How Tariffs Really Work & Why Business News Often Seeks to Scare the Public About Them


By Paul Dowling

Two tweets by Trump, from early in the morning of May 10, 2019:
“We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!”
“Build your products in the United States and there are NO TARIFFS!”

Why Tariffs?
There are two main purposes for instituting tariffs: 1) to raise tax revenue for the government, and 2) to protect domestic industries from foreign competition that is harmful or unfair.  It is also true, according to Business Insider, that “[f]rom 1790 to 1860 . . . [tariffs] produced 90 percent of all federal revenue.”  In the past, tariffs have worked as a net plus for the US economy, to protect against products being sold in America’s domestic market that are so heavily subsidized by a foreign government that their prices become cheap to the point of being ruinous to a US industry.

Trending: Twitter Goes Nuts After President Trump Verbally Chastises Juan Williams

China Seeks to Destroy American Steel
The Chinese have recently attempted to destroy America’s steel industry, by subsidizing their own steel industry so heavily that Chinese steel prices could be lowered to a level below the market value of American steel, thus making Chinese steel so much cheaper that the Chinese prices operate as a trade barrier against native steel companies in their ability to sell their product in their own home market.  The mercantilist Chinese have been able to afford subsidizing their steel price by using their profits from selling other products in the US toward that end.  The purpose of the Chinese government’s dumping of steel in this fashion is ostensibly to force the closure of US steel companies to the degree that America becomes bereft of the ability to produce enough steel to remain economically “steel independent”—that is to say, capable of manufacturing enough steel to meet the needs of its own economy, without calling upon foreign manufacturers to make up any production deficit.

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Steel is a strategically important asset when it comes to being able to defend the United States in time of war, as well as being a necessary component to any new building construction, car manufacture, or many other necessary peacetime production purposes.  Once the US becomes dependent on the Chinese for steel, the risk of being cut off from this necessary element—in the production of planes, tanks, and automobiles—would mean the inability for America to decide its own course of action in international affairs, up to and including the ability to defend herself in wartime, for the Chinese could always cut off the supply of steel, if they disapproved of any American policy or action.

How Tariffs Actually Work
Tariffs are defined by Business Insider as follows: “Tariffs are a tax on imports.  They’re typically charged as a percentage of the transaction price that a buyer pays a foreign seller.”  Only the initial purchaser of the goods produced pays the tax.  So, for purposes of providing an example of this process, let us imagine that a toaster made by the Chinese is purchased by a Hong Kong exporter.  Let us further imagine that the production cost of the Chinese company is six dollars, which would mean the Hong Kong exporter must pay 25% more, due to the tariff being charged.  This increases the price of the toaster to $7.50.  Upon reaching the US marketplace, the toaster continues its journey to a retail outlet, being marked up every time it changes hands along its journey to Target, Walmart, or Amazon.  The final price might be $20.00 or $25.00 once the toaster finally comes to rest on the shelf of the retailer.  The $1.50 upcharge could be absorbed across many middle-men along the way, for purposes of competition against competing brands, or the $1.50 could be passed through to the final price posted by the retailer, raising that price to $21.50 or $26.50.  The final toaster price does not rise from $20.00 to $25.00, or from $25.00 to $31.25, because the 25% tariff is not being charged to Target, Walmart, or Amazon.  If the company in China sells directly to an American importer, the process is much the same, the tariff being charged at the point of first purchase, so the importer pays the tariff at one of 328 ports of entry into the United States.

How Tariffs Affect Sales & Competition
While the final price is not much affected for the consumer who might purchase the Chinese-made toaster, the tariff being imposed does constitute a significant burden to the first buyer of the item.  His taxes have gone up on toasters from China, and everyone wants to avoid taxes.  So the behavior of the importer might be affected in his choice of what to import—toasters made in China for $6.00 that bear a 25% tax (thus costing the exporter or importer $7.50) or toasters made in Vietnam or Mexico for $6.50 or $7.00 that are taxed at 2.4%, thus making them $6.66 or $7.17 in price, respectively—both options costing less than the Chinese toasters.  China is much more injured by these tariffs than American consumers.  The importer is more likely to buy toasters from other sources or discontinue the carrying of toasters altogether.

Some likely consequences of this increase in tariffs on Chinese toasters are as follows: 1) an increase in the demand for non-Chinese toasters, due to simple reduction in the availability of Chinese toasters in the marketplace; and 2) an eventual lowering of the cost of American-made toasters, due to the higher volume of American toaster sales, will result in the ability of American manufacturers to reduce the profit margins they need to stay in business.  If the top American toaster manufacturer can now sell 6 million toasters to wholesalers, instead of only 4 million, the wholesale price being charged per toaster could be significantly reduced, since the total number of toasters being sold has increased by 50%!  Could such a business, that is much more profitable than before, decide to use some of those profits to lower their price for a toaster, thus putting them in a better competitive position?  Of course, this could happen, and it is actually more probable than not that it will, since increasing market share is a tremendous advantage to a company’s future financial stability.

Why So Many Economists Take a Hard Line Against Tariffs
There are at least two reasons that so many economists have taken a hard line against President Trump’s tariffs.  The first reason is that many economists nowadays have been educated—or dare one say “indoctrinated?”—on the issue of free trade, without ever having been taught how fair trade must exist first, before truly free trade can even be contemplated; nor have these economists been educated in the economic history of the United States and how vital industries have often enjoyed tariff protection, often in order to ensure their survival as an essential national resource (such as steel) or as a valued national treasure (such as Harley-Davidson motorcycles).  The second reason so many economists come out against tariffs is because they rely for their income on the publication of their articles by corrupt news outlets; these are outlets that serve the purposes of socialist Democrats and globalist Republicans almost exclusively.

Serving a political agenda of any kind—not just the socialist agenda of the globalists—will always serve to taint how an economist frames economic issues, such as tariffs.  For example, this author has been a fan of Fox Business News for quite some time—since Fox provides some of the more balanced reporting on economic issues now available—but even Fox Business News has reported incompletely on the tariff issue, by failing to point out that tariffs are only applied at the first point of sale.  This is a sin of omission, but a sin nonetheless.

Here is a typical example of reporting by Fox Business News: “While Trump’s move may cause short-term stock market turbulence, it’s great news for U.S. national security and our economy over the longer term. China’s communist government must now recognize that time is short to avoid prolonged pain for its economic aggression and malfeasance.”  This is accurate reporting, but only up to a point.  Since it leaves an incomplete understanding of the mechanism of how tariffs actually work, the reader of the article is left without essential information that might prove necessary to his ability to argue for the existence of tariffs—in his own mind or to the ears of others.  A news article should work to educate the reader, by giving a clear picture of the topic under discussion, and it is educational malpractice indeed when an incomplete education leaves the reader-learner with an inability to discuss, from a knowledgeable perspective, the simple basics of the issue being taught.  Anyone reading—and learning from—the above-cited article, if challenged by the inaccurate assertion that tariffs will hurt Americans much more than the Chinese, cannot defend tariffs on the basis of what the article says.  Such a reader cannot refute the inaccurate claim being made, since Fox Business News has not informed him that tariffs do not actually change the end-price of the product by 25%.

Sidebar Discussion: Does Fox News Sometimes Serve the Purpose of Deep State Propaganda?
Fox News (which recently appointed Donna Brazile as a commentator and Paul Ryan as a board member) employs many people who are far from being puppets of the Deep State (such as Sean Hannity, Tucker Carlson, and Lou Dobbs).  But one must keep in mind that Fox News was founded by Rupert Murdoch, who is a member of the Deep State organ known as the Council on Foreign Relations.  Some other notable members of the CFR are as follows: Businessman George Soros, former Vice President Joe Biden, former President Jimmy Carter, former Carter National Security Advisor  Zbigniew Brzezinski, former Vice President Dick Cheney, former President Bill Clinton, former Secretary of State Hillary Clinton, Supreme Court Justice Ruth Bader Ginsburg, journalist Dan Rather, Clinton Attorney General Janet Reno, actor George Clooney, former President George H.W. Bush, historian Max Boot, former Fed Chair Alan Greenspan, and economist Paul Krugman.  Deceased members worth mentioning might be National Reviewfounder William F. Buckley, President Herbert Hoover, and Arizona Senator John McCain.

The reason that the CFR reflects both Democrat and Republican membership is that the Deep State has always manipulated public opinion by sponsoring what is known as controlled opposition, in the form of aHegelian Dialectic (Synthesis meets Antithesis and results in Synthesis).  If both ends of an argument are controlled, then the final compromise solution can easily be ensured.  In the case of so many of the political compromises of the past, it becomes obvious that, with each compromise struck, the direction of the country has tended to drift more and more leftward, since most of the compromises tend not to be centrist in nature but more to the political left.  Gradually, the effects have been realized over time, if not immediately felt upon the striking of each deal.  As President Trump would say, the game has been “rigged” for years, with Democrats and Republicans merely working things out as puppets of the Deep State, to bring about what George H.W. Bush has so famously called a “New World Order.”  It is this Deep State that so many of America’s politicians serve, rather than serving the people. And it is this Deep State against which American Patriots have rebelled by electing outsider Donald Trump President of the United States.  Trump is not a member of the CFR, nor is he a member of the secret societies or public councils that have been working towards one-world governance and the institution of more and more power in the hands of fewer and fewer people.  (To do more research on the topic of the Deep State, please read “The Deep Structure of the Deep State: Why Trump Purposely Ignores Advice from the CIA.”)

Trump’s outsider status is the main reason that there has been almost universal vilification of Trump by over 90% of those working in the CFR-allied news media.  Incidentally, this has caused many citizen journalists (such as the one whose article you are now reading) to come out of the woodwork to educate the people about issues being obscured by the national fake news media, as well as being omitted entirely. (Facebook and Twitter are now operating as publishers who destroy free speech by censoring the posts of those who love freedom or report the truth.  For example, Facebook allows a “F*ck Israel” page that lies about Israel and which illustrates the killing of a Jewish baby, as well as allowing the posting of anti-Semitic cartoons, published in the New York Times, targeting both Trump and Netanyahu, while shadow-banning any philo-Semitic or pro-Israel posts by this author.)

However, leaving Facebook aside, Fox has been notorious for its unfairness in how it has chosen to support globalist elites in the past, when it has come to presidential politics, including the unfair targeting of Donald Trump during the opening of a presidential primary debate, probably due to his not being an initiate of the CFR or in any way supportive of its one-world government agenda.  It was Bret Baier who asked Republican primary candidates to raise their hands if they could not pledge to support the winner of the Republican primary and could not promise to refrain from running an independent campaign against the nominee.  Donald Trump raised his hand, and, as a result, a large part of America fell in love with Candidate Trump.

Many Americans—who saw what was happening to the country; who saw the corruption of the legacy media, Hollywood insiders, and the Democrat Party; who saw that only an outsider could “drain the swamp” that is Washington, DC—decided right then and there, during the Fox-sponsored debate, that Trump was the guy to do it—for only Trump had the nerve, the guts, to do what it takes, in addition to his being brutally frank and eschewing the political correctness of the Left!  Only Trump would have the intestinal fortitude to institute policies, such as the one instituting tariffs against the Chinese.  And only Trump would take an America First approach to so many other policies and actions, after Clinton, Bush, and Obama had all demurred.  If the American republic survives, it will be wholly due to the election of Donald Trump.  And tariffs will have played an important role in his accomplishing this reality.  For it will be tariffs, along with Trump’s other anti-globalist economic policies, that will lead the way to saving America both economically and politically.  Trump’s economic reset is underway, and using tariffs to get a fair trade deal with China is an important part of it.

Understanding Tariffs Is Only One Issue in the Information War
The matter of tariffs is only one issue of many being reported in the news today.  But, in the information war being fought—between patriots and globalists—there are many such issues that, upon being added together, can result in the effective indoctrination for or against certain kinds of ideas, due to false information that has been touted as true or, in many instances, because correct information has simply been censored.  Fox News, while seldom broadcasting information that is provably false, is often guilty, nonetheless, of omitting important facts, thereby allowing its competitors to win the information battle being fought.

The lesson is this: Always find multiple sources of information when seeking the truth.  News these days must be actively researched, as a rule, and not just passively read and digested.

To Learn More About Trump’s War Against the Deep State, Please See the Following Articles
The Deep Structure of the Deep State: Why Trump Purposely Ignores Advice from the CIA
Russian Collusion, Fake News, & Fake History Too: So, Who Sponsors All the Deception?
Just Like Jackson: The Reason President Trump Hangs a Portrait of Old Hickory in the Oval Office

Who Is Paul Dowling?
Paul Dowling is an American patriot who believes that individual freedom and minority rights—that only a free republic can protect—are the linchpin of Western Civilization.  Paul has written a book on the Constitution, explaining the republican values on which it is based and how they protect against the dangers of a strictly majoritarian system of governance.  The book is called Keeping a Free Republic: Learning the Blueprint for Liberty in the Constitution & the Bill of Rights.  (It is on sale at Amazon, for $6.25 in paperback and $0.99 as a Kindle download.

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