Via Mediaite, which claims that Trump is now encouraging outsourcing in hopes of raising some revenue off of the goods that would be imported back into the United States. He isn’t. He’s making a rhetorical point that his economic plan is supposedly win/win. Slap a 35 percent tariff on imports, Trump says, and the average U.S. company will elect not to outsource in order to avoid that massive tax. The tariff will keep jobs here in the U.S. And if a company decides to outsource anyway, hey — more money in the ol’ federal coffers when the tariff is collected. One question: Who does he think will be bearing the cost of the tariffs that’ll be padding Uncle Sam’s bank account? To hear him talk about this sanguinely as a revenue-raiser, you would think he’s imagining that companies will pay the 35 percent out of their own profits while holding the price of their goods on the U.S. market steady. Nuh uh. It’s the people cheering Trump in the video here who’ll be paying. A study published by Moody’s two months ago estimated the cost of a 45 percent tariff on all foreign goods to the average U.S. household to be … $6,000 per year. America will be making “a fortune,” as Trump puts it, off of a massive new tax on American consumers. And a really regressive one at that, aimed squarely at Trump’s working-class base. I can understand cheering the idea of using a tariff to save jobs, even though the logic is badly flawed. (And Trump himself used to agree.) I can’t understand cheering the idea of the government making a “fortune” off of the public via a gigantic tax hike. That sort of rhetoric is left of Obama.
The underlying point, that the tariff will discourage outsourcing, is questionable too. It all depends on whether the company makes most of its money in the U.S. market or in foreign markets. If the lion’s share of your revenue is coming from abroad then it’s still worth your while to cut labor costs by outsourcing. You’ll take a hit from the new Trump tariff in your U.S. sales, but depending on how much you’re saving on workers, that hit might be worth absorbing. In fact, there’s an argument that U.S. tariffs are an incentive to outsource. After all, once President Trump slaps a 45 percent tariff on China (and then on every other country in order to disadvantage foreign goods equally), reciprocal tariffs imposed by China on U.S. goods will badly damage your company’s sales in the Chinese market — unless you move to Mexico and turn your U.S. goods into Mexican goods. The U.S. can fight its trade wars as extensively as it wants, but if you’re a company with the wherewithal to move, you don’t have to fight alongside it. Go to Mexico — or even Canada, where the labor is comparatively expensive but which also wouldn’t be debilitated by foreign tariffs on its goods.
In fact, if the point of commerce is to protect jobs domestically rather than allocate goods efficiently — which is as leftist an attitude as leftist attitudes get — I don’t know why Trump would bother with tariffs instead of banning classes of foreign goods outright. It’s possible that labor costs for some goods made in China are so low that even a 45 percent tariff will still leave them a bit more affordable than similar U.S. goods, no? You’ll protect some American jobs by making the prices more competitive but think how many American jobs you might protect if only American companies were allowed to sell here. No more Hondas or BMWs on American roads; we’re putting Detroit back to work with a GM/Ford-only policy. Why not? If we’re going all in on protectionism, let’s really go all in.