The Tariff Issue – PaulCraigRoberts.org

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14-05-19 05:38:00,

The Tariff Issue

Paul Craig Roberts

Wherever I look at US policy, foreign or domestic, I see only insanity, ignorance, and incompetence.

Take the issue of tariffs, which is Trump’s mistaken approach to bringing the jobs back home. The tariff “solution” overlooks that offshored US production counts as imports when US firms bring their goods into the US to be marketed.

The Chinese did not steal American jobs by selling below US cost.  The jobs were taken to China by US global corporations, along with the technology and business know-how, for the sole reason of maximizing US corporate profits.  Labor, made as productive as US labor by offshored US capital, technology, and business know-how, could be hired at much less cost in China and elsewhere in Asia due to the enormous excess supply of labor that overhangs Asian labor markets.  The enormous cost savings went directly into US corporate profits, capital gains for shareholders, and bonuses for executives.  Half and perhaps more of the “cheap goods” imported from China are the goods of American firms, such as Apple, Levi, Nike.  They are products of US firms that are made in China for sale in the US.  They are not “cheap Chinese goods.”  Do you think an iPhone is cheap or a MacBookPro is cheap?

The tariffs fall on American goods produced offshore by American firms for sale in America.  The tariffs will reduce the profits of American overseas production and raise prices to US consumers, who have already lost the incomes from the manufacturing jobs that American companies moved abroad.  

In other words, tariffs are not a solution.

The only way to bring home the offshored American jobs is to change the way US corporations are taxed.  No, this does not mean to lower corporate taxes.  The way to bring the jobs home is to tax corporations on the basis of the geographical location in which they add value to their products.  If US corporations produce in the 50 states for their US market, the tax rate would be low.  If they produce abroad in China or elsewhere for sale in the US, the tax rate would be high.

The tax rate on offshored production for US markets would be calculated to offset the lower labor and regulatory costs abroad.

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