Rich or poor, religious or not, every leader of every Southern state in 1860 opposed tariffs and embraced slavery. In the North, where there was no slavery, everyone favored tariffs to protect both American industry and wage earners from unfair foreign competition.
Today, Paul Ryan, Cato Institute or Heritage Foundation invariably promote cutting Social Security, Medicare, Minimum Wage, in fact they despise anything that helps the middle class. On the other side, CNN, Paul Krugman, WAPO and the New York Times say they oppose cuts to these necessary programs.
So, what’s happening here. Why are the leaders of the far left and far right joined together to fight against America seeking fair trade through fair tariffs?
Both sides argue that an American tariff on imported steel will cause a trade war with the world. They both ignore the astounding, but not secret, fact that the European Union last year announced this:
The European Commission explained it had set final duties of between 18.1% and 35.9% for five years on producers, including Bengang Steel Plates, Handan Iron & Steel and Hesteel.
This compared with provisional rates in place of 13.2% 22.6% , following a complaint by EU producers ArcelorMittal, Tata Steel and ThyssenKrupp.
The EU has just threatened America with tariffs on bourbon and motorcycles if we also dared to protect our steel industry with a 25% tariff.
But German manufacturers quickly reminded their government that the U.S. tariff on imported cars is 2.5% and the tariff in Germany on American cars is 10%. That means a $20,000 American car costs $22,000 in Germany, and a $20,000 German car costs $20,500 in America. Talk about poor trade agreements.
But it all gets worse when we bring China into the picture. They really know how to protect their industries.
For example, a Jeep Wrangler, manufactured in Toledo, Ohio, has a suggested retail of $40,530 in the United States. A little wrangling with the dealer could probably lower that.
Try to sell that same Jeep in China and the price will be $71,000, mostly because of taxes that Beijing charges on every car, minivan and sport utility vehicle that is made in another country and brought to China’s shores.
A $40,000 Jeep made in China would sell for $41,000 here. Again, unfair trade.
Partly because of China’s taxes, less than 5 percent of cars in the country are imported, compared with one-quarter in the United States. Major American, European and Japanese car makers have built huge assembly factories in China with the help of local partners, contributing to China’s rise to become the world’s largest automaker.
And then there is Japan, a nation we defeated in World War II, but is now the victor in manufacturing dominance. Last year, the European Union decided to scrap its 10% tariff on passenger cars made in Japan over seven years under an envisaged bilateral economic partnership agreement (EPA). Once again, the U.S. tariff is 2.5%.
As part of the negotiations, the EU has also agreed to eliminate its 14% tariff on television sets imported from Japan over five years, but it needs at least seven years to abolish the automobile tariff.
Despite media reports that President Donald Trump “invented” tariffs or brought them back from the grave, the world is full of protective policies for national industries. These include not only tariffs, but so-called import duties, as well as a near universal (except the U.S.) Value Added Tax (VAT). The latter imposes about a 10% to 100% tax on products sold in the home country and no VAT on the same products shipped to America. The VAT also applies to imports, causing a dramatic price increase.
For the uninformed, all tariff revenue goes to the federal treasury, meaning tariffs could allow lower other taxes, allow investment in our roads and bridges, or even fund minimum free healthcare for all citizens.
Little has changed in the history of tariffs in America. Indeed, there was no income tax levied for many decades and the federal government was financed by import and other duties. Our vast economic growth came after the Civil War collapsed the South’s slave worker economy and its dependence on imports.
The South hated tariffs, because it feared retribution against its exported agricultural products. Then, like now, Southern “gentlemen” argued that picking cotton (or today’s grapes, apples, oranges) was a “job no American wanted to do.” Slavery was the cheapest form of labor, just as illegal immigrants are the lowest compensated workers. The South didn’t invest in factories, but did spend a fortune on slaves. A single male cost between $1,000 and $1,800 in 1860 gold money at then $20 an ounce.
Slavery forced the rest of Southern Americans to compete for work at the lowest wage possible. Owners used the slave and low wage workers to establish an unequal society of very rich and very poor.
In 1860 the Senate membership was politically half slave states and half free. The free states wanted tariffs to protect their growing Northern industries and the millions of jobs created. The South wanted cheap imports. When pro tariff Abraham Lincoln won (by a plurality, not majority of votes), and the control of the Senate would change with the next state to enter the Union, the South feared tariffs and went to war to prevent them.
Protecting American industry with import duties was the norm until the world bank globalization era that began after Richard Nizon opened China to trade in 1972, and reached its peak with Bill Clinton’s push to allow China membership in the World Trade Organization.
Nixon and Clinton – strange bedfellows, but not as strange as the two Pauls – Ryan and Krugman.