Tariff

Tariffs are a hot topic these days. We all know that it’s a tax charged to countries in order for those countries to import goods and services into our country. There are a number of political reasons to do this, but that’s not what I’m going to focus on. To understand where I’m coming from, we need to look at the bigger picture.

History

When World War 2 ended, America was the last industrial nation left, for the most part, in tact. It made sense for America to take the lead financially in rebuilding the countries devastated by the war. America lead the way. As countries started to get their footholds, we then turned to trade. Again, as one of the richest nations in the world, it made sense for us to negotiate deals that weren’t always in our nations best interest. This was necessary at the time to assists other nations in regaining their financial stability while they rebuilt their economies. It also helped American companies to have a presence (and revenue) coming from these other countries. We went easy on the terms.

Fast Forward to Today

Now let’s fast forward to today. In my opinion America made a mistake. We continued to allow easy terms with respect to imports and we also continued to to allow easy terms with respect to world initiatives (climate control, NATO, etc.) The problem here is that while America continued to do this, other countries were getting their own financial footing. They of course welcomed the deals with America. America didn’t pull back, rather it plowed forward. America would become the police of the world and open our markets to all. While this was going on, other countries welcomed it. Let America pay the lions share. This, again, in my opinion is the problem.

Today

Over decades of America paying the lions share, other countries started to expect it. No longer was the aim to rebuild the countries of the world decimated by war. No longer was the intent to help other countries rebuild their economies. Today other countries have become the spoiled children expecting their parents to pay their way. Sure they also assisted in some way, but the lions share was still on America.

Costs

Today America has one of the largest national debts. (https://worldpopulationreview.com/country-rankings/countries-by-national-debt). Our trade deficit is the highest in the world. (https://www.visualcapitalist.com/the-worlds-top-10-highest-trade-deficits-by-country/). The cost for doing business the same way we have since the end of World War 2 is causing us to go broke.

Summary

Obviously the above is a VERY general overview. The topic is rather complex because it has been building for decades. The bottom line is that America has no choice and must get its financial house in order. One way to do this is by having better terms with respect to trade. It also means the amount of money America spends on other world initiatives must be re-evaluated . If America wants to be a viable country it must get it’s financial house in order. I suspect pain at first. Other countries are so used to America paying the lions share that they now expect nothing less. I think it will be painful at first but I also think it’s a necessary evil.