Porter Replies To Reader Emails On The Topic
Inside today’s Daily Journal…
Essay: Why Tariffs Still Don’t Lead To Prosperity
Private credit defaults are rising
Bombing energy infrastructure extends the war
The Fed, interest rates, and inflation
Chart Of The Day… Mitsui & Co.
In Monday’s Daily Journal, I explained “Why Tariffs Don’t Lead To Prosperity,” writing…
And… when I explain that tariffs are merely taxes and more government is never the answer? You see the true believers emerge. Contrary facts do not change their minds. They deepen their conviction. Nevertheless, it’s only facts I have to offer.
Indeed, the “true believers” responded strongly – and angrily – to what I said about tariffs on Monday. But I also received some very reasoned responses. So in an extended version of the “Mailbag,” I share – and respond to – three of those emails today.
“Why Do Other Countries Use Tariffs?”
David T. writes:
Hi Porter,
Your explanation of the tariffs being doomed for failure was very well explained, as usual for you. The best line you wrote was at the end: “Tell me what you think… but please at least think first.” I love it. I can’t wait to use it.
That, along with a few of your other favorite lines (e.g. There’s no teaching, only learning) could make up for some “Porter” merchandise. Maybe some baseball hats or T-shirts with these lines on them for sale or promotional giveaways to your fans.
Next time, I hope you can explain why so many of the ex-USA countries charge tariffs if it’s such a bad idea for the U.S. to do so. I have my ideas as to their limited economies making them different in this regard, but I’m sure you could clarify it better than I could.
Porter Comment: Politicians love tariffs:
They can tell the voters that someone else pays them
They extend their protection racket over any industry that wants protection from better, foreign competitors
Of course, neither is good for the economy. But both are good for the politicians. – Porter
“Response To Monday’s Essay On Why Tariffs Don’t Create Prosperity”
Steve B. writes:
Dear Porter,
We’ve met a couple of times. I’m a Porter & Co. lifetime member, and I generally enjoy and appreciate your work!
Regarding my ability to speak to tariffs, I’ve lived overseas multiple years, Asia-Pacific (two locations, SE Asia and Tokyo), Australia, and Europe, plus have extensively worked in approximately 20 countries, built engineering centers in three countries and built approximately 10 manufacturing plants in five countries.
Every single manufacturing plant I built in Asia-Pacific resulted in the closure of an American manufacturing plant in either Michigan, New York, Ohio, or Wisconsin. The bottom line: I’ve met no one who can BS me on tariffs.
Most of the world has put duties, tariffs, taxes, or whatever you want to call it on American products, and America has let products come from the same countries virtually tax-free. The result is the country’s extreme deficit of trade, and the gutting of America’s manufacturing capability to the extent that America can build very few value-added products. For example, America can no longer build an automobile. It can assemble an automobile but building an automobile and assembling an automobile are two entirely different matters. Assembling an automobile has very little value added and can virtually be done almost anywhere in the world. America no longer designs, builds, or manufactures most of the key components in an automobile, and this is where the real value-add occurs.
This is not only true for our auto industry, but also for almost all our industries that require taking raw materials and producing a needed manufacturable good. This gets to the heart of a country’s standard of living, and the value a country brings to the world…
Now let’s consider two points you make in your writing:
The U.S., meanwhile, specializes in the high-value, high-return work: design, intellectual property, marketing, finance, and e-commerce
America gets to keep all the highest-paid staff: the designers, R&D, engineers, marketers, accountants, lawyers, and executives
Honestly, I would expect much better from you. I’m an engineer by education, and I currently use AI to do most of my accounting, marketing, finance, and legal. Maintaining strong engineering capability requires both product and process expertise, and manufacturing is required to maintain product and process expertise. Without manufacturing, one’s product and process technical expertise begins to fade.
America has been massively whored by Wall Street and our politicians, and most of our corporate executives have contributed to the country’s demise due to their lack of economic knowledge on how the world truly works.
Regarding tariffs, a good place to start is to impose equal tariffs on each country that places tariffs on America’s products. I personally believe there is a place for additional tariffs, provided they are implemented with precision and a specific purpose. Blanket tariffs in mass are counterproductive and do not achieve the desired objective.
The perfect example of counterproductive tariffs are tariffs on spirits. The current tariffs that have been placed on spirits, e.g., French wine and tequila from Mexico, are resulting in massive economic pain on America’s bourbon industry, the American spirit. Bourbon plants are closing, many people are losing their jobs, and several American bourbon businesses are going through foreclosure.
I would close by saying, if you have any way of getting to President Trump, or someone close to him: his tariffs on spirits are the height of stupidity and bringing massive pain to America’s bourbon industry.
I appreciate the opportunity to share my thoughts!
Porter Comment: Steve – Nice to hear from you. I appreciate your note. I don’t think your experience or your examples contradict anything I’ve written or believe about free trade or its advantages.
