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Hidden Tax Hikes in Trade War Threat

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Democratic presidential candidate Hillary Clinton addresses Service Employees Union (SEIU) members at the union's 2016 International Convention in Detroit, Michigan, May 23, 2016. REUTERS/Rebecca Cook

Both Democrat Hillary Clinton and Republican Donald Trump have broken with the 70-year consensus on free trade, with Trump threatening a 45 % tariff on imports from China, Mexico, and other countries on his enemies list. The problem is that tariffs don’t really tax foreign countries and companies; it’s a tax on American consumers, who must either pay more for imported products they want, or pay more for American-made items they don’t really want.

In terms of creating jobs, far more workers in the US make items for export than the meager number of new positions possibly gained by restricting imports; economists agree a trade war would cost jobs rather than creating them.

With today’s global economy and enhanced transportation of goods, the promise of new protective tariffs—a punishing tax hike on American consumers—illustrates the wisdom of H.L. Mencken’s statement that “for every complex problem there is an answer that is clear, simple … and wrong.”

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  1. Rich  •  May 18, 2016 at 5:00 pm

    Oh no! Someone is suggesting we do something different. A departure from the policies of the last 70 years may do us a bit of good.

  2. American  •  May 19, 2016 at 1:17 am

    Baloney! Read 'Free Trade Doesn't Work' by Ian Fletcher and 'Cornered: The New Monopoly Capitalism and the Economics of Destruction Paperback' by Barry C. Lynn. I'm a straight A MBA whose studied economics intently and Donald Trump's socio-economic platform is going to resurrect our dying domestic labor market. The necon car has crashed Medved. Why don't you get out of it before it catches fire and join us in making America great again.

  3. Rizzo  •  May 27, 2016 at 8:32 am


    Ian Fletcher is a quack, and basically so are you. I'm not sure what MBA program you're attending as a "Straight A" student, but if that's who you are being informed by, I would demand a refund. You need to expand your breadth of knowledge and sources of information that you rely upon.

    • American  •  May 27, 2016 at 1:11 pm

      Your ad hominem only belies a lack of character which is usually a result of ignorance (name calling being the last resort of someone unable to make a legitimate argument).

      Ian Fletcher is a senior economist and research fellow, educated at Columbia and the University of Chicago, and one of America's foremost experts on the problems of free trade.

      No refund is necessary. But you do need to reinvent yourself from an ignorant name caller to a person worth listening to because they have a legitimate argument. I wish you Godspeed toward reinventing yourself from a nasty ignoramus to someone that has accurate and meaningful content to contribute. Of course, a good education will aid you in this. And, if I may suggest, strive for high marks as I did for which I have zero regrets. EOM.

      • Rizzo  •  May 27, 2016 at 2:43 pm

        You can start your re-education by reading Adam Smith, or you can just keep on quackin' little Ducky.

      • American  •  May 29, 2016 at 3:17 pm

        I read Smith's publications many years ago in college Rizzo. The problem with ideologue's like yourself is that when the consequences of your ideology refute your ideology, you still cling to it (while lashing out at everyone around you that explains why it is not working).

        Even if Adam Smith's antiquated treatise works, it requires everyone to implement that paradigm for it to work. The opposite has occurred. We've implemented a form of free trade with trading partners that did not, who merely exploited our economy for their benefit while remaining protectionist.

        Take China, for example. From 1990 to 2013, China’s share of exported manufactured goods on the planet grew from 2.3% to 18.8%. In some areas of American life, Chinese market penetration neared 100% while trade deficits mounted to sums never before seen before in human history.

        China's rise was not organic. China became the largest economy in the world at the expense of the U.S. parasitically exploiting the free trade we implemented while remaining ardently protectionist themselves. They played chess with a U.S. partner who removed their queen and both rooks before starting the game.

        They took the enormous transfer of American jobs, American capital investment, American invention/innovation/idea creation, etc… from us like taking candy from a baby that offered all their candy willingly because the baby is composed of ignoramuses that think like you.

        In some areas of American life, Chinese market penetration neared 100% through a combination of offshoring, outsourcing of U.S. contracts, and insourcing of Chinese firms into the U.S. to compete directly against U.S. firms right on U.S. soil too. That's just one example, there are many foreign interests engaging in the same behavior of exploiting the U.S. "free" trade paradigm for their benefit but to the detriment of our national interest and the American people.

        Free trade has failed the United States. Along with mass immigration, free trade destabilized our domestic labor market glutting it with an oversupply of labor as demand dwindled resulting in depressed labor participation rate, stagnation in real wages, and skyrocketing income inequality/wealth inequality.

        It resulted in ever greater numbers of Americans on social services, drove the national debt to heights never before seen in human civilization with an annual interest expense so large it's now almost a half a trillion a year in the federal budget. It's endangered our nation's long term interest by building up our largest potential enemy's military all while dampening our political ideology's influence in the global marketplace of competing political ideologies. Etc…

        I could write a three volume book in detail explaining how what we've done has hurt our culture, our long-term national interest, and the socio-economic position of most of our nation's people.

        But then, Ian managed to summarize much (not all) of the trade aspect in just one. Ian and Trump are correct. You are not. Smart trade, not "free" trade must be implemented and done so correctly. Adam Smith was wrong that everyone benefits equally. There ARE always winners and losers in trade ESPECIALLY when one of them is open and nobody else is. We need to stop losing and start winning again.

        "Fletcher has written a powerful and refreshing critique of some cherished assumptions held by mainstream economists. It is uniformly insightful, often brilliant, and remarkably readable. Obama’s team should read it – and soon." —George C. Lodge, professor emeritus, Harvard Business School.

      • Rizzo  •  May 29, 2016 at 10:06 pm

        Harvard Business School… Oooooh, I am so impressed! Who are you going to quote next, Elizabeth Warren?

        The Truths of Free Trade

        Free trade increases prosperity for Americans—and the citizens of all participating nations—by allowing consumers to buy more, better-quality products at lower costs. It drives economic growth, enhanced efficiency, increased innovation, and the greater fairness that accompanies a rules-based system. These benefits increase as overall trade—exports and imports—increases.

        Free trade increases access to higher-quality, lower-priced goods. Cheaper imports, particularly from countries such as China and Mexico, have eased inflationary pressure in the United States.1 Prices are held down by more than two percent for every one-percent share in the market by imports from low-income countries like China.
        Free trade means more growth. At least half of US imports are not consumer goods; they are inputs for US-based producers, according to economists from the Bureau of Economic Analysis. Freeing trade reduces imported-input costs, thus reducing businesses’ production costs and promoting economic growth.
        Free trade improves efficiency and innovation. Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The result is higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities.2
        Free trade drives competitiveness. Free trade does require American businesses and workers to adapt to the shifting demands of the worldwide marketplace. But these adjustments are critical to remaining competitive, and competition is what fuels long-term growth.
        Free trade promotes fairness. When everyone follows the same rules-based system, there is less opportunity for cronyism, or the ability of participating nations to skew trade advantages toward favored parties. In the absence of such a system, bigger and better-connected industries can more easily acquire unfair advantages, such as tax and regulatory loopholes, which shield them from competition.
        Myth vs. Reality

        Myth: More exports mean more wealth.

        Reality: It is the total level of trade—exports and imports—that most accurately reflects American prosperity. Prosperity is defined by the breadth and variety of what Americans are able to consume. More exports increase wealth only because they allow Americans to buy more imports and give non- Americans greater incentives to invest in America, helping the US economy grow. Restricting imports leaves Americans worse off.

        Poorer Americans suffer more from tariffs than higher-income people. Not only do they spend more of their income on consumption goods, many of the goods they consume are subject to higher tariffs than more expensive goods of the same type.3
        For example, imported cheap sneakers can face a tariff as high as 60 percent, while men’s leather dress shoes are subject to an 8.5 percent tariff. Similarly, plain drinking glasses face a tariff of nearly 30 percent, while expensive crystal glasses are taxed at 3 percent.
        Myth: Free trade means jobs go overseas.

        Reality: Free trade does not create more jobs, but neither does protectionism.4 Free trade may reduce jobs in inefficient industries, but it frees up resources to create jobs in efficient industries, boosting overall wages and improving living standards. Protectionism, in contrast, attempts to protect jobs that the market will not sustain; it does so at the expense of more innovative industries.

        Much of the change in the labor force is not the result of free trade but of innovation. New technology, such as apps on mobile devices, has displaced a staggering variety of products, including radios, cameras, alarm clocks, calculators, compact discs, DVDs, carpenters’ levels, tape-measures, tape recorders, blood-pressure monitors, cardiographs, flashlights, and file cabinets.
        Using protectionist policies to “save” a job comes at enormous cost, as opportunities shrink and input costs swell for industries downstream.
        Myth: Restrictions on trade help Americans.

        Reality: The only beneficiaries of trade restrictions are the inefficient firms and special interests that secure these protections against competition.

        Despite receiving protection from foreign competition for many decades, large firms have steadily left the US steel industry due to high fixed costs and competition from smaller firms. Tariffs on steel increase costs in steel-consuming industries, which employ 12 million Americans, compared to the 190,000 Americans employed in the steel-making industry.
        The United States’ recent imposition of tariffs on Chinese-made solar panels resulted in China imposing tariffs on American polysilicon, raising the cost of solar equipment and reducing employment opportunities in both nations.
        Myth: US trade deficits are bad for Americans.

        Reality: US trade deficits generally are good for Americans.5

        The trade deficit is not debt. A growing trade deficit, despite its misleading name, is good for the economy. It is typically a signal that global investors are confident in America’s economic future. The US trade deficit might be larger than it would otherwise be if a trading partner chooses to keep the price of its currency artificially low, but this practice harms the trading partner, not the United States.

        America’s trade deficit increases whenever non-Americans choose to increase the amount they invest in the United States. This is why another name for the trade deficit is the “capital account surplus”— that is, the net investment funds flowing into the United States. More investment means expansion of existing businesses, more new businesses, higher worker productivity, and more output enhancing activities, such as research and development, all of which increase prosperity.
        So-called “currency manipulation” by a trading partner does not harm the American economy. For example, a lower price of the yuan makes Chinese goods cheaper for American consumers, conferring a real benefit for the United States. Keeping the price of the yuan lower through monetary policy, however, does not lower the real costs of the resources and outputs exported by the Chinese people, who also face higher prices for American imports. An undervalued yuan benefits Americans at the expense of the Chinese.

  4. Sandy  •  May 27, 2016 at 10:25 am

    America has suffered through other economic policy waves that protect business and labor unions, and the cycles were bleak (A Patriot's History of the United States). Whether or not current politicians have the will and where-with-all to stand their ground, and support policies that protect COMPETITION: the key component for quality production and cost-effective products, would be seriously tested in order to pursue Trump and Clinton solutions.

  5. Sjohnson  •  May 27, 2016 at 11:19 am

    This idea of free trade is the biggest joke ever and those who think we need to continue with this fantasy are looking in the wrong place.we have been loosing company's and jobs since,if it is so good ask your self why are those from Mexico still coming here for jobs.i am sure everyone knows the definition of insanity well to continue as we are is just that.and I for one am ready for a new plan.
    Medved do you even read this replies it's really stupid that you continue to push the Dem. Ideas you have and pick and choose what parts of the constitution to follow
    Can I make a suggestion for your take the Hillsdale course and start listening to Krisanne Hall it will be good for you to get it right that way you can stop being dis honest about being s conservative and truly get with it.

  6. LHunka  •  May 27, 2016 at 12:07 pm

    If you think Trump is bad, than take a look at the Clinton public service history. Just in case you have forgotten what it is like to have a Clinton in the White House!!


    Food for Thought: Just a quick refresher course lest we forget what has happened to many "friends" of the Clintons:

    1) James McDougal – Clinton’s convicted Whitewater partner died of an apparent heart attack, while in solitary confinement. He was a key witness in Ken Starr's investigation.
    2) Mary Mahoney – A former White House intern was murdered July 1997 at a Starbucks Coffee Shop in Georgetown. The murder happened just after she was to go public with her story of sexual harassment in the White House.
    3) Vince Foster – Former White House counselor, and colleague of Hillary Clinton at Little Rock's Rose Law firm. Died of a gunshot wound to the head, ruled a suicide.
    4) Ron Brown – Secretary of Commerce and former DNC Chairman. Reported to have died by impact in a plane crash. A pathologist close to the investigation reported that there was a hole in the top of Brown's skull resembling a gunshot wound. At the time of his death Brown was being investigated, and spoke publicly of his willingness to cut a deal with prosecutors. The rest of the people on the plane also died. A few days later the Air Traffic Controller committed suicide.
    5) C. Victor Raiser, II – Raiser, a major player in the Clinton fund raising organization died in a private plane crash in July 1992.
    6) Paul Tulley – Democratic National Committee Political Director found dead in a hotel room in Little Rock, September 1992. Described by Clinton as a "dear friend and trusted advisor".
    7) Ed Willey – Clinton fundraiser, found dead November 1993 deep in the woods in VA of a gunshot wound to the head. Ruled a suicide. Ed Willey died on the same day his wife Kathleen Willey claimed Bill Clinton groped her in the oval office in the White House. Ed Willey was involved in several Clinton fund raising events.
    8) Jerry Parks – Head of Clinton's gubernatorial security team in Little Rock. Gunned down in his car at a deserted intersection outside Little Rock. Park's son said his father was building a dossier on Clinton, He allegedly threatened to reveal this information. After he died the files were mysteriously removed from his house.
    9) James Bunch – Died from a gunshot suicide. It was reported that he had a "Black Book" of people which contained names of influential people who visited prostitutes in Texas and Arkansas
    10) James Wilson – Was found dead in May 1993 from an apparent hanging suicide. He was reported to have ties to Whitewater..
    11) Kathy Ferguson – Ex-wife of Arkansas Trooper Danny Ferguson, was found dead in May 1994, in her living room with a gunshot to her head. It was ruled a suicide even though there were several packed suitcases, as if she were going somewhere. Danny Ferguson was a co-defendant along with Bill Clinton in the Paula Jones lawsuit. Kathy Ferguson was a possible corroborating witness for Paula Jones.
    12) Bill Shelton – Arkansas State Trooper and fiancée of Kathy Ferguson. Critical of the suicide ruling of his fiancée, he was found dead in June, 1994 of a gunshot wound also ruled a suicide at the grave site of his fiancée.
    13) Gandy Baugh – Attorney for Clinton's friend Dan Lassater, died by jumping out a window of a tall building January, 1994. His client was a convicted drug distributor.
    14) Florence Martin – Accountant & sub-contractor for the CIA, was related to the Barry Seal, Mena, Arkansas, airport drug smuggling case. He died of three gunshot wounds.
    15) Suzanne Coleman – Reportedly had an affair with Clinton when he was Arkansas Attorney General. Died of a gunshot wound to the back of the head, ruled a suicide. Was pregnant at the time of her death.
    16) Paula Grober – Clinton's speech interpreter for the deaf from 1978 until her death December 9, 1992. She died in a one car accident.
    17) Danny Casolaro – Investigative reporter. Investigating Mena Airport and Arkansas Development Finance Authority. He slit his wrists, apparently, in the middle of his investigation.
    18) Paul Wilcher – Attorney investigating corruption at Mena Airport with Casolaro and the 1980 "October Surprise" was found dead on a toilet June 22, 1993, in his Washington DC apartment. Had delivered a report to Janet Reno 3 weeks before his death.
    19) Jon Parnell Walker – Whitewater investigator for Resolution Trust Corp. Jumped to his death from his Arlington, Virginia apartment balcony August 15, 1993. He was investigating the Morgan Guaranty scandal.
    20) Barbara Wise – Commerce Department staffer. Worked closely with Ron Brown and John Huang. Cause of death unknown. Died November 29, 1996. Her bruised, nude body was found locked in her office at the Department of Commerce.
    21) Charles Meissner – Assistant Secretary of Commerce who gave John Huang special security clearance, died shortly thereafter in a small plane crash.
    22) Dr. Stanley Heard – Chairman of the National Chiropractic Health Care Advisory Committee died with his attorney Steve Dickson in a small plane crash. Dr. Heard, in addition to serving on Clinton 's advisory council personally treated Clinton's mother, stepfather and brother.
    23) Barry Seal – Drug running TWA pilot out of Mena Arkansas, death was no accident.
    24) Johnny Lawhorn, Jr. – Mechanic, found a check made out to Bill Clinton in the trunk of a car left at his repair shop. He was found dead after his car had hit a utility pole.
    25) Stanley Huggins – Investigated Madison Guaranty. His death was a purported suicide and his report was never released.
    26) Hershell Friday – Attorney and Clinton fundraiser died March 1, 1994, when his plane exploded.
    27) Kevin Ives & Don Henry – Known as "The boys on the track" case. Reports say the boys may have stumbled upon the Mena Arkansas airport drug operation. A controversial case, the initial report of death said, due to falling asleep on railroad tracks. Later reports claim the 2 boys had been slain before being placed on the tracks. Many linked to the case died before their testimony could come before a Grand Jury.
    Total of 27
    a) Keith Coney – Died when his motorcycle slammed into the back of a truck, 7/88.
    b) Keith McMaskle – Died, stabbed 113 times, Nov, 1988
    c) Gregory Collins – Died from a gunshot wound January 1989.
    d) Jeff Rhodes – He was shot, mutilated and found burned in a trash dump in April 1989.
    e) James Milan – Found decapitated. However, the Coroner ruled his death was due to natural causes".
    f) Jordan Kettleson – Was found shot to death in the front seat of his pickup truck in June 1990.
    g) Richard Winters – A suspect in the Ives/Henry deaths. He was killed in a set-up robbery July 1989.
    Total of 7
    a) Major William S. Barkley, Jr.
    b) Captain Scott J . Reynolds
    c) Sgt. Brian Hanley
    d) Sgt. Tim Sabel
    e) Major General William Robertson
    f) Col. William Densberger
    g) Col. Robert Kelly
    h) Spec. Gary Rhodes
    i) Steve Willis
    j) Robert Williams
    k) Conway LeBleu
    l) Todd McKeehan
    Total of 12.

    Total of 46 people dead that had close dealings with the Clintons.
    Quite an impressive list! Pass this on. Let the public become aware of what happens to friends of the Clintons! Do you really want these scum bags in the White House? HELL NO!

  7. Rizzo  •  May 28, 2016 at 12:00 pm

    I'm a straight A student at the University of Blah Blah Blah. I'm very successful and clearly I'm the smartest person here. People say, I'm good enough, I'm smart enough, and gosh darn it, they like me. As a result, you should listen to me. I have much knowledge to impart on you. I say things like "ad hominem" and accuse people of such attacks, all the while attacking people on the very same basis. If I seem conflicted, I am. But don't let that deter you from listening to me and my vast amounts of knowledge. I sometimes post under the pseudonym "American".

    Have a nice day!

  8. Bob  •  May 30, 2016 at 1:27 pm

    Michael we do not want free trade we want fair trade. China has been screwing us over for years. Wake up it is time to put America first. Of course you are one of those establish type Republican so you want the same old thing. Oh it has worked so well NOT

  9. Bob  •  May 30, 2016 at 1:32 pm

    We don't have free trade China has been screwing us for years. Time to put America first. Michael you don't like Trump so no matter what he says your against it. Let's hear your plan for job growth. Oh that's right you don't have one. Your just another do nothing taking head

    • Rizzo  •  May 30, 2016 at 1:55 pm

      Free trade does put America first. It also puts freedom first.
      Arguments against free trade are really arguments against freedom generally.

      Decline in manufacturing employment is not limited to the U.S. Since 2000, China has lost over 4.5 million manufacturing jobs. In fact, nine of the top 10 manufacturing countries, which produce 75 percent of the world's manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada, and Mexico), have lost manufacturing jobs but their manufacturing output has risen.

  10. Rizzo  •  May 30, 2016 at 2:46 pm

    And BTW Bob, this has very little to do with "one of those establishment types".
    What you are advocating for has more in common with Bernie than anyone else.

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