The Tariff Bomb

 Financial FAQs

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Now that Elon Musk, the world’s richest man, is doing all he can to elect Donald Trump the next American President with his $Billions; because there are too many regulations (read environmental), which means he might never otherwise get to Mars; it’s time to ask what a Trumpian economy would look like if Elon succeeds in his quest.

It would be a big win for wealthy oligarchs such as Musk.

Trump’s biggest lie is that a 20 percent tariff on almost all imports is a tax paid by the exporter, not American users of those imports. Common sense tells us that we can only tax foreign products after they arrive on our soil, not in the country of origin.

Any tax on imports arriving in the U.S. is therefore an American tax, so that the product’s final price charged to American consumers includes the import tax added to whatever the exporter is charging for said product, a price increase.

The results would do horrendous damage to our economy just out of the worst pandemic in 100 years that killed one million Americans. In fact, it would precipitate another recession because past history has shown Americans the damage wrought by high inflation on the working classes that pay taxes on a larger proportion of their income, than the one percent of earners and corporations.

A recent report by the Peterson Institute for International Economics, a serious non-partisan think tank, asserted that the labor shortages and higher tariffs on imports Trump proposes would return inflation to pandemic levels of 6 to 9 percent, not to mention the damage to employment and the USDollar if Trump exceeded in deporting immigrants, or hamstringing the Federal Reserve in its inflation fight.

“We find that all the policies examined could cause a loss of production and employment, especially in trade-exposed sectors such as manufacturing and agriculture.”

CPI consumer inflation rate reached the astronomical height of 14.6 percent during the 1981 and 1982 recessions, 5.5 percent during the Great Recession (2008-09), and rose as high as 9 percent in 2022 during the COVID-19 pandemic.

Trump’s tariff lie exposes an even larger lie beneath it. He can only pay for the tax cuts, such as were enacted in his Tax Cuts and Lobs Act (TCLA) on wealthy individuals and corporations, with a consumption tax that all Americans pay.

It lets corporations and the wealthiest off the hook on paying for the necessary programs that fund Medicare, Medicaid, and defense, which is what the TCLA did that is about to expire and was the only major legislation during his four years in office.

A Brookings Institute analysis of his TCLA was even more damaging, and he intends to renew it if elected: “The new law will reduce federal revenues by significant amounts, even after allowing for the impact on economic growth. It will make the distribution of after-tax income more unequal. If it is not financed with concurrent spending cuts or other tax increases, TCJA will raise federal debt and impose burdens on future generations.”

So, it’s also time to ask exactly what policies have made the U.S. economy the stronger than any other developed countries since the COVID-19 pandemic. Is it by Republicans or Democrats, since it’s become and election issue?

Former president Obama claimed in a recent Detroit campaign speech that it was his eight years—2008-2016, during the recovery from the Great Recession—that his administration was responsible for creating what became almost 11 years of positive GDP growth, longer even than President Clinton’s record recovery streak of 10 years.

That recovery continued into the Trump administration from 2016-2020 and the onset of the COVID-19 pandemic that briefly stopped all growth, but recovered quickly due to the government aid that flooded into the economy (before the supply-chains recovered) and inflation skyrocketed.

The Fed has finally tamed inflation and even more importantly, job growth returned to pre-pandemic unemployment levels. And that was due to President Biden’s Bidenomics policies that are modernizing the American economy for future generations.

Yet Trump has said climate change is hoax; so the increasingly frequent hurricanes and tornadoes must also be illusions. He has also said that he wants to eviscerate many of President Biden’s spending programs and policies, in the name of cutting the budget deficit, as well as once again attempt to repeal Obamacare, if elected.

It is what very wealthy oligarchs such as Elon Musk also say that they want.

Harlan Green © 2024

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