Tariffs are an Admission of Failure

by Jul 28, 20258 comments

The US Government is using tariffs to correct an imbalance in imports versus exports. The US feels that it is unfair for countries around the world to sell more stuff to America than they buy from America. Thus, the government hopes that by making imports more expensive citizens may be dissuaded from shopping abroad.

But this avoids the real issue, which is that America buys foreign goods because they are better than American-made equivalents. America excels in technology and digital services. And that is about it.

The top 16 best-selling passenger cars in America are all from overseas (although, we lead the world for trucks). If US-made cars were better, wouldn’t we be buying them? Tesla is the leading electric vehicle manufacturer, but BYD (Build Your Dreams) is closing in fast and has overtaken Tesla globally.

The Germans have cornered the market for precision engineering, engineered machines, equipment and parts. The Italians, Spanish and the French lead the fashion world. The Chinese and Japanese have locked up the market for computers and cellphones. China supplies 31% of our pharmaceuticals and India provides another 26%. Seventy percent of rare earth minerals come from China and they process 90% of them. In addition, America does not rank in the top ten countries for education or healthcare – essential for a thriving population and economy.

Foreign countries have invested in manufacturing and infrastructure, making logistics, and freight transport cheaper and more efficient. America has abandoned rail for freight transport in favor of trucks and hollowed out its manufacturing capacity, ceding this to other countries. Meanwhile, Japan and most of Europe have trains that travel at more than 500-600 kilometers per hour – top speed for the US is Amtrak’s Avelia Liberty train at 300 kilometers per hour.

All this suggests that other countries have invested in their specialties and outpaced the US. Most people would conclude that the solution is to up our game, not penalize countries who have mastered production and delivery of their products and make better stuff than we do. If we were much better at making things, people would buy them.

We don’t need tariffs.  We need a coherent investment strategy in education, manufacturing and infrastructure to raise the level of our capacity and quality ASAP. Then other countries would be complaining that THEY have a trade deficit!