Recently, a Wall Street investor selected by President-elect Trump for the Treasury secretary position, has come forward to defend tariffs against criticisms from economists. In an op-ed piece, the investor argued that the common belief that tariffs function as a 'sales tax' is misleading and incorrect. He emphasized that the opposition to tariffs is more rooted in political ideology rather than sound economic reasoning.
The investor highlighted the historical significance of tariffs as a tool for generating revenue and safeguarding strategically important industries in the United States. He also pointed out that President-elect Trump views tariffs as a negotiating tactic with trading partners, adding a new dimension to their use.
Before the introduction of the individual income tax through the 16th Amendment, tariffs served as a primary source of federal funding. The investor referenced Alexander Hamilton, the first Treasury Secretary of the United States, as a proponent of tariffs. Post-World War II, there was a shift towards multilateral tariff disarmament under the belief that free trade would lead to widespread prosperity and political freedom. However, the investor argued that these predictions have not materialized.
The investor raised concerns about the negative impact of open markets on the U.S. manufacturing sector, attributing it to the exploitation of American openness by other countries. He advocated for tariffs as a means to protect American interests and address national security vulnerabilities.
Furthermore, the investor highlighted the utility of tariffs in advancing the President's foreign policy goals. From encouraging allies to increase defense spending to securing cooperation on various issues, tariffs can play a pivotal role in achieving diplomatic objectives.
Lastly, the investor emphasized the revenue-raising potential of tariffs, citing the substantial amount of goods imported by the U.S. annually. With the U.S. being the largest importer globally, the investor argued that the country holds significant market power that can be leveraged through tariffs.
