According to attorney and economist Spencer Morrison, the phrase “trading partners” is a misleading description at best for America's numerous trading partners around the globe.
That's because there isn’t much “partnership” when one country suffers a deficit in the billions, Morrison said on Washington Watch Thursday.
As Donald Trump’s tariffs go into effect, as the markets respond and critics abound, there are certain realities in play, such as a U.S. trade deficit of $295.4 billion with “partner” China and $235.6 billion with “partners” in the European Union.
While campaigning, Trump mentioned the possibility of a 60% tariff on Chinese imports. Days after taking office he applied a blanket 20% tariff.
China responded with tariffs of up to 15% on U.S. chicken, wheat, corn and cotton.
On Friday, China announced that it would impose a 34% tariff on imported goods from the US, starting 10 April.
The move is a response to a U.S. levy of the same amount on Chinese goods, announced by Trump earlier this week as part of his so-called "Liberation Day" package, EuroNews.com reported.
The EU has said its retaliation tariffs could reach $28 billion.
Trump is doing unto others what he’s seen done to the U.S., Morrison, the author of “Reshore: How Tariffs Will Bring Our Jobs Home and Revive the American Dream,” told show host Tony Perkins.
The premise of Morrison's book is that tariffs can help revive American manufacturing and strengthen the middle class.
“For the last 50 years, America's politicians have been asleep at the wheel. We embraced this “international free trade” starting in 1974. Ever since then, this country has run a large, chronic trade deficit,” Morrison said.
In 1974, the Trade Act was amended allowing the President to action to offset trade deficits.
A deficit occurs when imports exceed exports, but opinions vary among economists and trade experts as to the seriousness of trade deficits.
More recently, in the 1990s, presidential candidate Ross Perot famously warned of a "giant sucking sound" as U.S. jobs went south to Mexico. Perot at the time was warning about NAFTA, the North American Free Trade Agreement.
The cumulative value of the U.S. trade deficit since 1974 is $25 trillion, Morrison said, and that has led to selling off assets like farmland and residential real estate and (accumulation) of debt.
“The country has taken on enormous amounts of debt to pay for all of this, and it’s time to pay the piper," he insisted.
President Trump, Morrison says, has taken an average tariff rate imposed by each country on the U.S., then has cut that in half and said, “this is what we’re going to charge if you want to bring your products to America.”
Trading for security
A sort of “idealism” began around trade in Europe decades ago, Morrison explained.
“If you look back at the founding documents of the European Union, it's architects like Robert Schuman, saying that what they'd like to do is make warfare materially impossible by integrating all of the economies in Europe, right? So if Germany relies on French steel, and France relies on German coal, it would be impossible for those two countries to wage war,” he said.
That application took root with the U.S. courtship of China in the 1970s. Eyebrows were raised during the pandemic.
Since the ’70s “we’ve been off-shoring our critical industries to countries like China. The wake-up call came with COVID when we saw what China did with their control of personal protective equipment and how we were reliant on them for pharmaceuticals and other material,” Morrison said.
For a long time trade with China made sense for U.S. manufacturers, the ability to product material at cheaper prices, Marlin Stutzman, a U.S. House representative from Indiana, told Perkins.
Stutzman worked in manufacturing before his political career.
“What’s happened is we've hollowed out our manufacturing, our factories. We don’t have the same ability and capability that we used to. Now we've built up China's economy over the past several decades, and it's now coming back to haunt us. What President Trump is simply doing, is that he's going to level the playing field,” Stutzman said.
There have been signs that Trump’s tariffs will have the impact he desires. Already automakers Hyundai, Honda and Stellantis have announced expansion plans in the U.S.
But as Trump levels the playing field, who gets trampled at the 50-yard line in the short term, and can the administration sustain the pain and pushback felt by Americans?
During his first term, Trump's tariff push hurt farmers in the Midwest who depended on China's imports of their product.
A tale of tariffs and a small business
Kristin Rae was a small-business traveler on Trump’s bumpy tariff road during his first term.
Rae is the founder and designer of Inspire Travel Luggage, which promotes its brand as “Made in the USA.”
“These taxes on businesses stifle innovation in several ways. Businesses will pull back on percent of capital expenditures, they’ll reconfigure budgets, they may not hire as many employees. The uncertainty is worse.
“Without a definitive tariff, most business could say, ‘I might not have any risk here,’ but businesses that don’t know are all pulling back. There’s definitely a chilling effect when it comes to businesses, but also consumers” who might feel they need to tighten their own budgets, Rae told the Taxpayers Protection Alliance podcast.
The impact for business can’t be overstated, and it takes time for the effects – fewer employees leading to lesser service, fewer jobs – to reveal themselves.
During Trump tariffs in 2017, Rae said her company was forced to temporarily close while she secured U.S.-based suppliers. “It took years to find adequate suppliers here in the states. It takes time to turn the ship.”
Short-term pain is real
Can Trump policies negate tariff pain?
There’s long-term promise but the short-term pain is real.
Other Trump policies can help off-set this, Stutzman said. Tax cuts, the energy sector and government deregulation will all play a part, he said.
“We're set to see the largest tax increase in American history kick in at the end of this year. So, we're going to make sure that we make those (current) tax rates either permanent or at least extended. President Trump also has a strong energy policy plan that I believe will help keep energy prices low.”
In the end, the return of manufacturing jobs in the U.S. will spur economic growth.
“There's so many other announcements of investment from companies back into the United States because they want to avoid the tariffs, whether it's in Mexico or any other part of the world,” Stutzman said.
