President Trump has announced that tomorrow will be “Liberation Day” as he levies new tariffs on imports into the US. The road to this day has been littered with many inconsistencies and incoherent explanations, so tomorrow will afford an opportunity to assess his real intent. He claims that other countries have used tariffs to aid their own industries at the expense of US products. If these claims are valid, the US always has the option of bringing a case to the World Trade Organization to redress the wrong suffered. But Trump has studiously avoided any appeal to any international organization and instead relied upon unilateral US action.
Trump has also chosen the tactic of deliberate ambiguity in a pathetic attempt to gain an advantage against the countervailing tariffs that other states will impose on US products–an outcome that is all but inevitable. That outcome is the main reason most economists think that raising tariffs will reduce global economic growth as happened in the 1930s when the US imposed the infamous Hawley-Smoot tariffs. Alexi Guagas assesses the impact of those tariffs:
“The Hawley-Smoot Tariff Act raised tariffs on over 20,000 goods, intending to protect struggling sectors like farming and manufacturing. Instead, it sparked a global trade war, with countries around the world retaliating by imposing their own tariffs. By the mid-1930s, global trade had plummeted by more than 65%. Far from boosting the U.S. economy, the tariffs deepened the economic downturn, worsening the effects of the Great Depression. Hawley-Smoot remains a defining example of how protectionist policy, in a globally connected economy, can have far-reaching negative consequences.”
I am certain that Trump is aware of this negative outcome, so his persistent support for tariffs must have another motive. Tomorrow’s announcement will give us all an opportunity to discern Trump’s intent. Right now, there appears to be an emphasis on the revenues that tariffs will bring in, particularly if the tariffs imposed are universal: on all products from all countries. Peter Navarro has bandied about a figure of $6 trillion over ten years as a likely outcome (perhaps in a fevered dream as he languished in a prison cell for contempt of Congress). Moreover, Trump links the tariff plan to a rebirth of US manufacturing since he anticipates that companies will choose to build their factories in the US in order to avoid the tariffs. The Washington Post reports:
“One option would raise import duties on products from virtually every country, rejecting more targeted approaches that have been publicly outlined in recent days by some of Trump’s senior advisers. It cites as its legal justification the 1977 International Emergency Economic Powers Act, which grants the president broad powers to regulate international transactions, the people said.
“One person familiar with the administration’s thinking said the White House believes it would, combined with additional tariffs on sectors such as automobile and pharmaceutical imports, raise more than $6 trillion in new federal revenue and amount to the biggest tax hike in decades.”
If these possibilities are what is motivating Trump, then it is important to recognize that they have nothing to do with unfair trading practices. Rather, they reflect a desire to completely restructure the US economy and its taxation system. If the figure of $6 trillion over ten years is a prominent motive, then one has to consider that Trump is thinking about replacing the personal income tax with tariff revenues. $6 trillion over ten years would pay for Trump’s tax cut extensions that overwhelmingly favor the rich. It would fit nicely with Trump’s clear intent to eviscerate the Internal Revenue Service, a political move with tremendous power for his supporters. But just using tariff revenues would punish the poor and middle classes since it is essentially a sales tax on products.
A far more insidious motive would be to use tariffs to induce companies to build their factories in the US. That goal sounds laudable, but it is highly unlikely that tariffs alone would be a sufficient inducement to most companies. But the heavy use of tariffs would immiserate large numbers of workers, perhaps enough to compel them to accept lower wages or to end their support for unions. Significantly lower labor costs would be a powerful incentive for companies to bring their factories back to the US. That strategy would allow the rich to enjoy greater profits. The price, however, would be the impoverishment of millions of workers in the US and would likely drag down wages globally.
So, we should listen carefully to the rhetoric of “Liberation Day”. If it turns out that the tariffs are not focused on specific products or countries and are generally uniform across countries, then it is a safe bet that they have the purpose of a radical restructuring of the American economy. Making most people much poorer, and enriching the small number of people with capital enough to manage the turmoil of such a restructuring.
World Politics News 
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