This post Tariffs Are as American as Apple Pie appeared first on Daily Reckoning.
Listening to hysterical commentary from the mainstream media about President Trump’s tariff proposals, one would think his policies were in violation of the U.S. Constitution. Nothing could be further from the truth.
In fact, tariffs are as American as apple pie.
America grew rich and powerful from 1787–1962, a period of 175 years, using tariffs, subsidies and other barriers to trade to nurture domestic industry and protect high-paying manufacturing jobs.
The passage of the U.S. Trade Expansion Act in 1962 authorized the White House to reduce those tariffs in rounds of international negotiations. Such tariff reductions marked the unilateral surrender of U.S. jobs to foreign competitors, first in Japan, then later in South Asia and finally in China.
Your correspondent and a Chinese computer scientist wearing lab coats inside the highly secure Huawei research facility near Nanjing, China. Huawei is China’s national champion in the fields of networking and telecommunications. Huawei has been banned from making tech acquisitions in the U.S. because of suspected ownership and control of Huawei by the People’s Liberation Army and other elements of the Communist Chinese government. The U.S. has not explicitly supported national champions in the postwar era, but that policy may be changing with U.S. rejection of the takeover of U.S. smartphone chipmaker Qualcomm by Chinese-controlled Broadcom.
By the 1970s, cheap Japanese automobiles were flooding the United States and decimating U.S. auto manufacturing jobs in Detroit. In the early 1980s, Ronald Reagan imposed steep tariffs on Japanese, German and other auto imports to the U.S. This resulted in Japanese manufacturers like Honda and Toyota moving their manufacturing operations to Kentucky, Indiana, Alabama, Texas and other parts of the United States.
German car manufacturers such as BMW did the same, building large auto plants in South Carolina.
As mentioned above, the architect of those tariffs on Japanese and German cars in the 1980s was Robert Lighthizer, a trade adviser to Ronald Reagan. Lighthizer is now back in the Trump administration. Except this time he’s the U.S. trade representative, a Cabinet-level position with the rank of ambassador.
Lighthizer is running the Reagan playbook again for Trump. It is the same basic playbook that predominated in U.S. policy from George Washington forward.
Washington’s secretary of the Treasury, Alexander Hamilton, drafted a report to Congress called the Report on Manufactures presented in 1791. Hamilton proposed that in order to have a strong country, America needed a strong manufacturing base with jobs that taught skills and offered income security.
To achieve this, Hamilton proposed subsidies to U.S. businesses so they could compete successfully against more established U.K. and European businesses.
These subsidies might include grants of government land or rights of way, purchase orders from the government itself or outright payments. This was a mercantilist system that encouraged a trade surplus and the accumulation of gold reserves.
Hamilton’s plan was later proposed on a broader scale by Kentucky Sen. Henry Clay. This new plan began with the …read more
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