President Trump, Let’s Subsidize Exports Rather Than ‘Tariff’ Imports

President Trump should consider subsidizing exports rather than imposing tariffs on the world’s countries.

Now that’s a sentence I never thought I would write.

Stay with me on this.

I might be a little late to the dance with this idea, given the tariff war with the world well underway, but think of it this way:

The United States can either spend taxpayer money to help U.S. businesses export to the world (subsidies) or it can collect taxes so that the federal government has more money to spend (tariffs on the rest of the world).

Call it the lesser of two evils.

A few more thoughts before I get to some specific exports that face high tariffs and some specific countries that impose them.

Pre-Trump, both subsidies and tariffs were troublesome. The former would run up against World Trade Organization rules and the latter against blowback from many Republicans and some Democrats, most economists, most trade wonks, some journalists like me, and a few scattered others.

It’s a new day, baby.

Subsidies are no longer particularly troublesome for one simple reason: Trump, during his first term, and former President Joe Biden during his term, failed to appoint appellate judges to the WTO after it was left with just one of seven judges.

The Appellate Body had dwindled from seven members to three during former President Barack Obama’s term – the number needed for a quorum – and then two additional terms expired on Dec. 19, 2019, a month before he was due to leave office.

Obama had already abandoned the Trans-Pacific Partnership at that point, a multi-country, multi-continent effort he had put forth to hem in China. Trump walked away from it immediately after entering office.

With only the Chinese appellate judge remaining, the WTO has been effectively de-fanged.

There is a degree of irony to this, of course.

What we today think of as the WTO sprung from U.S. efforts in the ashes of World War II to create a global system to increase trade in a rules-based system. The idea was to lessen the likelihood of World War III, given that much of Europe and Japan were literally in ashes.

Tariffs, as much as the president seems to favor them, just put more money in the hands of our government – not anathema to all, particularly the more liberal members of the Democratic Party and, it seems, an increasing number of Republicans. It also, with retaliatory tariffs, puts more money in their governments’ hands.

They rarely solve the problem they were meant to solve, and certainly less frequently in a direct fashion. Steel tariffs have been shown to help the few to the detriment of the many.

But, for Trump, steel is not the big problem. The big problem is the U.S. trade deficit. Alas, it has done nothing but go up and up and up for decades, including three of Trump’s first four years in office and, so far, the first five months of his second term.

Again, as much as I can hardly believe I am suggesting subsidies, would it not be more favorable to refund tariffs placed on U.S. exports to the businesses paying them? (Maybe we wouldn’t even have to call them subsidies.) Would that not help U.S. businesses grow, U.S. exports grow and (no promises here, since nothing seems to really work) decrease the U.S. deficit? Think of the job creation.

The European Union, Japan, China, India, Brazil – the list of countries that impose restrictions on U.S. exports isn’t endless but it’s not insignificant either.

The European Union imposes tariffs on dairy, processed foods and vehicles. Subsidize them to cover any additional costs and offer this simple message: Let your people decide. Granted European countries take a different approach to government than does the United States historically, but it’s a better argument than what we are offering now.

Let the Japanese experience our beef, rice and dairy, with our producers able to sell them with any tariffs reimbursed.

Offer the Chinese industrial goods, pork, poultry and soybeans at better rates, with costs meant to keep out U.S. exports covered by subsidies.

Many motorcycle enthusiasts in India would be able to afford a Harley-Davidson if the price paid to enter the country was covered by the United States government.

Many of these same countries impose significant restrictions on pharmaceuticals and medical devices, products the manufacture of which the United States excels.

Could this run the same risk of causing inflation that tariffs do, creating shortages in this country? Maybe, but not if the producers can hire and increase output. And the deficit: Any guarantee it would decrease? Of course not, but if exports rose, the economy would benefit.

Where would all this end? At the end of Trump’s second term, perhaps the incoming president, whether a Republican or Democrat, might then be able to chip away at our subsidies and tariffs in coordination with the rest of world, find a path forward that works sufficiently well enough for all nations.

In the meantime, imagine the markets we might be able to open. Aren’t we better off with a world where more people, not fewer, can afford U.S. products? Isn’t that what had been happening?