The Case for Tariffs

Donald Trump’s former trade rep, Robert Lighthizer, says it’s not that free trade doesn’t work; it’s that it doesn’t exist.

Good Morning!

Here are today’s highlights:

• Lou Mosca is concerned about the many challenges confronting business owners right now.

• Gene Marks says Microsoft’s latest AI offerings are promising, but you might want to hold off a bit.

• Trump’s government cutbacks are affecting private businesses around the country.

• Before the fires, State Farm’s low rates shocked its competitors.

INTERNATIONAL TRADE

Robert Lighthizer says the real goal of Trump’s tariffs is free trade: “The international trading system has failed America and many other countries around the world. No one has done more than President Trump to bring attention to this broad failure. By imposing tariffs on China (and threatening to impose them on Mexico and Canada), he has taken an immediate measure that is driven by an urgent national security issue — the fentanyl crisis, which is killing thousands of our citizens every month. But using tariffs as leverage on security matters should not be confused with the fundamental fact that the global trading system has failed our country. It has not faltered because free trade doesn’t work. It has failed because free trade doesn’t exist.”

• “China, which recently announced a nearly $1 trillion trade surplus for 2024, has demolished the system. But it is not China alone: Other chronic surplus-trade countries, such as Germany and Vietnam, have also adopted policies across their economies intended to shift resources from their consumers to their manufacturing sector to increase exports.”

• “The innocent parties are countries like the United States and Britain that have consistently run sizable trade deficits. Policies that produce large deficits, even if they include tariffs, are not protectionist. They are the opposite. This is why countries with democratic governments and mostly free economies should come together and create a new trade regime. This new system, formalized by agreement, would focus on the key principle of balance for the parties involved in the exchange.”

• “In the last 20 years, we have transferred some $20 trillion of our wealth (in the form of equity in our companies, debt and real estate) to the governments and citizens of the exploiting countries. The aggressors now own both those assets and the future income of a large segment of the U.S. economy. We and our children are poorer and our ostensible trading ‘partners’ are richer.”

• “Finally, some will claim there would be inflation. But ultimately, a system that encourages competition and balance will help keep prices down. The people who unfairly benefit from the current system will argue that such a system would not work. But we have done it their way for decades, and that has failed. It is time to try something different.” READ MORE