Thoughts on Reciprocal Tariffs, April, 2025

8 April 2025

My thoughts on the "tariffs announced by Donald Trump yesterday" with that being the recriprocal tariffs announced on April 3, 2205

This is a complex topic with several facets or prongs each of which is also somewhat complicated.

Why It Matters

• Because of non-symmetrical tariffs and other factors, Americans buy a LOT more from Chinese, than Chinese buys from Americans. This produces a flow of dollars to China.
• The Chinese wish to do something with those dollars. They cannot very well buy America made stuff because of the high tariff their own government charges. So they buy American Real Estate and American debt in the form of "t-bills"
• Until recently, China held about 1.3 trillion dollars of American debt. But t-bills provide nowhere near the rate of return as compared to Real Estate investment. So about 500 billion dollars have been moved, presumably to Real Estate
• The combined effect of inflation and vast corporate and foreign entities buying Real Estate has resulted in a HUGE increase in housing prices most notably from 2021-2023 when these prices nearly doubled.
• The Federal Budget last year depended on debt for 28 percent of its operating budget. Source: IRS form i1040gi (General Instructions for Form 1040). In other words, America depends on China and other nations to fund the American government! This is unwise and unsustainable.

Impact on Domestic Prices

• Tariffs will cause many prices to rise according to a percentage of wholesale price (not retail price). In other words, an item that imports at $100 with a 34 percent tariff, will cost the importer $134. The $34 extra is passed along and the final retail price of $200 is added that same $34, or $234, so the percentage effect is about half the stated rate. But it is still going to be an increase.
• With less competition from China and elsewhere, domestic producers might increase their prices.

Impact on Trade Negotiation

• Nations that wish to trade with the United States, not recently incentivized to negotiate, are now demonstrating a willingness to negotiate. Already, Canada and Mexico agreed to trade terms that is very nearly free trade whereas Canada charged a whopping tariff on American products to be sold in Canada, 250 percent or something like that for Wisconsin butter to be sold in Canada.
• Vietnam and Cambodia have had extremely punitive tariffs against American goods. Cambodia presumably has dropped its tariff from 40 percent to 5 percent.

What Can Be Done About It

• Live within our means: same as any household. That 28 percent of government operations funded by DEBT must be eliminated. The "deficit" must be zero; that's not debt, that is simply the rate by which the debt grows every year.
• Pay off the loan. The Chinese are not likely to "forgive the debt". Nor any of the other creditors that the United States owes money to.
• Americans must still pay interest on the national debt! At some point, the interest payments exceed the GDP and when that happens, the debtor nation is "owned" outright.
• iNon-essential government activities must be pruned or eliminate entirely. This is the purpose of the Department of Government Efficiency (DOGE)
• Improve the Balance of Trade primarily through tariffs and negotiations. Americans must send fewer dollars to China OR the Chinese must send them back by buying American made goods rather than American REAL ESTATE.

Strategic and National Security Factors

• ALL material needed for national security must be sourced domestically; or in dire cases, with our most trusted trading partners (Canada, Mexico; Brazil, Chile, Bolivia and others).
• It is inexcusable that China or Russia holds America hostage to certain minerals such as lithium or neodymium.
• The UK has shut ALL of its steel making factories, the United States has nearly eliminated all domestic steel production.
• To encourage domestic production and factory building, levy tariffs on steel and other vital strategic minerals and metals
• How likely is war? It is certain. When has planet Earth never NOT had war? But war with China or Russia is amazingly bad. It won't be like any other war ever seen on Earth. War typically results from bad economic decisions; one nation becomes dependent upon another, gets into debt, and is either absorbed by the superior nation or destroyed. China is currently absorbing the United States, a relatively peaceful process but once enslaved there's no way out of it.
• Donald Trumps actions are risky, but by leveling the economic playing field, actually makes war less likely> for various reasons.

Historical context

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