Frank's Musings

The initial result of President Trump’s autonomous imposition of an average 18.6 percent tariff on imported products has been a surge in U.S. government revenues without expected inflationary consequences, surprising most economists. What this really means is that America can afford to pay more for goods manufactured abroad because they get additional value from allowing its workforce to concentrate on higher technology production.

Rather than producing Halloween costumes, for example, the U.S. designs and integrates sophisticated spooky year-round diversions. Rather than manufacture standard speed boats, the U.S. engineers and builds water transportation systems that combine high efficiency, advanced materials, luxury features, and wide mission diversity. These sorts of accomplishments take time and expertise to achieve. On the other hand, the everyday consumer goods that can easily be made, particularly in less developed foreign countries, are an important part of America’s international imports, which generates much of the recently ballooning tariff receipts.

The low inflationary impact of the tariffs will not last long. The executives of foreign suppliers realize that in the long run products like theirs (e.g.,  the Model T, the VCR, and others) will disappear from use. So, to preserve their share of the market for as long as it lasts, they are absorbing much of the cost of the tariffs. All of those who stay in business in the future, however, will incorporate the cost of import taxes on new products into their respective prices, making tariffs just another ingredient in the final price that American consumers will end up paying for.  As imported goods get more consumer-friendly, their prices will go up, along with the anount of tariffs on them.

Until that time and afterwards, tariffs will have paid for a large share of government expenses but only by shifting more of that burden towards the lower income segments of society, for whom the tariffs are a more significant drain on their budgets. That strategy will have rewarded the financial backers of Trump's authoritarian regime by reducing pressure to increase their income taxes.  It won't improve the  general welfare.  A coalition of concerned activists from a wide spectrum of classes and occupations needs to be mobilized by a charismatic leader to resurrect the country’s liberal democracy that favors the common people.