Everybody is talking about these new tariffs as if they’re unheard of. President George Washington signed our first tariffs into law in 1789.
A 5% tariff was levied on imported goods to raise money for the government and encourage domestic production. Since we had liberated ourselves from British rule, we didn’t want to keep sending them our money, and we needed job creation.
Tariffs have been part of our trading policies throughout much of our history.
In 1972, President Nixon visited Red China. It was called “the week that changed the world.” As a result, we began trading with China. There were objections, but the justifying rationale was: “It’s better to trade with them than to fight with them.”
In the early ’80’s, American jobs were migrating to the Far East at an alarming rate. What I found most disconcerting was that our companies were sourcing critical components over there. I wrote a paper about this that included graphs on our balance of trade and circulated it to clients and colleagues.
I was doing work for MIT’s Center for Advanced Engineering Studies, so I gave a copy to Dr. Myron Tribus, its executive director. Dr. Tribus was the original vice president of engineering at Xerox and also had been the undersecretary of commerce in the Nixon administration.
Dr. Tribus had noticed the same alarming trend and had brought his concerns to a cabinet meeting. Unfortunately, he didn’t get very far with that, but was delighted with my paper and gave me valuable feedback.
In 1993, President Clinton signed NAFTA (the North American Free Trade Agreement). H. Ross Perot, a businessman running for president, said, “You’ll hear a great big sucking sound of American jobs going down to Mexico,” and that’s exactly what happened.
In 1994, President Clinton signed GATT (the General Agreement on Tariffs and Trade). It took NAFTA further, essentially opening our markets to the rest of the world. Now that “great big sucking sound” also came from the Far East.
Both NAFTA and GATT were supposed to create American jobs by reducing or eliminating tariffs and other trade barriers. Our trading partners really didn’t lower their barriers as they were supposed to, so we’ve had a negative balance of trade since the 1970s, and it’s been getting steadily worse ever since. It’s the greatest exportation of jobs and wealth the world has ever seen.
Just think of the manufacturing jobs we’ve lost here in New Hampshire. Back in the ’80’s, our largest employer was Digital Equipment Corp. Today, our largest employer is Walmart.
Nothing against Walmart, but manufacturing jobs pay much better than retail jobs. We’ve exported many of our best-paying jobs and replaced them with retail and fast-food jobs.
Back to sourcing critical components overseas — did you notice how difficult buying a car became during and after the pandemic? There was a chip (integrated circuits) shortage. These tiny components control many of the functions in new cars, and many of them are sourced in the Far East. This shortage limited new car production, and many dealers started charging $5,000 or more over the manufacturer’s suggested retail price so they could make more money selling fewer cars.
Hopefully, we’re finally learning the fallacy of sourcing critical components to people who aren’t necessarily our friends. We’re told the administration is using these tariff increases to force our trading partners to lower their tariffs and give our companies a chance. This could get very ugly, very fast.
It seems to already be working in some cases, but I hope it’s not too late. Bringing manufacturing jobs back is tough, because these jobs have become highly automated. People who can’t make change from a dollar will have trouble qualifying for the manufacturing jobs of today.
Even so, manufacturing jobs are what created the American Dream. If we want to become prosperous again, not just for the rich but for everyone, we need such jobs. This could put real pressure on our broken education system to start teaching the skills people need to make a decent living.
Ronald J. Bourque, a consultant and speaker from Salem, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.
