Tariffs

I question whether the Secretaries of the Treasury and of Commerce know what they're talking about. Much of this information I gleaned from a college Economics textbook that I picked up at a used bookstore for about $3. I’ll be pleased to admit where I am wrong. By the end of this essay you will know why Treasury and Commerce are at odds.

 The difference between imports and exports doesn’t rip anybody off. What is a deficit in the trading of goods internationally? The nation of Colombia has a surplus with America because we import so many flowers for Valentine’s Day. America has a deficit in goods with Canada because we import so much oil, hydroelectric power and lumber. Does that mean Canada is ripping us off? NO! Does it mean that any part of our $37 trillion national debt has been incurred because of trade deficits in goods with dozens of important countries around the world? NO!

 Why not, if we are buying more goods from Canada than Canada is buying from us? Does that mean that the nation is sending actual money to Canada that America has to borrow from somewhere? NO! The press and the Secretaries don’t mention that. There is also trade in services. America has a big surplus in services with many, if not most nations.

 Higher Education. Chinese students come here by the hundreds of thousands (or did until the first trade war) to our most expensive elite universities to study subjects such as medicine, physics, computer science and everything else. Most of them pay the “sticker price.” On the other hand, some Americans go to Chinese universities to study Chinese. They do not go to China for the purpose of learning science or much else. Chinese universities are greatly inferior to ours and this applies to most of the rest of the world. We have a huge surplus in provision of higher education.

 What about legal services? American law firms have offices all around the world. Do law firms from other countries have offices in North Carolina? I've never seen or heard of one. There might be one or two. What about entertainment and technology? We have huge surplus there. But that is not all.

 Have you ever heard of foreign direct investment (FDI)? Companies all over the world want to buy land and buildings in America. They pay good money for it to American owners who want to take advantage. When a Japanese, Swiss, or Danish company wants to invest in a big manufacturing facility here, everyone wants an invitation to the groundbreaking and the ribbon cutting. It must be a wonderful thing. Governor Roy Cooper was a master at taking credit for such events.

Foreign direct investment in America doesn't just apply to corporations. Lots of foreigners want to have a second home here. They like lower taxes, or freedom of speech or less bribery. Many invest and come for safety in case their home country is in turmoil, politically or economically. America is a great place to keep your money for the same reason. The US dollar is the reserve currency for most of the world. These factors add up to make any ________ a deficit in trade an insignificant factor.

What about Wednesday’s reciprocal tariffs? Aren't they fair? They may be fair, but they are a ridiculous solution. Did you study in high school the Triangular Trade of the Colonial era? England would send cheap manufactured goods to Africa. African slave traders would put African slaves on ships to bring to the Americas to work sugar and cotton plantations. The Americas would then send rum and cotton from the Americas to England.

There is no economic requirement that trade be balanced between any two countries. The flow of money, goods and services is a worldwide balance. America could have a significant deficit with one country which has a significant deficit with a second country that has a services deficit with America. These surpluses and deficits generally balance out in any given time. If not balanced the effect is that the value of the currency of that nation either increases or decreases in relation to other currencies. In some cases, there is a transfer of gold held by reserve banks by moving some gold bars from one part of the storage room to another.

I'll be glad to send my old textbook on Economics to Secretaries, Ludnick and Berrent, if they will promise to refresh their recollection. I promised to the outside to explain why Commerce and Treasury are feuding. treasury is looking for more tax money (paid as a hidden national sales tax on consumers). But Commerce is looking for job protection for Americans. But these two goals are contradictory. If the tariffs work to protect American workers, they won’t raise much money.

I dictated this on April 1st. I am revising it on April 2nd with this question: Will this be a day of Liberation for Recession? I can't think of a single thing this day will liberate us from. I certainly can see the prospect of an American economic recession. When America goes into recession it bleeds into the rest of the world unevenly.

Let's get real.