War III? Plain Truth, 1971)

And while his basic impression of timing was off as was Gene Hogberg’s, it is correct that trade issues will be a factor that will trigger WWIII. A war that will be against the USA, Canada, and UK by a power that will reorganize (Revelation 17:12-13) and then rise in Europe. A Europe that is angry at the UK for Brexit and one that is mad at the USA for a host of reasons (including decisions of its current President Obama and statements by its President-elect Donald Trump).

There is a cost to trade wars and tariffs. Those who think otherwise are fooling themselves.

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