For some of us, our history classes in school consisted of extended lessons about the nations’ wars, while teachers skipped over the boring parts in between. Or maybe we just didn’t pay much attention to those boring parts in between.
Too bad, because we could use some of those lessons now.
Remember when teachers tried to tell us about the Nullification Crisis of 1832-33? If you didn’t snooze through that, then you might remember the bare outlines — South Carolina tried to “nullify” a federal law, and a strong-willed President Andrew Jackson faced down the rebellious South Carolinians by making it clear he’d send in the U.S. Army to enforce the law, thank you very much.
The Nullification Crisis was generally taught as a lesson in federal power versus state’s rights — and a foreshadowing of the Civil War nearly three decades later when South Carolina was feeling even more rebellious. Broadly speaking, Abraham Lincoln simply did what Andrew Jackson threatened to do.
There was another lesson to be learned, though, one that remains applicable today (so does the primacy of federal power, but we’ll let that dog lie today). What South Carolinians were upset about in 1832 were tariffs – basically the same kind of tariffs that President Trump is now imposing on Chinese goods and China is imposing right back.
Another parallel between then and now and every era in between: Some industries benefitted from tariffs and some didn’t, which always tends to make tariffs politically touchy.
In the 1830s, the North was keen on tariffs to protect its young industrial economy from low-cost British imports. The South, though, didn’t have much industry to protect and liked those low-cost imports. Those regional differences almost brought the nation to war.
Today, we see similar differences, between regions and between economic sectors. Trump sees tariffs as a good thing for certain types of U.S. manufacturers — automakers who must compete against foreign imports, for instance. However, farmers who depend on foreign exports see things quite differently.
Tariffs in the 1830s played very differently in Boston than they did in Charleston, South Carolina. Today they play very differently in Detroit than in Des Moines, Iowa.
There’s nothing really new here — only the products and the countries have changed.
Tariffs pose a philosophical question: In an economically diverse country, whose interests should prevail?
Conservatives usually decry government intervention in the marketplace as the government inappropriately “picking winners and losers,” but that’s exactly what tariffs try to do. They’re also simply taxes by a different name. That’s the double irony of a Republican president being so fond of tariffs: Here’s a market intervention and a form of taxation that Trump is teaching Republicans (at least some of them) to love. Will wonders never cease?
Politically, he’s betting that factory workers (particularly those in the industrial Midwest) will reward him at the polls and unhappy farmers (particularly in the rural Midwest) aren’t so unhappy that they’d actually vote for a Democrat. That’s probably a good bet. There’s more involved here, though, than mere politics.
Trump often seems to act without much of a long-term plan but here’s one exception: His ultimate goal is to force or persuade U.S.-based companies to unwind their supply chains and build more of their parts at home. That’s good for people who would find work in those factories, but perhaps not so good for other people who would find themselves paying more for the American labor that went into them. There’s a reason why Walmart is so dominant: Americans like cheap stuff. Trump is fixated on bringing back manufacturing jobs that went overseas for a reason; he’s not so fixated on growing those parts of the economy that depend more on America’s more unique advantages with a high-skilled, high-tech workforce.
Here’s the conundrum: An American company invented the iPhone and Americans love to buy them — but one reason Americans love to buy them is they’re relatively cheap, and they’re cheap because they’re built by low-paid workers across Asia. Americans might not be willing to buy so many iPhones if Apple had to pay its workers more. The South China Morning Post reports that workers at one Apple factory in China make $299 to $447 per month, which works out to $15,548 to $23,244 per year. By contrast, the $15-per-hour minimum wage that some Democrats are pushing for works out to $31,200 per year. What would happen if the price of an iPhone doubled to pay for American labor? Here’s one of those choices to be made: Is it better for the U.S. to have people working in a minimum-wage iPhone factory (but iPhones only available to more affluent customers) or to have more higher-paid software coders designing whatever the next invention is? If you believe the former, then maybe tariffs are a good thing. If you believe the latter, then we need to be getting more people into college.
We mentioned the regional differences that factored into the Tariff Act of 1824 (the “Tariff of Abominations” it was called in the South —maybe not a great Twitter hashtag but pretty clever sloganeering in the 19th century) as well as the tariffs of today. So how does Virginia fare in the current trade war with China?
The answer is an all-purpose one: Depends.
In theory, Virginia has a lot at stake. The state exports – yes, exports — more goods to China than any other market except Canada (another country Trump targeted for a trade war). Those exports have also been growing — up 47% from 2008 to 2017. That translates into an estimated 15,300 jobs dependent on that trade with China.
So far, though, the retaliatory tariffs that China has imposed don’t appear to hit the main products Virginia is exporting: Scrap products (think: recycling), pulp and paper products (think: the WestRock paper mill in Covington), sawmill and wood products (WestRock again), coal and pharmaceuticals. On the other hand, China is the biggest buyer of Virginia soybeans, and it has slapped a tariff on those. So that means Accomack County (the state’s top soybean-producer) gets hurt, but Covington and the coalfields are not — and least not yet.
Tariffs were boring when we had to read about them in history class, but much more interesting when they start affecting your job today. Perhaps that’s why the old Chinese curse goes: “May you live in interesting times.”