BETTER THAN TARIFFS

I want to address some misconceptions about tariffs (again) and offer superior alternatives that could better serve our economy.

By now, many people realize that Karoline Leavitt, Trump, and Howard Lutnick were incorrect when they claimed tariffs were taxes on foreign countries or foreign companies.

If you want to read my suggestions for superior alternatives to Trump’s tariffs, skip to the end of this substack.

Tariffs: A Tax on American Consumers and Businesses

I’ve said it since day one, and I will remind people again: a tariff is a tax on imported items that must be paid at the border before receiving your product.

This tax is paid in the United States directly to the Department of the Treasury, headed by Scott Bessant. By all accounts, Bessant is being referred to as "the adult in the room" who advised Trump to pause these outrageous, irrational tariffs. Trump's approach resembles a protectionist racket—a mafia-like "pay up or I'll break your legs" tactic that lacks diplomatic finesse.

Tariffs are a tax hike on the individual or company importing a product. Companies either absorb this cost from their profits or pass it down to consumers—usually it's a combination of both. Trump is simply wrong when he claims that other countries are paying these taxes. Who would they be paying it to? No country has the authority to tax another sovereign nation.

By the way, the president lacks the constitutional authority to issue tariffs anyways (read my substack about that here). While Congress has delegated some emergency powers to the executive branch through specific laws, Trump has invoked a completely fake, phony, and fraudulent "national security emergency."

Friends, what was so broken that needed to be fixed by way of retaliatory tariffs? We are the world's wealthiest country and the number one exporter of services worldwide. As a service-based economy, we've evolved through the typical development phases of advanced economies: agricultural phase → manufacturing phase → service phase.

Being the world's leading service exporter is an achievement, not a problem. When Trump characterizes the trade deficit as problematic, he fundamentally misunderstands economics. A trade deficit is simply a fact, not an economic indicator of weakness. Some economists argue that certain trade deficits are beneficial.

Consider this: I run a 100% trade deficit with my grocery store. I give them money and import their products into my home without selling them anything in return. In a free market, I can shop around at other grocery stores for the best products at prices vendors are willing to sell and I'm willing to pay. That’s economics at a very basic level.

Trump already tried tariffs in 2018 when he started his trade war with China. The results were clear: more than 150,000 manufacturing jobs were lost in the aftermath. In 2019, we saw increased bankruptcies among small businesses. This makes sense—if you're a small business importing items and suddenly face higher costs, you're at risk.

Tariffs damage not just our economy but also our international relationships and reputation.

So, tariffs are a tax hike on American consumers. They are definitively a tax on companies that must then give that money to the government. Why should they have to do this? It doesn't make sense to me why companies can't have the ability in a free market to select where they want to get their products and from whom.

If you've ever run a business or worked in one, you know that supply chains—finding your vendors and suppliers who will provide you with materials, whether from your own country or a foreign one—are built on relationships. These relationships develop over time, and suddenly all of that is going to be damaged. That is what Trump is doing: not only damaging supply chains but also damaging our reputation.

Why would a company want to invest in the United States with all this volatility and uncertainty? Even if a company wanted to invest here, what bank would loan that company money to invest in such an uncertain environment? You might tell me, "Well, all these companies are bringing back manufacturing." Some of them had those plans on the books before Trump was even president, and others have only pledged to do so. You have to think this all the way through. It's actually quite simple when you apply critical thinking and logic.

These companies are taxed, and the money goes to the Department of the Treasury, so it is a type of revenue increase. People will say, "Well, why can't we go back a hundred years ago when these tariffs replaced our income tax?" The government was spending much less money a hundred years ago, and back then we weren't a service economy—we were a manufacturing economy, as I described earlier. Because the government was smaller and wasn't spending as much money, they didn't need to raise as much revenue.

I did a deep dive in a previous video here. I showed exactly the volume of imports we're bringing into this country. Even if we were to impose a 100% tariff on every single import, it wouldn't even come close to replacing the revenue from income tax.

My Background

This happens to be an area of expertise for me. With a master's degree in international policy studies, I've extensively studied international trade and relations. I've long been fascinated by economic systems, particularly investigating why certain systems result in greater prosperity, well-being, and peace for the greatest number of people across countries. While our capitalist system isn't perfect and has examples of corruption (which may increase with these tariffs), it has proven effective overall.

When I initially pointed out that Trump, Leavitt, and others were wrong about tariffs, many responded by telling me to "stay in my lane." This is my lane, so I'm happy to share accurate information.

Superior Alternatives to Tariffs

Instead of harmful tariffs that hurt everyone, here are better approaches:

→ Work toward reducing trade barriers: Countries Trump mentioned already have complex trade agreements with the United States. These agreements were carefully negotiated over months or years. Renegotiating through proper diplomatic channels would be more effective than unilateral, retaliatory tariffs.

→ Reduce personal income taxes across the board: Allowing people to keep more of their earnings stimulates spending, investment, and charitable giving. If Americans could keep 75-80 cents of every dollar earned instead of just 50 cents, they would invest in businesses, purchase goods, and drive economic growth.

→ Reduce corporate taxes: Lower corporate taxes enable companies to reinvest in growth, hire more employees, conduct research and development, and create more competitive products at better prices.

→ Reduce payroll taxes: This would increase take-home pay and reduce employment costs.

→ Decrease regulations: Excessive regulations strangle manufacturing in this country. Regulatory compliance departments cost companies significant resources, difficulty, and money that could otherwise be invested in productivity and growth.

→ Maintain 100% bonus depreciation: This accounting provision allows companies to write off capital investments in the first year rather than depreciating them over decades, freeing up capital for immediate reinvestment.

→ Offer targeted industry incentives: Government could offer certain industries specific incentives at local, city, county, or state levels, including deferred taxes or other favorable conditions for manufacturers.

These strategies have been proven to drive economic activity, increase wages, create jobs, and result in higher productivity and standards of living. Why ignore these tried-and-true strategies for the bizarre experiment of tariffs that history shows harm everyone involved?

Read Next:

TARIFFS: Clearing Up the CONFUSION with FACTS

Trump's Terrible Tariffs are Tax Hikes in Disguise