When I was in school in the 60s and early 70s, we were taught that protectionism was a big no-no in a free market. So, what is protectionism? Well, it’s basically when a country tries to protect its own industries from foreign competition by putting taxes on imported goods. According to Dartmouth economist Douglas Irwin, tariffs have several main goals: to raise money for the government, limit imports, protect domestic producers from foreign competition, and to reach agreements that reduce trade barriers. From 1790 to 1860, average tariffs rose from 20% to 60% before dropping again to 20%. From 1861 to 1933, which Irwin calls the “restriction period,” the average tariffs jumped to 50% and stayed there for a while. From 1934 onwards, which Irwin calls the “reciprocity period,” the average tariff dropped a lot until it reached 5%.
For the purpose of making a point without argument, I’m going to categorically state that in this present time, tariffs are being imposed by the US to make foreign governments reduce the tariffs on our own exported goods. Hypothetically, this should lower the trade deficit with the world, making American goods cheaper to import. We knew these tariffs were going to come if we elected Donald Trump last November. At that time, they were called potentially harmful to the economy as they would raise prices for all consumers in the process. This was the position of those on the left. It still is. Much of what we consume, whether in whole or in part, especially with regard to any manufactured goods, contains items made overseas, especially China. Right now, the US is imposing tariffs on imports, which means it will most definitely cost us more to purchase most things. Even if automobiles and anything else manufactured in the US use American parts, there is also a plethora of components that come from China and Mexico.
These tariffs are coming at a time when inflation over the past four years has been at historic highs, meaning Americans have less spending power. If the last four years of economic decline had happened under a Republican administration, it would have been called a recession by the media and the Democrats. Here we are now under a Trump/Republican administration, and it won’t be long before the continuation of this economic slump is in fact called a recession, or the Great Recession 2.0. I’m not going to debate the effectiveness of tariffs in reducing inflation. I can’t do that. President Trump has mentioned that there might be some pain as we go through this transition, and to paraphrase Jack Nicholson in A Few Good Men, “We can’t handle the pain!” We’re not in any position to, not economically.
Tariffs have also been used in the past to gear up the manufacturing sector in the US, to encourage us to build factories here. We should absolutely be doing that, but this revitalization of American infrastructure cannot happen overnight, let alone in four years. We can’t handle four more years of stagflation as we retool our infrastructure, especially considering we cannot produce the steel we need and will have tariffs imposed on imported steel. American corporations have spent the last 50 years shipping most of the country’s manufacturing capability offshore in their quest for greed and to minimize their exposure to union costs in this country. We are now wholly dependent on foreign goods and components to sustain our ‘buy it now’ culture in a world where things aren’t really built to last. Building things that last forever kills new replacement purchases. Brick and mortar retailers, as well as those that operate online, rely on us restocking or replacing our favourite items, otherwise they die off as they have never fully recovered from the COVID-19 shutdowns.
Here’s the real problem. We’ve told our best friend here in North America, Canada, to pound sand. We started a trade war with our brothers and sisters up north. While Canada has 39.1M people, it is the second largest country geographically in the world, behind Russia. It is rich with natural resources, all of which we need to reindustrialize the continent, both in the US and Canada. I don’t care if this is meant as a tactic by the Trump administration to force a political change in Canada, or lower import tariffs on American goods, but this is not how we should behave as a civilized society. Certainly, it’s not how Canada behaves. It’s how gruff Americans behave and it’s not nice. We’re exchanging tit-for-tat language and tariffs between two best friends that basically live together and it’s not sustainable. The people of Canada are as patriotic as Americans, if not more so. While they may want a change in their own government, they are patriots both left and right politically and they equally regret being bullied by our president. They hold it against our own citizens, our businesses, our industries, and our territory, cancelling their trips to and through our country.
Here is what I’d like to see as an initiative of our president and federal government: let’s put ourselves on an “economic war footing” with our best friend, Canada. Let the two of us work together with our combined work forces, natural resources, and future manufacturing capabilities to build a strong North American Union. If China and Russia are not our friends, we need to start yesterday by finding every way to strengthen our collective economies. Let’s do it by continuing the joint exploration, development, production, and refinement of our mineral wealth. Let’s employ the latest technological advancements to, in short order, build modular factories quickly as if we were going to war and we had no choice. With regard to Canada, Mr. President, More Carrot, Less Stick!
Ellis Martin is a seasoned broadcast journalist, marketing consultant, and serial entrepreneur with a career spanning over four decades, primarily focusing on the natural resources and biotechnology sectors. He studied business administration and broadcast journalism at Northeastern University in Boston and the University of New Mexico.
In 1999, Martin founded The Ellis Martin Report, a global radio program and syndicated news show that showcases potentially undervalued public companies for consideration by discerning investors. The program features interviews with financial analysts and entrepreneurs, offering insights into various sectors, including precious metals, biotechnology, and more. The Ellis Martin Report airs globally through radio and podcast formats, reaching an audience of over 5 million potential investors. His program Money Talk Radio can be heard daily at 930am in South Florida.
martinreports@gmail.com
