A Time to Tear Down and a Time to Build
Reading the major big-city publications and watching the major media outlets is like visiting a cemetery; the story is buried, and the only thing you can trust is the epitaph.
I often return to two pieces of writing to fix my mental orbit and attitude, and I recommend their frequent reading to family and friends. I read the Book of Ecclesiastes in the Old Testament and Rudyard Kipling’s poem, “If.”
The former reminds me that everything is cyclical and has a time, purpose, and end that we can’t determine or control. The latter reminds me that character and grit are invaluable companions on our short life journey. Both applications are personal yet universal, regardless of station, means, or birth. No border holds them.
They both come to mind as I read, watch, and digest the hullabaloo caused by President Donald Trump’s audacious resetting of the global trade systems as it relates to the United States, and his efforts to reorganize America’s defense posture for a dangerous new world.
Of Trump and Trade
The Western media cabals, capsized in the toxic waste of sentimental liberalism and pining for a world that never was, are predictably creating mountains out of the tiniest tidbits, making up preposterous stories filled with ludicrous conclusions about Trump, his associates, and his policies.
Reading the major big-city publications and watching the major media outlets is like visiting a cemetery: The story is buried, and the only thing you can trust is what’s written on the tombstone.
The real story, in this instance, is easily understood and brief: In the years following the close of the Second World War, the US was the only participant not left in tatters or rubble and was a dynamo of industrial and energy production and scientific innovation. Through the Marshall Plan and trade agreements, the post-war decades allowed our allies to both rebuild and protect nascent industrial production and wealth creation. In addition, the organization of NATO in 1949 provided an umbrella of military security for Europe — for which the US did, and does, pay the lion’s share of the budget ($860 billion of a $1.3 trillion budget in 2023).
I suspect most folks — then and now — think that was a good thing and are proud of America’s role in stabilizing a wobbly post-war world, however imperfectly implemented.
Over the last 75 years, “global trade” has become a cottage industry; money always does that. In the late 1940s, the the General Agreement on Tariffs and Trade (GATT) was created. In 1995, the World Trade Organization (WTO) was created by 123 nations incorporating GATT for the trade of goods, and today, it has 164 members, including China. In addition, there have been various curiosities and upgrades since then among trading partners, like the North American Free Trade Agreement, updated with the United States, Mexico Canada Agreement.
Unequal Measures
The economic concept of “free trade” reverberates within these various trade treaties. That theory reckons each country will sell goods and services that it is very good at making or delivering. In contrast, the country with which it is trading will do the same based on labor costs, raw materials, capital requirements, taxes, and transportation costs. At the end of the process, both countries will grow more prosperous, having done what they do best.
But not so fast. What sounds good on paper and, in theory, has fizzled out for many decades in reality. Like every individual, each country has its own best interests invested. Each has political and strategic considerations to balance and pressure groups to placate. [Some, notably China, are simply modern bandits stealing technology, using slave labor, demanding tribute from others to manufacture or sell within its borders. To those countries, treaties are as disposable as toilet paper. They’ve been doing it for thousands of years to each other; now they’ve just gone global.]
Over the last decades, the US has operated, with few exceptions, within a 2-3% tariff band, while most of the industrial world has operated generally within a range of 3-5% (here). But it’s far more convoluted than that — the US didn’t get monstrous trade imbalances through tariff rates alone.
Many countries backdoor subsidies to specific industries because of their critical importance to maintaining employment and competitiveness — or dump products below the manufacturing cost into the US to drive out competition. (Air Bus comes to mind for the former, steel for the latter.) “Duties” on certain goods are also applied in addition to tariffs. Also, many Second and Third World countries have desperately low labor costs and minimal safety or environmental rules that help lower the cost of production.
Other tariffs, by another name, are critical to manipulating trade rules. The US and a handful of smaller countries are the only nations in the world that don’t use a value-added tax (VAT), a consumption tax on goods in every step of manufacturing within a country, and a one-time tax on finished exports coming into a country (here). Some claim that a VAT is basically like a state sales tax in the US – or a destination tax. But that doesn’t hold water. For example, buying an automobile made in Germany enters the US at a 2.5% tariff — before the president’s new tariff schedule. However, an American car of equal value exported to Germany has a VAT of 19% added to the tariff (a “duty”) of 10%.
A New Season
Regardless of how it is done or for what reason, one thing is clear: The “system” no longer works for the US, as the president’s chart so clearly demonstrated. The massive transfer of wealth is staggering. Two decades ago, the US’s “international investment position” — how much Americans “own” overseas versus how much other countries own in the US — was less than $3 trillion in the negative. Today, that figure is nearly $26 trillion negative (here). This transfer of American wealth across the world is escalating quickly.
Worse than the opportunity cost of that outflow of wealth, we have lost control of our destiny – our critical manufacturing base of core necessities. We depend on other countries for steel and other metals, machine tools, shipbuilding, medicine, medical equipment, electronics, and soon possibly aircraft, while increasingly reliant on outsourced innovation. We have some of the world’s most expansive mineral and energy assets, yet instead, we are dependent on other nations for much of them.
The giant American $30 trillion GDP powerhouse that has saved, financed, and protected much of the world for three-quarters of a century has reached a turning point the author of Ecclesiastes knew well: “There is a season under the heavens for everything … a time to tear down and a time to rebuild.”
As a nation, we have been through this before. A Great Revival to reset the nation’s soul. A Civil War to reset the Constitution’s promise. A great World War to stop evil’s march. Now, it is another season.
President Trump, the contrarian builder from Queens and most unlikely national leader, knows this in his gut.
Michael Giere writes award-winning commentary and essays on the intersection of politics, culture and faith. He is a critically acclaimed novelist (The White River Series) and short-story writer. A former candidate for the U.S. House of Representatives from Texas, he was a senior executive in both the Reagan and the Bush (41) administrations, and in 2016 served on the Trump Transition Team.