I found this on "Breitbart News"... it speaks of a long-known (but lately ignored) economic theory on how tariffs can enrich the US, but at a particular rate:
For decades, American elites have spoken of free trade as though it were a moral commandment engraved in stone—unquestionable, sacred, eternal. Tariffs, they say, are relics of the past. Economic heresy. An automatic road to higher prices, shrinking output, and worldwide retaliation.
What they don’t tell you—what most of them don’t know—is that some of the most brilliant economists in history developed a theory proving exactly the opposite: under the right conditions, tariffs can make a country richer.
This idea goes by the name optimum tariff theory, and it has been around since long before modern economists started pretending free trade was a universal good. Long before Donald Trump ever uttered the word “tariff,” British and classical economists were working out exactly how, when, and why a powerful country could tilt global trade in its favor.
And if that sounds familiar, it should. Because Trump’s trade policy—especially his 10 percent baseline tariff on all imports—is a near-perfect real-world application of this theory.
The core insight is this: when a country is big enough, it can influence world prices. The United States is not a small, open economy. We are the world’s largest buyer. When we buy less of something, the world notices. Prices move.
Now imagine we put a tariff on imports. That’s just a tax at the border. It raises the domestic price of a foreign good. As a result, we buy less of it. But if we’re a major share of global demand for that product—steel, semiconductors, autos, solar panels, whatever—the global price starts to fall. The country selling it can’t easily find other buyers. Supply outstrips demand. So, prices drop.
In this case, the tariff doesn’t just make the product more expensive at home. It pushes down its world price, so we end up paying less for it than we would without the tariff. We give up some volume of trade, yes—but what we do trade, we trade on better terms. This is what economists call a terms-of-trade gain.
Trump's instinct told him what they proved in theory: America has leverage. We are the buyer everyone wants. And when we put a modest price on access to our market, we get better deals in return. That’s the logic behind the 10 percent baseline tariff. That’s the logic behind reciprocal tariffs.
The textbooks forgot. But Trump remembered.
My summary: Simply put, the USA is the largest buyer of goods in the world and we want and deserve a better deal.
The free trade televangelists are either horribly naive or terribly corrupt. My money is on the latter. They have spent decades deceiving Americans into believing we have free trade. And, that by implication, what we have is fair trade.
Watching President Trump maneuver through this tariff scenario has been enjoyable. It further convinces me he has the support of a highly skilled team who has been working on this for a very long time. I don’t doubt POTUS has great instincts. But, I completely doubt he is doing this based on instinct alone. These moves and countermoves have been thoroughly analyzed and war gamed.
I saw a good interview with Yannis Varoufakis, former Greek Finance Minister, today.
Yanis Varoufakis Explains Trump’s Tariffs
He made the point, among others, that if you are on the wrong side of a trade balance and if you really need those imported goods then the people suffer but if you can source those goods locally instead then the country benefits.
Great post Banjo.
You would think free trade would require free markets to trade between. But if only one side has government-influenced situations such as minimum wage, OSHA, environmental regulations, pro-union legislation, and a litigious labor setting due to lack of tort reform, while the other side has none of these, then to think of it as free trade on a level playing field is laughable.
Speaking of:
… if only one side of an international trade even pays lip service to the idea of treating its workers according to Christianity’s golden rule while the other side doesn’t even pretend that it’s a virtue, then there is also spiritual incompatibility.