The Price of Tea in China

Donald Trump needs a new moniker, so I hereby name him Dr. T. The real Dr. T was of course a fictional character named Doctor Terwilliker, played by Hans Conreid in the 1953 absurdist classic. The 5000 Fingers of Dr. T. The screenplay was written by Dr. Suess, who surprise surprise was not actually a Doctor. Dr. Suess was his self-named pseudonym, an inside joke, and a nod to his father’s dream for his son becoming a doctor in real life.

In 1925, the young Theodor ( Ted) Suess Geisel was a Dartmouth College senior partying with his friends and a bottle of bootleg gin. The dean ousted young Geisel as editor-in-chief of the Dartmouth humor magazine, but in what Suess called a “corny subterfuge,” he continued to insert cartoons into the college paper, under several pen names, including “Seuss” and “T. Seuss.” Later, he added the title “Dr.” a tribute of sorts to his father’s dreams.

What does Dr. Suess and Dr. T have to do with the price of tea in China?

Soon our resident genius, President Dr. T will have more than 5000 fingers in the American Pie. His plan to use trade tariffs to bring back manufacturing jobs to America through the injudicious use of trade tariffs is a long game at best, but more likely magical thinking of the New Order.

Tariffs are essentially taxes on foreign goods imported into the country. The companies who import these goods will pay the tariff/tax. The associated increase in costs will trickle down to Joe and Josephine Q. Public. Not China. Not Mexico. Not Canada. The USA will pay the tariffs in higher prices, inflation, and most likely recession.

The history of tariffs goes way back to the birth of the Republic. Before the introduction of Income Taxes in 1913, tariffs were the primary way that government was funded. Tariffs help reduce the trade deficit, and raise money for government. Tariffs are the bedrock of Protectionist public policy. Between 1861 and 1933, the US had one of the highest average tariff rates on manufactured imports in the world. From 1942 to 2016 when Trump was first elected, the U.S. government was increasingly funded by income taxes. Bill Clinton made the prophecy of Ross Perot come true with the expansion of globalism and free trade. The giant WOOSHING SOUND that Perot foretold, sounded more like a toilet being flushed as Main Street America shutdown, manufacturing jobs disappeared, all in trade for cheap prices at Walmart.

Back in 1887, the President at the time was Grover Cleveland, the 22nd President. Cleveland devoted his entire State of the Union Address to the issue of the tariff, as he called for a reduction in some duties and the abolition of duties on raw materials. But by the next election, Democrat Cleveland lost to Republican Benjamin Harrison, (the 23rd President) who favoured tariffs in 1888.

Republican Representative William McKinley, introduced the McKinley Tariffs, which became law on October 1, 1890. The tariff raised the average duty on imports to almost 50%, an increase designed to protect domestic industries and workers from foreign competition, as promised in the Republican platform. It represented protectionism, a policy supported by Republicans and denounced by Democrats. McKinley would go to be the 25th President and the second President to be assassinated. But I’m getting ahead of myself. Harrison and McKinky’s tariffs resulted in a steep increase on prices for American consumers.

As such, the tariffs became very unpopular, becoming a major topic of fierce debate in the Congressional elections of 1890, giving Democrats a landslide. Democrats then replaced the McKinley Tariff with the Wilson–Gorman Tariff Act, which lowered tariff rates, and Grover Cleveland returned to power in 1894, becoming the 24th President.

The history of Tariffs in the USA goes way back to the birth of the country.

After the devastating Civil War, tariffs were needed to help raise money for the Union government, who had to pay for the enormously expensive war.

Now history repeats itself, as Fearless Leader wants to levy high tariffs to help reduce the huge US deficit, caused chiefly by the trillions spent on the never ending war machine. Since they already have a budgetary deficit, this out of control military spending threatens to bankrupt the country.

Hence, the return of the tariff. But as noted above, the reality is that by imposing tariffs, they will raise the cost of goods for consumers, thereby feeding inflation.

Higher prices also come from the rising costs of shipping, most recently driven up by Yemen Houthis piracy in the Red Sea. But as we saw with Covid, supply chains are very fragile, and small changes in one country affect everyone. This is the cost of globalization.

Biden raised tariffs on Chinese electric car makers, driving parts makers and other associated companies, to rush to ship, causing shipping rates to soar in the following months.

Now Trump is threatening Canada and Mexico with 25% tariffs. Whether these tariffs happen or if they are simply a negotiation tactic, the chaos keeps building. Shipping decisions are flip-flopping depending on his daily musings on Truth Social.

What all of these discussions bring home, is that historical events are repeating themselves. Those who fail to learn from history are doomed to repeat. Soet of like when little Donnie failed third grade and had to repeat it.

Will these repetitive failures lead to another Great Depression or World War? Unfortunately, both are distinct possibilities, and not out of the question.