Just … Tariffic

Tackling a topic as complex as the tariffs that President Trump and his administration are perpetually imposing, revoking, adjusting, then re-imposing—and the market volatility being created and negative effects on confidence thus far appear—I don’t think it’s a stretch to say that his upsetting of the global trade apple cart has produced the most disruptive and unsettled economic conditions in modern times.

Our contributing columnist, Ken Herman, takes a deep dive into the topic on Page 12. But the tariffs aren’t being imposed in a vacuum, as Herman notes; they come as Washington is witnessing the most intensive cost-cutting initiative of any in our lifetimes.

I believe that what Elon Musk is doing with the Department of Government Efficiency is not only appropriate, but necessary. Almost daily, we’re treated to new accounts of dysfunction, cronyism, government waste and stunning inefficiencies.

But I’m a bit of the opinion of doing too much, too fast and too much of the same has caused excessive disruption and insecurity. It seems as though nearly every phase of the economy and most Americans’ confidence is in turmoil, perhaps best-reflected in the gyrations of the equities markets over the past two months.

A big concern I have is for retired folks who do not possess the means of rebuilding their portfolios and being able to recover from the Chinese roulette being played with long-time trading partners.

Time and again, I hear politicians reference America as possessing the greatest economy of all time. But even with strong economic growth, we’re nowhere near big enough to generate tax revenues that can begin reducing such a massive national debt. The world’s biggest and strongest economy, unfortunately, is not big enough or strong enough to spare us a fiscal reckoning that simply can’t be avoided, one that has been decades in the making.

Winners and Losers

When you start peeling the onion on tariffs, the eyes roll into the back of your head. A gazillion factors are in play here, and I’m not sure the tariff strategy Trump unveiled recently on his self-styled “Liberation Day” sufficiently distinguishes the good from the bad.

One must applaud tariffs designed to counter players who bring bad intentions to the market. Think of Chinese dumping steel into the American market at prices meant to drive U.S. companies out of business.

That differs entirely from trade deficits per se. If the cost of wine I buy from France exceeds the revenue I get from selling magazines in Paris (hint: an amount not significantly different from zero), I’m running a trade deficit with Emmanuel Macron’s crew.

That’s the whole point of free and fair trade: two parties who exchange cash, goods or services in the expectation that each will improve his situation through that singular transaction.

If you go hog-wild on tariffs against everyone, everywhere, all at once, trying to correct a wine-t0-magazine imbalance, you risk doing precisely what fiscal conservatives and libertarians have long decried as the ultimate economic sin in the nation’s capital: Government’s desire to pick winners and losers, outside of conditions set by the marketplace.

The simple truth is, a $27.8 trillion economy has too many moving parts to declare that top-down correctives for a trade imbalance can ever work.

Case in point: Trump wants to punish foreign vehicle makers (especially China) who try to dodge U.S. trade restrictions by building plants in Mexico, undercutting the costs of U.S. labor but still sending their products north to American consumers. Yet Ford and General Motors don’t see increased tariffs as a solution, because so many of the products that go into their cars and trucks have overseas suppliers who will raise costs to cover the tariffs.

The ultimate cost of those most costly components will be paid by consumers. And by work forces reduced after production cutbacks inflicted by tariffs.

Closer to home, we just received the latest report from our good friend, Creighton University economist Ernie Goss, with his monthly survey of banking leaders in a nine-state region. Nearly three out of four believe some level of tariff adjustment is needed to deal with restricting exports of beef, pork and grains raised by Midwestern farmers.

So now you have the ag community pitted against automakers. That’s not a good place to be if you profess to embrace capitalism and open markets. Chances are pretty close to zero that Donald Trump will be on the phone next week to seek my guidance on where to take his tariff policy going forward.

But if I could get one word in edgewise with him, it would be this: Fair. Create an environment where individuals and companies can exchange goods and services fairly—as they see fit to define what’s fair.

Otherwise, a lot of good people are going to be hurt, collateral damage from the bomb blast of an overly aggressive trade policy. The markets have already shown us that the losers won’t be limited to those on the receiving end of Trump’s tariff baton. Just level the playing field,
sir, and leave the deals to us.