CRAFT by Under My Host® Issue No. 17 Made in America: Part II | Page 29

packaging materials.
Let’s have some real talk here about what tariffs do and why they are used. Tar-
iffs used to be one of the only ways that the federal government funded itself.
Now, income taxes and other domestic taxes fund the federal government, in
addition to tariffs, but there has only been a federal income tax since 1913, before
that it was mainly revenue from tariffs. The real purpose of tariffs today is more
political than practical, and these new tariffs, in particular, have the purpose of
increasing steel prices domestically to preserve and increase employment in the
steel and aluminum industries, and many happen to be located in political bat-
tleground states.
The political motives can’t be ignored, but it shows that politicians’ primary job
is not “the greater good” but really horse trade to help ensure their own re-elec-
tions. Tariffs are about benefiting the few and powerful at the expense of the
many. The positive effects of these measures will be targeted at a very specif-
ic industry and group of people that will gain substantially. But the expense of
higher prices for equipment and products will be borne by everyone else. Since
the group that is harmed by these tariffs is so broad, and the amount of increase
is so diffuse, there will likely be no backlash or fight put up to change these new
measures. You will just find breweries absorbing the extra costs, taking less
margin, or passing the increases on to their customers.
Another interesting effect of tariffs is that there will be less purchasing of do-
mestic products, not only by China but globally. We are short-sighted in how in-
ternational trade and floating currency rates work. For instance, when a Chinese
steel manufacturer sells steel to a US manufacturer and receives US dollars as
payment, does that steel producer hold onto those dollars? Or do they use those
dollars to buy other goods and services that can be obtained cheaper from the
US? Or perhaps our Chinese steel producer can trade them into Euros to purchase
something there, and in turn that European business may, in turn, purchase
something from the US.
I wish we would understand that international trade is not a zero-sum game and
that all sides can win as long as we are allowed to trade freely. As for currency
rates, suppose everything was cheaper in China, and the US purchased massive
amounts of goods from there in US dollars. Eventually, in order for those US dol-
lars in Chinese hands to be able to convert into yuans for use in China, the yuan
exchange prices would naturally rise, making those prices for Chinese import
goods less attractive. This is the free market at work, and we would benefit from
letting it work.
So I guess my take on the new tariffs is that politicians are going to politician,
and until we have a better understanding of trade, we will all pay the price. But
then again, I’m not an economist, I’m a professional Karaoke artist. Come listen
to me absolutely kill it on 4 Non Blondes next time you are at T. Eddies.
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