Bushels Barrels—an economist and commodities trader shares his insights on why Trump’s tariffs might be the shake-up America needs.
Trade policies have always been a battlefield of competing interests, with tariffs often dismissed as relics of outdated economic thinking. But a closer look at today’s global financial framework suggests they could be a useful tool for realigning economic priorities. Years of firsthand experience in commodities trading have shifted perspectives, challenging the assumption that tariffs are simply protectionist roadblocks.
One of the most overlooked aspects of tariff strategy is the power of bilateral agreements. Multilateral trade deals, while seemingly cooperative, often dilute American influence. The USMCA negotiations showed how targeted, country-specific agreements can extract better terms than broader deals like the TPP. The ability to negotiate directly with key trading partners—China, Mexico, and Canada—provides leverage that is difficult to achieve in larger international forums.
Critics of tariffs frequently invoke the Smoot-Hawley Act as a cautionary tale, warning of economic retaliation and trade wars. But the US economy has evolved since then. The country is no longer a dominant exporter; it has become the world’s largest importer with a substantial trade deficit. Retaliatory tariffs, which once had the power to cripple US exports, now have less of an impact in an economy that overwhelmingly consumes more than it produces. The weight of global trade has shifted, and so too must the strategies used to manage it.
Currency dynamics play an equally crucial role. The US dollar remains the dominant reserve and trade currency, forcing other nations to adapt when tariffs are introduced. Countries facing tariffs often devalue their own currencies to maintain competitiveness, effectively neutralising the intended cost increases for US consumers. This has been observed with China’s yuan over the last decade and, more recently, with the Canadian dollar and Mexican peso. While the theory suggests tariffs should drive up consumer prices, real-world currency adjustments often soften the blow.
Beyond trade policy, tariffs offer an unintended yet significant benefit—an alternative approach to taxation. The American tax base has undergone major transformations over the past century. The introduction of the Federal Reserve, federal income tax, and the abandonment of the gold standard have all played a role in shifting how revenue is collected. Despite historically high tax-to-GDP ratios, the US continues to face an overwhelming deficit, largely due to spending rather than a lack of revenue.
Tariffs act as a form of consumption tax, aligning with economic principles that suggest higher import costs discourage excessive spending. In a system already burdened by high income, corporate, capital gains, and property taxes, tariffs provide a way to distribute tax burdens differently. Instead of further increasing the tax load on those already paying the most, tariffs offer a way to encourage saving and investment over consumer-driven growth.
The tax distribution in the US paints a clear picture—the top 1% of earners contribute more than 40% of federal income taxes, while the top half of earners cover nearly all tax revenue. Increasing these taxes further is neither sustainable nor politically viable. Tariffs, while indirectly increasing costs, offer an alternative method of revenue generation that shifts focus towards economic sustainability rather than endless tax hikes.
There is also the issue of long-term economic resilience. By making imported goods more expensive, tariffs create an environment where domestic industries have a chance to compete. The goal is not just to shield American businesses but to rebalance economic incentives. Overreliance on cheap imports weakens supply chains and reduces local investment. Higher savings rates have been consistently linked to stronger economic growth, job creation, and innovation. When spending slows, resources shift towards reinvestment in local production and infrastructure, reinforcing economic independence.
Of course, no economic policy comes without trade-offs. Tariffs inevitably raise consumer prices in the short term, leading to concerns about affordability. But when measured against the broader objective of strengthening domestic industry and investment, the benefits may outweigh the immediate inconvenience. The long-term goal is a shift towards financial discipline, reducing dependency on foreign goods and fostering local economic stability.
Trump’s tariffs, when viewed through this lens, are not just an exercise in economic nationalism. They represent a recalibration of priorities, moving away from unchecked consumerism and towards sustainability. The global economic landscape has changed, and policies that once seemed outdated now present opportunities to correct imbalances that have built up over decades.
Rather than being seen as an obstacle, tariffs might be the necessary adjustment to encourage smarter spending, higher savings, and stronger domestic investment. The balance between trade, taxation, and economic incentives is shifting, and as history has shown, adaptation is key. This time, the adjustment might just lead to a more stable and self-sufficient economic future.
