By M. Samuel Anderson, Awakening News chief editor
This first “Capital Comment,” a new series that focuses on key news items from the world’s capitals, comes from Washington D.C.
WASHINGTON—As the smoke clears on the issue of President Trump having placed tariffs on Chinese goods, it’s helpful to see the big picture.
For one thing, tariffs get an unfair rap even though they are just another tax. Tariffs were America’s main revenue source for the Republic’s first 125 years. And taxes of any kind create pressure to boost the price of goods and services.
Indeed, federal and state income taxes are “tariffs” imposed on the domestic economy. They’re embedded in retail prices just like tariffs imposed at the water’s edge typically are.
Ironically, though, Ford Motor Co., as of this writing on July 6th, pledged not to increase the price of its Chinese-made automobiles as the tariffs kicked in at 12:01 a.m. on that date.
It’s also ironic that, as Reuters noted: “China accused the United States . . . of ‘opening fire’ on the world with tariffs . . . warning that it will respond the moment that duties on $34 billion in Chinese goods kick in.”
What’s missing is that, for decades, the U.S. has endured huge and growing trade deficits with China.
The U.S. trade deficit with China was $347 billion in 2016 alone—because U.S. exports to China were $116 billion while imports from China were $463 billion.
That deficit grew to $375 billion in 2017, when U.S. exports to China were $130 billion and imports from China swelled to $506 billion, according to the U.S. Census Department and TheBalance.com, a nonpartisan website for financial news and guidance.
What does this all mean?
As the late GM executive and author Gus Stelzer told me during several interviews, running such massive, growing trade deficits for decades with China represents a “forfeiture of production and all the wages, salaries and dividends that are part of that production.”
In other words, it’s “unrealized wealth” that never came into existence, on top of entire U.S. industries that have been uprooted and moved to China and elsewhere over the last few decades.
Meanwhile, and this may shock some, for years China has been buying up U.S. land, including in Milan, Michigan, to create economic-industrial zones. There are pluses and minuses to such arrangements.
Yet, California’s scarce freshwater (namely groundwater) supplies are being used to grow alfalfa to ship to Chinese dairies, with China reportedly buying up the land to grow the crop, in some cases. The Saudis are doing the same.
Call it a “water trade deficit” as the U.S gives away precious water. Never mind that almost constant forest fires have been charring the often drought-stricken West, or the fact that California’s rich fruit, vegetable and to some extent livestock production is being gravely imperiled, raising prices on, and lowering the supply of, groceries.
All told, China has been leveraging its trade surplus with the U.S. to build its military, buy up land and become a superpower—all because there’s never been fair and balanced trade between it and the U.S.
Furthermore, constant trade deficits, said Stelzer, are “back-door foreign aid” which never appears in the foreign-aid budget of Congress.
Seen through this lens, Trump’s tariffs appear largely remedial—in the sense that they might restore some balance to the equation, although the economy will encounter turbulence as things shift.
While this is not an endorsement of the Trump White House or its trade policies, it is a sober, rarely discussed assessment of the situation with China, which has festered for many decades, long before Trump’s ascent.
Dare we add that delivering China’s massive output to the states has caused serious wear and tear on America’s infrastructure—its land and sea ports, bridges, interstate highways, etc.—while converting China into a slave-labor empire where widespread industrial pollution has choked entire regions?
It’s important to add that the failure of the U.S., Canada and the rest of the world’s governments to create and maintain another kind of infrastructure, namely, a properly balanced monetary system, is the foundational factor that drives nations to try and shore up their balance sheets through an obsession with exports in the first place.
If, in each nation’s Capital, the legislature made sure that its depleted money supply was increased to be on par with Gross Domestic Product, and if each nation, accordingly, created its own money supply directly, free of interest and debt, instead of empowering private banks to create the national money supply and borrowing that debt-based money at perpetual interest, we’d see a day when most of what’s produced in a nation is consumed in that same nation.
Trade would still happen, of course, but nations would no longer have to duke it out, with each one competing with the other to export more than they import and achieve a trade surplus. That’s impossible anyway, since some must run a deficit for others to run a surplus.
Balanced, fair and necessary trade is fine. Each nation could produce most of what it needs for its own consumption, while exporting surpluses and importing mainly those things it cannot readily make, or grow, itself. But over-dependency on trade, where national self sufficiency becomes too distant, does not and cannot work.
At any rate, when you add the loss of revenue for streets, roads, bridges, schools, senior care, police and fire departments, etc. from America’s steep trade-deficit-induced industrial losses, China’s complaints about Trump’s tariffs begin to wear rather thin.
China may have a point by saying that such tariffs could spark a trade war (which can lead to military confrontation) but the record shows that China has been engaged in a form of economic warfare versus the U.S. for a long time.