Trade War: Tariffs Are Needed To Defeat Globalism But They Come With A Cost

This article was written by Brandon Smith and originally published at Birch Gold Group

Ever since the days of Herbert Hoover and the official start of the Great Depression the concept of trade tariffs has been readily demonized across most of academia and among the majority of modern economic ideologies. Is is actually one area where globalists and free market economists tend to align (though each group has very different reasons).

Proponents of Adam Smith’s free market philosophy or Ludwig Von Mises and his Austrian school are Just as likely to be opposed to Donald Trump’s tariff plans as any globalist from the halls of Davos.

First and foremost we have to make it clear what tariffs are: Tariffs are taxes on international companies importing goods from other nations. These taxes are designed to force companies to import from countries outside of the tariff list or produce goods domestically. The primary targets of tariffs are actually corporations. The secondary targets are countries on the tariff list.

Austrian economists in their opposition to tariffs operate on the assumption that large corporations are “free market” entities. They also assume that globalism is a product of free markets.

Adam Smith might have witnessed the corruption of mercantalism, but he had no inkling of the monstrosity of modern globalism and how it would ultimately pervert the free market ideal. The same goes for Mises. Their support for global trade was contingent on the idea that government interference is always the root problem, the fly in the ointment.

They did not take into account the blurring of lines between corporations, governments and NGOs – They did not consider the corporate shadow government of Davos and the manipulation of markets in the name of “free trade”. They couldn’t have even fathomed the creation of organizations like the IMF, World Bank, the BIS, etc. at the time they came up with their economic theories.

After the Bretton Woods conference Mises would go on to question the motives of the new “global order” and the trade agreements being put in place. He would also oppose at least some aspects of globalism before his death, leaving Austrians to debate the merits of “good globalism” vs “bad globalism”.

The reality is that today there is no “good globalism”. It doesn’t exist because the entities dictating global trade collude rather than compete. They are not actually interested in free markets, they are interested in global monopoly. And corporations are the key to this monopoly.

Adam Smith criticized the idea “joint stock companies” (corporations), but there are a lot of Austrians and Anarcho-capitalists that defend international companies as if they are an inherent evolution of free market progress. This is simply not so. Global corporations (and central banks) are pure socialist constructs chartered by governments and given special protection. Their immunity to constitutional restrictions serves government interests and government legal chicanery serves corporate interests.

This is the opposite of free markets. I’ll say it again – Under the current conditions, global conglomerates are NOT free market organizations. They destroy free markets by using government partnerships to erase competition.

The covid event and the rise of woke propaganda in the US are perfect examples of the collusion between companies and governments to institute social engineering and erase free economic participation. Anyone not suspicious of these entities after everything that happened is beyond help at this point.

These corporations also act as wealth siphons; sucking up consumer cash in one country only to deposit it in other countries instead of cycling that wealth (after their cut) back into the economy they rely on for sales. In other words, global corporations act as a kind of wealth redistribution machine that takes money and jobs from Americans and spreads them around the world to the detriment of the American public.

As the middlemen of this wealth redistribution scheme, companies generate vast profits while people on both sides of the exchange get very little in return. Mexico might seem like it benefits from the NAFTA trade imbalances, but this is a mistake – The Mexican people and their standard of living enjoy minimal benefits; the companies that use them for labor get the advantage, along with some government officials on the take.

In turn, US GDP and our supposed national wealth continues to rise due to global corporations. But the majority of that wealth increase is not going to Americans, it’s going to the .0001% of elites. The longer globalism carries on the wider the wealth gap becomes. This is an undeniable fact and I think people on the left and the right mostly agree on this issue, but nobody wants to make the hard decisions and do something about it.

Leftists think bigger government and more regulation is the answer. Conservatives think smaller government and less regulation is the answer. Conservatives are closer to the mark, but neither solution confronts the core problem of collusion between governments and conglomerates.

Keep in mind, the US operated on tariffs for hundreds of years.  The “T-word” did not become a bad word until the creation of corporations, the Federal Reserve system and the income tax.

So, I stand with my Austrian School economist friends on most things, but when they cry foul on Trump’s tariffs I have to remind them that the situation is not as simple as “government interference bad”. The current system is long overdue for a course correction and fiscal Libertarianism is not going to provide it.  They think they’re defending free markets, but they’re not.

Another key problem of globalism is forced interdependency. If each nation is producing an ample supply of their own necessary resources, they have resilient domestic job creation, and they decide to trade excess goods with each other then global markets make sense. But, what happens then when each nation is pressured though trade agreements to rely on every other nation for the basic economic needs of their populace?

Then we must reexamine the value of globalism in general.

International economic interdependency is a form of slavery, especially when corporations and NGO middlemen are involved. Only resource redundancy and localism foster true free markets and individual liberty. Tariffs can help to energize local production and trade and make communities more self reliant. That said, there’s going to be a cost.

The comparisons made between Donald Trump and Herbert Hoover are rampant and have been since 2016. I warned during Trump’s first term that accelerating fiscal decline and growing stagflation could be dropped in his lap and blamed on conservative policies. That is to say, anti-globalism would be blamed for the financial destruction caused by globalists. I continue to believe that this agenda is still in play.

Hoover was blamed for exacerbating the Great Depression in 1930 with his Smoot-Hawley tariffs. In truth, the Great Depression spread because of a series of policy decisions by major banks and rate hikes by the Federal Reserve (Former Fed Chairman Ben Bernanke admitted to this openly in 2002). At the time it didn’t matter who caused it – Hoover was president and so he was the scapegoat.

The same situation could happen for Trump if he’s not careful, and all conservatives will be blamed by extension. It’s important to remember that US production has been hollowed out by decades of government interference supporting globalization, along with unchallenged corporate power. Reining in corporations with tariffs is not going to be enough, there must also be incentives to reverse the damage done by decades of government corruption.

I can’t think of any other way to rebuild America’s production base fast enough to counter the price increases that will inevitably come with tariffs. Defeating inflation would require an unprecedented national effort to bring back manufacturing specifically for necessities. Tariffs by themselves are not going to make this happen.

We need mass goods, energy and housing NOW, not several years from now. Otherwise, in the long run tariffs will only make the situation worse.  Libertarians are right to warn of negative effects on American consumers, but the solution is not to let corporations do whatever they please and for globalism to continue unchallenged.  The solution is to break globalism and return to a domestically independent model.

Finally, there’s the issue of the dollar and its world reserve status. After Bretton Woods the great unspoken arrangement was that America would act as the military pillar of the western world (and apparently the consumer cash cow of the world). In exchange, the US would enjoy the advantages of having the world reserve currency.

What advantages? Namely, the dollar could be printed well beyond any other currency for decades without suffering the immediate effects of hyperinflation because most of those dollars would be held overseas. The breakup of NATO and a trade war might trigger the end of this arrangement. Meaning, all those dollars held in foreign banks could come flooding back into the US and cause egregious inflation.

Reserve status has long been the Achilles Heel of the US and it must end eventually. Just take note that globalists have been preparing for this shift since at least 2008 with the SDR basket and CBDCs.  This past week the EU announced they will be distributing retail CBDCs by the end of this year.  They know what’s coming.  A trade war will not only require the Trump Administration to facilitate increased domestic production, but also facilitate a new commodity backed currency system to protect against the fall of the dollar.

In the meantime, individual citizens and communities are going to have to prepare as globalism breaks down. This means local production of goods, retailers seeking out local suppliers, people trading goods and services through barter networks, etc. State leaders should consider introducing commodity backed scrip to offset any potential damage to the dollar. They should also open up more natural resources to improve local industry.

There’s a lot to do, and not much time to do it.

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