The art of the tariff deal: Another way Trump can boost our economy

Economic gains should come on merit, not be conferred by government favoritism.

Yet the governments of many of our trading partners are beholden to special interests and power brokers who raid the public treasury for their own benefit at the expense of everyone else.

China routinely violates US patents and other intellectual property, for example. Foreign countries often completely restrict American companies’ access to foreign markets or use tariffs and subsidies to channel investment and jobs out of the United States.

That’s why former President Donald Trump and others have called for US tariffs as a possible remedy.

But tariffs can be used both destructively and constructively, and using them is a fine art.

When applied recklessly and arbitrarily, tariffs can hurt American families by imposing higher costs for household items without creating jobs.

On the other hand, strategic tariffs can help break up foreign cabals and create a level global economic playing field, creating good jobs here at home.

When used correctly, a US president’s threat of a new tariff is a direct attack on foreign special interests, a way to break their illegitimate control over their governments.

The Trump administration successfully used the threat of tariffs to suppress European efforts to push for carbon taxes and digital services targeting American industries.

His administration used similar threats to open markets in Asia to American exports. During the first three years of the Trump administration, before the COVID pandemic, exports of US goods to Japan and South Korea increased by approximately 14% and 27%, respectively.

But while the Trump administration aggressively used tariffs to gain negotiating leverage for better market access and other diplomatic and security purposes, the Biden administration has dropped half of the equation.

Instead, it has allowed all these impediments to trade to remain, without pursuing whatever larger goals Trump was trying to achieve by issuing them in the first place.

What President Biden has left us with are higher barriers to trade and none of the benefits.

Tariffs and international tax policy can also be used to eliminate imbalances in the global tax system that for decades have stifled our economy and helped cripple American industry.

Most of the industrialized world taxes domestic consumption. This means that countries tend to tax products consumed domestically—whether produced there or imported—and tend not to tax domestically made products that are then exported abroad.

The American tax system, on the other hand, taxes productionno consumption

The imbalance means that exported US goods face a double layer of taxation: once under US trade taxes and a second time under foreign consumption taxes.

This layer of double taxation hinders US industrial development and puts our workers at a disadvantage. It also means that imports into the United States tend not to face many taxes.

In effect, our tax system favors foreign production over American production, and then taxes our exported goods twice as much.

It’s “America Last” for workers and employers alike.

A tariff-like tax, known in federal policy circles as a border adjustment tax, could help solve this problem. This program would subject all imports to a uniform tax and exempt all US exports from taxes.

This solution would correct the imbalance and end this decades-long penalty on American domestic production.

It would also raise significant federal revenue—a 10 percent adjustment, for example, would require roughly $1 trillion over 10 years.

This new revenue would be enough to powerfully reduce other taxes, allowing, for example, full and immediate business deductions for research and development work, and for investments in new physical capital such as factories.

This is a roadmap for careful and productive tariff policy, which can be used as a tool to negotiate fair trade deals, to remove current penalties on domestic production, and to raise revenue that can be applied to tax cuts in in favor of growth.

Mastering the art of tariff policy with a tariff-like border adjustment tax could be one of the strongest tools at the next president’s disposal to jumpstart our economy, free up American industry, and allow families to Americans prosper.