Patrick J. Buchanan thinks an 18 percent value added tax (VAT) on imports is just what America needs to reopen all those shuttered factories. Why would other nations not just impose more taxes on American exports? Wouldn’t the VAT raise prices on all the Trump supporters who rightfully believe they are falling behind economically? Buchanan insists that other taxes will be cut to offset the VAT, but can he name a single time when any country has instituted a VAT and cut other taxes? If the country with the reserve currency (the US) runs a trade surplus, won’t that be globally deflationary, and won’t the higher foreign exchange value of the dollar make US goods less competitive internationally? Why won’t other countries just depreciate their fiat currencies enough to make up for the tax? What part of the decline in manufacturing jobs is attributable to higher productivity, substitution of capital for labor, and automation? (Hint: most of it; manufacturing output is close to its all time record and is 36 percent of US GDP, although manufacturing jobs have been in a steady decline. US agriculture employs 2 to 3 percent of the population, but US farms produce multiples of what they produced when agriculture accounted for 3 out of 4 jobs.) For the answer to these and other problematic questions, look not to Buchanan for answers. However, here’s Buchanan’s proposal for a trade policy, at buchanan.org:
Donald Trump’s election triumph is among the more astonishing in history.
Yet if he wishes to become the father of a new “America First” majority party, he must make good on his solemn promise:
To end the trade deficits that have bled our country of scores of thousands of factories, and to create millions of manufacturing jobs in the USA.
Fail here, and those slim majorities in Michigan, Pennsylvania and Wisconsin disappear.
The president-elect takes credit for jawboning William Clay Ford to keep his Lincoln plant in Louisville. He is now jawboning Carrier air conditioning to stay in Indiana and not move to Mexico.
Good for him. But these are baby steps toward ending the $800 billion trade deficits in goods America runs annually, or bringing back factories and creating millions of new manufacturing jobs in the USA.
The NAFTA Republicans tell us the plants and jobs are never coming back, that we live in a globalized world, that production will now be done where it can be done cheapest — in Mexico, China, Asia.
Yet, on Nov. 8, Americans rejected this defeatism rooted in the tracts of 19th-century British scribblers and the ideology of 20th-century globalists like Woodrow Wilson and FDR.
America responded to Trump’s call for a new nationalism rooted in the economic principles and patriotism of Hamilton and the men of Mount Rushmore: Washington, Lincoln, Jefferson and Theodore Roosevelt.
The president-elect has declared the TPP dead, and says he and his negotiators will walk away rather than accept another NAFTA.
Again, good, but again, not good enough, not nearly.
The New International Economic Order imposed upon us for decades has to be overthrown.
For the root cause of the trade deficits bleeding us lies in U.S. tax laws and trade policies that punish companies that stay in America and reward companies that move production overseas.
To continue reading: An ‘America First’ Trump Trade Policy
Everyone is evaluating Trumps actions on the basis of their own denial. If you accept that a collapse is coming, indeed overdue, the only logical action is to prep. Trump’s actions make much more sense from this perspective.
Your points are all very well taken. A few I would add: A major factor driving manufacturing jobs out of the US is the heavy regulatory and tax burden (which is not only the money, but the cost and difficulty of compliance with increasingly complex and capricious tax rules) imposed on employers – all employers, although manufacturers are even more laden with regulation (labor, environmental, physical product standards and requirements) and, due to the necessarily longer time frame in which they generally must consider business planning, are especially afflicted by uncertainty and instability in tax and regulatory policy. The trade deficit, to the extent that it is any more than an irrelevant accounting tautology, is a cause of nothing, but merely an effect of other (bad monetary, mostly) policies, and attempts to reduce it without regard to those policies will inevitably do far more harm than good.
I respect Mr. Buchanan; there are many things he gets right, but a few things he gets very much wrong. This is one of them. A case (weak, IMO) can be made for tariffs as a source for government revenue in lieu of other forms of taxation (most particularly income) but other alleged economic benefits are a complete fallacy. A good concise explanation: The Logic of Tariffs on Both Sides of the Border
Well said.