Sorry Mr Trump, the Gipper Knew and Said So

 

Sorry Mr Trump, the Gipper Knew and Said So

Wanton Tariffs are Economy Killers; the Ad is NOT Fake News

"When someone says, 'let's impose tariffs on foreign imports', it looks like they're doing the patriotic thing by protecting American products and jobs. And sometimes, for a short while it works, but only for a short time… "Imposing such tariffs or trade barriers and restrictions of any kind are steps that I am loath to take. And in a moment I'll mention the sound economic reasons for this: that over the long run such trade barriers hurt every American worker and consumer." 

 President Ronald Reagan (the “Gipper”) in his 1987 radio “Address to the Nation on Free and Fair Trade” after he had recently issued very limited and targeted tariffs on some Japanese goods over a trade dispute

The notion of tariffs as a principal revenue generator in the modern era is a non-starter. Because as most economists confirm, tariffs are a regressive consumer tax (a de facto sales tax) that slam lower- and middle-income people (those with the least in discretionary income) so much harder than those at the top of the economic ladder. Trump’s “Big Beautiful Bill” has more than rewarded corporations and those at the top of economic ladder with trillions of dollars of deficit busting tax cuts. From the McKinley era tariffs at the turn of the 20th century (which had to be undone) to the Smoot-Hawley tariffs that intensified the Great Depression, the modern era effort to use blanket tariffs to bolster the US economy have always failed, always causing more damage than any overall benefit.

Sure, targeted tariffs at specific nations, to be used sparingly, are occasionally necessary. Donald Trump and his MAGA minions claimed that the excerpts from Ronald Reagan’s 1987 radio address, cited above and used in a Canadian-sponsored television and social media ad targeting the United States, materially misrepresented Reagan’s position on tariffs. Trump immediately terminated the tariff discussions with Canada and slapped a 10% increase against most Canadian imports. True, the ad did not mention the defensive tariff against an abusive Japanese trade practice targeting certain imports from the United States, but there was absolutely no material misrepresentation of Reagan’s position on tariffs.

Indeed, on October 27th, the entire editorial board of the conservative, Rupert Murdoch-owned Wall Street Journal dramatically disagreed with the Trump administration that the Canadian ad materially distorted Reagan’s position on Tariffs. Here is some of what they said: “The MAGA crowd likes to dismiss Ronald Reagan as irrelevant today, but apparently he still matters to President Trump. How else to explain Mr. Trump’s tantrum against Canada after the province of Ontario invoked the Gipper on trade in a television ad?

“The Ontario government had the temerity to buy ad time to run clips of Reagan’s 1987 remarks warning about the dangers of protectionism. Mr. Trump pitched a social-media fit in response late Thursday, claiming Ontario ‘fraudulently used an advertisement, which is FAKE, featuring Ronald Reagan speaking negatively about Tariffs.’… The President said the ad was intended to interfere with the Supreme Court as it considers the legality of his claim that he can levy tariffs on anything he wants, for any amount he wants, whenever he wants. He immediately declared an end to trade talks with Canada…

“The Supreme Court isn’t likely to be influenced by anything other than the law, but Mr. Trump’s Canada eruption is a good argument for the Justices to rein in his tariff power. The President gets angry at a TV ad and imposes on a whim a 10% tax on Americans who buy goods from their northern neighbor. Mr. Trump claims he’s not ‘a king,’ but on tariffs he is acting like one, and without a proper delegation from Congress as the Constitution requires.

“It’s striking that Mr. Trump is so worried about a TV spot featuring a President who left the White House nearly 37 years ago. Don’t you know what time it is, as your apologists like to say, Mr. President? Perhaps Mr. Trump fears he’s going to lose the tariff case, and maybe he also knows his tariffs are unpopular,

“Mr. Trump is wrong about the Reagan speech, and he was wrong when he said on social media that ‘Ronald Reagan LOVED tariffs for purposes of National Security and the Economy.’ The Gipper was a free trader. In the 1987 speech, Reagan was trying to explain why he was making an exception to his free-trade policies on semiconductor imports from Japan… We remember that speech well, and its purpose was to head off a protectionist surge in Congress. The Gipper delivered it as fear of Japanese economic dominance was reaching its political peak in the U.S. ‘Japan as Number One’ was the title of a popular, and misguided, book of the time.” Reagan even admitted some mistakes he had made succumbing to protectionist demands of some US companies, policies that were quickly changed.

Trump loves to tout the rising stock market as signs of his success, choosing to ignore soaring consumer prices and dismal jobs numbers. But that stock market/GDP growth is a vulnerable one-note-johnny, as explained by Fortune’s business editor Nick Lichtenberg in his October 7th contribution: “The commentary on September 29 by Morgan Stanley Wealth Management’s chief investment officer, Lisa Shalett, frames the current market boom as a ‘one-note narrative’ almost entirely dependent on massive capital expenditures in generative AI, raising questions about its durability as economic and competitive risks start to mount. Shalett’s critique came squarely in the middle of some people in the AI field — and many financial commentators around Wall Street —fretting at market exuberance and beginning to talk openly about a bubble.

“In an interview with Fortune, Shalett said she was ‘very concerned’ about this theme in markets, saying her office had broadened from a belief that the market would only bid up seven or 10 stocks to roughly 40. ‘At the end of the day … this is not going to be pretty’ if and when the generative AI capital expenditure story falters, she said… Shalett’s comments centered on several recent multibillion-dollar deals to scale up data-center infrastructure. As notable substacker and former Atlantic writer Derek Thompson recently noted in a post titled ‘This is how the AI bubble will pop,’ so much money is being spent to support AI’s energy-consumption needs that it’s the equivalent of a new Apollo space mission every 10 months. (Tech companies are spending roughly $400 billion this year alone on data-center infrastructure, while the Apollo program allocated about $300 billion in today’s dollars to get to the moon from the 1960s to the ’70s.).”

The story behind the story, one that is behind the 40% increase in GDP and almost 80% of the rise in the major stock markets, is that the massive competition behind those seven major IA behemoths’ growth numbers does not present a measurable path from any of them for how to generate a return on investment. Bubble or a series of bubbles?

I’m Peter Dekom, and beware of the manipulative misstatements and spotty anecdotal (vs statistical) evidence from the Trump administration to hide the President’s massively failed economic policies.