The Wall Street Journal - Why Trump’s Tariff Idol, McKinley, Abandoned His Own Tariff Policy | WSJ
The video explores the historical context of tariffs in the U.S., focusing on President McKinley's use of tariffs for revenue, restriction, and reciprocity. Initially, tariffs were a major source of government revenue, but as the economy evolved, McKinley shifted towards using tariffs to protect domestic industries and later to negotiate trade agreements. This shift was due to the changing economic landscape, where the U.S. needed to open foreign markets for its surplus production. President Trump is seen following a similar playbook, aiming to use tariffs to generate revenue, protect domestic industries, and negotiate better trade terms. However, the video highlights the challenges of achieving all three objectives simultaneously in today's global economy, where integrated supply chains make tariffs more disruptive.
Key Points:
- Tariffs historically served three purposes: revenue, restriction, and reciprocity.
- McKinley initially used tariffs to generate revenue and protect industries but later advocated for trade agreements.
- Trump aims to use tariffs for similar objectives but faces modern economic complexities.
- Achieving revenue, restriction, and reciprocity simultaneously is challenging due to global supply chains.
- Tariffs today can disrupt international commerce more than in McKinley's time.
Details:
1. 🎩 Tariff Inspirations: Trump & McKinley
1.1. McKinley's Early Tariff Policies
1.2. McKinley's Later Policy Shifts
1.3. Trump's Tariff Inspirations
2. 📖 The Three Rs of Tariffs: Revenue, Restriction, Reciprocity
- Tariffs have historically served three main objectives: revenue generation, trade restriction, and reciprocity, impacting both national economies and international relations.
- In the past, tariffs were a primary revenue source for the US government, accounting for nearly 100% of its revenue 200 years ago and about 50% during the 1880s, which led to a fiscal surplus after the Civil War debt was paid off.
- The historical debate on tariff rates involves the Laffer Curve, highlighting differing views on revenue maximization: Republicans argued that higher tariff rates would reduce imports and thus revenue, while Democrats believed that lowering tariffs would decrease the taxable base and revenue.
- Although tariffs now contribute approximately 2% to US government revenue, understanding their historical significance can inform current economic strategies and trade policies.