By Laura Schmitt
Trump is the mastermind of “The Art of the Deal.” Through that lens, his unprecedented use of tariffs is genius. Those in the business of selling panic, aka “Panicans,” claim an “unhinged” Trump is provoking trade wars, economic depression, chaos, and possible actual war. Reality is quite the opposite.
Trump, a Wharton School of Finance graduate and an experienced student of the “school of life,” has spent the last 4 years contemplating the implementation of his long-talked-about tariffs. His tariffs are what 79 million Americans voted for. The pandemic underscored the vulnerability of an America dependent on adversaries for its PPE, pharmaceuticals, computer chips, rare earth minerals, and steel needed for military equipment. Giving China monopolies over needed goods gives them leverage to hold us hostage. At one point, China toyed with cutting off our medicines. Returning manufacturing to America is a national security necessity.
Are these Tariffs permanent? Are they intended to increase revenue, reduce taxes, or reduce the national debt? Are they purposed to create political leverage or protect national security? Are they meant to promote U.S. manufacturing and bring back jobs? To some degree, the answer is “all of the above” and more.
The “Art of the Deal” advises to create urgency, get parties to the table, use leverage, and “stack the ask.” Hence, the April 2 announcement of worldwide tariffs created the urgency. Its blitz-like speed brought over 75 countries rushing to our table. They were rewarded with a 90-day pause, reducing tensions for the next phase. Now Trump is “stacking the ask,” bombarding friends and foes with his lofty political and economic wish list. He will unapologetically ask for the moon on topics specific to each country. Nothing ventured, nothing gained. “Stacking the ask” allows both sides to claim wins and feel good about the deal. He doesn’t want to create rabid dogs who will bite back. As countries fall in line to set up meetings in Washington, Trump is softening his rhetoric, allowing them to save face, ensuring the best long-lasting deals and friendships.
Where does our leverage come from? Unpredictability maximizes Trump’s leverage. He knows when to show his cards and when to hide them. Moreover, our deck is stacked with aces in unduplicated intrinsic leverage as the greatest consumer economy on earth. The world’s economies are dependent upon our ability to buy from them. China’s 1.8 billion people are too poor to approach anywhere near what we 347 million Americans buy. It is much easier to replicate a manufacturing economy than a consumer one. But, it is best to have a blend.
Only China reacted defiantly, resulting in our 125% tariff on them. Our reliance on Chinese goods is akin to our appetite for junk food. It’s cheap but very unhealthy. In the long run, paying more for American products will make us both wealthier and healthier. In the meantime, no taxes on tips, social security, overtime, and other domestic fixes will ease any pain as our factories build.
In addition, Trump is using tariff negotiations to form coalitions with other countries to reduce China’s impact economically and politically. Our uncoupling from China would be a good thing. Being so reliant on another country, especially an adversary, is dangerous. It isn’t just their abusively manipulated trade practices or theft of our intellectual property, but recent reports verify that it was the military exercises near the Wuhan gain-of-function bio lab that first infected 7 of our military personnel, along with international allied servicemen, with COVID in October 2019. Their return through Seattle airport made Seattle the first COVID epicenter on US soil. Like the long arc of a rainbow, Trump’s “Art of the Tariff” has a long overdue reach of accountability for China. Trump is Picasso! Color me happy!
