Originally posted on X.

President Donald Trump’s address to Congress portrayed a vision of “America is back!” This includes faster economic growth centered on tax cuts, deregulation, and less government spending.

While these proposals are critical for ensuring America’s competitiveness, his speech failed to address two major economic threats that will impact every American: the mounting national debt and the costs of tariffs. These would be drags on economic growth, real wages, and prosperity.

While Trump’s instincts to cut government overreach are necessary, true economic prosperity requires confronting the nation’s spending crisis and embracing free trade.

Trump’s call for cutting government spending is necessary, especially considering that the national debt has surpassed $36 trillion and the debt-to-GDP ratio exceeds 120%. 

Over the past year, the debt has grown by $2 trillion, and annual interest payments are now about $1 trillion. Interest payments now consume a larger share of the federal budget than spending on national defense. This burden will only grow as interest rates rise and more debt is added, crowding out spending on key services like defense, the justice system, etc.

If Washington continues reckless spending, the cost will fall even harder on American families through higher taxes, faster inflation, and reduced access to public services.

Trump’s speech rightly criticized wasteful spending but failed to address the biggest drivers of the nation’s budget crisis: Social Security and Medicare. These two programs account for over half of all federal spending and more than $100 trillion in unfunded liabilities. Without reform, Social Security’s trust fund will be depleted by 2034, triggering automatic 21% benefit cuts. For millions of retirees who rely on Social Security to make ends meet, these cuts would significantly reduce their standard of living. Similarly, Medicare’s Hospital Insurance Trust Fund is expected to run out by 2036, which would create a major shortfall in funding for seniors' health insurance.

Reform is urgent. Since their inception, Social Security and Medicare’s problems have been like a Ponzi scheme as debt and workers pay for retirees’ payments. We can no longer wait to address these welfare programs, as the longer we wait, the more drastic the necessary changes will be on retirees and workers.

Trump could have led on entitlement reform by proposing gradual fixes—raising the retirement age, means-testing benefits for wealthier retirees, or creating options for private savings accounts, especially for younger workers. Without these reforms, the alternative is either large tax hikes or draconian benefit cuts, neither of which would be palatable to voters.

In his speech and previous comments, Trump missed an extraordinary opportunity to address these challenges, leaving future generations to bear the burden of a growing fiscal crisis.

On the positive side, Trump’s pledge to make permanent improvements to the 2017 Trump tax cuts is an essential policy for economic growth. Lowering taxes puts more money in the hands of individuals and businesses, spurring investment and job creation.

Before the pandemic, the 2017 tax cuts helped drive record-low unemployment and rising wages. However, tax cuts alone are not enough if government spending remains unchecked. While tax relief helps boost growth, the rising debt and unfunded liabilities will eventually overwhelm these gains if the government doesn’t control its spending.

Running trillion-dollar deficits while cutting taxes is a short-term solution that leads to long-term consequences. If Trump is serious about maintaining tax cuts, he must pair them with meaningful spending reductions to keep debt levels manageable.

The most concerning aspect of Trump’s speech was his renewed push for tariffs on China, Mexico, and Canada.
Trump argued that tariffs would protect American jobs and reduce the trade deficit, but history shows that tariffs are taxes on American consumers. Past tariffs drove up prices on electronics, household goods, and other essentials, hitting families and small businesses hardest.

In addition to increasing costs, tariffs provoke retaliation from different countries, threatening American exports. If these tariffs continue, American farmers and manufacturers, already struggling to access foreign markets, will face even steeper barriers to trade and likely bailouts like last time.

The U.S. should reduce corporate taxes, eliminate regulatory barriers, and foster global competitiveness rather than rely on mercantilist protectionism.

Free trade, not government-imposed tariffs based on a flawed mercantilist view, strengthens the economy by giving businesses access to cheaper materials and larger markets. By lowering the cost of doing business, Trump could help create more jobs and keep prices lower for consumers. Tariffs do the opposite: They disrupt supply chains and drive up costs for Americans.

Trump’s economic vision contains many strong elements, mainly his focus on cutting wasteful spending, improving tax cuts, and ensuring deregulation. These policies would allow businesses to expand, wages to rise, and the economy to grow.

However, the failure to address “entitlement” reform and the continued reliance on tariffs undermine the long-term sustainability of his economic plan. If Trump wants to restore America’s economic strength, he must confront the country’s fiscal challenges by addressing Social Security and Medicare reform, reducing the national debt, and shifting away from protectionist trade policies.

Ultimately, the path to long-term prosperity is clear: cut spending, shrink government, and champion free markets. If Trump remains committed to these principles, his policies could fuel another wave of prosperity. But if the U.S. continues with rising debt, higher tariffs, and an ever-expanding government, the risks to economic freedom and growth will be severe.
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Now is the time for fiscal discipline. By reining in government and unleashing the private sector, we can restore and secure American prosperity for generations. In short, Trump can let people prosper!

Originally posted to The Kansas Policy Institute.

The return of tariffs under the Trump administration spells trouble for Kansas, especially its agricultural sector. 

Past federal tariffs and retaliatory tariffs by other countries in 2018 and 2019 led to nearly $1 billion in lost trade annually for Kansas farmers, particularly those exporting soybeans, sorghum, and pork. In response, the federal government issued billions of taxpayer dollars in subsidies, but bailouts are no substitute for free markets. 

This time around, tariffs are in place for many goods imported from China at an additional 10% above what’s already imposed and for Canada and Mexico at a 25% rate. These countries have already announced retaliatory tariffs that contribute to the heated trade war at the time of this writing.

The High Cost of Tariffs
​

• Higher Prices, Job Losses—Tariffs raise consumer costs, reduce investment, and disrupt supply chains.
• Slower Economy – Economists warn that tariffs could push the U.S. into recession within a year.
• Bailouts Are Unsustainable—Although previous federal aid subsidies soared to $20 billion in 2020, they primarily helped large farms while adding to the national debt.

Kansas Leaders Must Act

Instead of waiting for Washington, Kansas policymakers should:

• Expand Export Markets – Diversify trade relationships to reduce reliance on a few countries.
• Boost Value-Added Agriculture – Encourage processing industries that add value to raw commodities and create jobs.
• Reduce business costs – Spend, tax, and regulate less so businesses can better manage the uncertainty and increased costs of tariffs. 
• Defend Free Trade – Work with federal leaders to remove trade barriers that hurt Kansas businesses, pushing Congress to take back its power to tax from the Executive Branch.

Conclusion

Tariffs weaken Kansas’s, and everyone else’s,  economy, leading to higher costs, job losses, and uncertainty. Bailouts don’t fix the problem—free trade does. State leaders must develop pro-growth policies to protect Kansas from another costly trade war.

Originally posted to DC Journal. 

President Trump’s latest moves include a 10 percent tariff on all imports from China, a 25 percent tariff on steel and aluminum, and reciprocal tariffs on Canada and Mexico that could reach as high as 25 percent. These measures, justified as a way to “level the playing field,” will instead exacerbate price pressures that the Federal Reserve has struggled to contain.

According to the Tax Foundation, the proposed tariffs will shrink Canada’s and Mexico’s gross domestic product by 0.3 percent and China’s by 0.1 percent. They will also impose a $1 trillion tax hike on Americans, averaging more than $800 per U.S. household over the next decade.

The economic damage from these policies is staggering. The expanded steel and aluminum tariffs will raise taxes on Americans by an additional $53.7 billion — not by growing the economy but by squeezing businesses and consumers through higher costs. This will disproportionately hurt American manufacturers that rely on these materials, making their products more expensive domestically and less competitive globally.

We’ve seen this play out before: The 2018 steel tariffs caused more job losses in steel-consuming industries than the total number of steelworkers in the United States — an undeniable example of how protectionism backfires.

Tariffs don’t hurt just businesses; they also hit working-class Americans the hardest. The new trade war is projected to reduce after-tax incomes by 0.8 percent in 2025, with middle- and lower-income households bearing the brunt of rising consumer costs.

This doesn’t account for foreign retaliation, which is already in motion. China has announced counter-tariffs on $21.2 billion worth of U.S. exports, including liquefied natural gas, coal and large motor vehicles — industries that will see falling demand and potential job losses.

In reality, Trump’s tariffs are one of the most significant tax increases in modern history. If imposed, they will rank as the biggest tax hike since 1993 and the 18th largest since 1940. And for what? The justification that trade deficits hurt the U.S. economy is fundamentally flawed.

A trade deficit is not a sign of economic weakness — it reflects strong capital inflows and consumer purchasing power. Trying to “fix” it with tariffs only distorts markets and raises costs. The 2018-2019 trade war proved this: tariffs on $380 billion of goods led to higher prices, reduced employment, and a 0.2 percent decline in long-term GDP. This result is similar to the estimated drag on growth from an otherwise pro-growth agenda that I estimated during the first Trump White House’s Office of Management and Budget.

Beyond the direct costs, these tariffs ignore the real causes of the decline in manufacturing in the United States.

Protectionists love to blame China for job losses. Still, the decline in Rust Belt manufacturing predates China’s entry into the World Trade Organization in 2001. Although manufacturing output has continued to hit record highs, employment has stagnated due to automation, technological advances and government-imposed costs. High wages, excessive state and local taxes, and overregulation made operating in places like Michigan and Pennsylvania too expensive long before globalization became an easy scapegoat.

The solution isn’t tariffs — it’s lowering business costs in America.

A more pressing issue that Trump’s tariffs ignore is the overvaluation of the U.S. dollar, which makes American exports more expensive abroad and increases reliance on cheap imports. Runaway government spending and deficits are major drivers of the strong dollar, making it harder for manufacturers to compete globally. Yet, instead of tackling the root problem — government spending — Trump is opting for tariffs that further distort trade without addressing the issue.

If policymakers want to strengthen American manufacturing, they should focus on reducing the federal budget deficit to prevent excessive borrowing from propping up the dollar. Cutting government spending would ease inflationary pressures, allow interest rates to stabilize, and remove artificial barriers that weaken U.S. exports.
That’s the right approach — not slapping tariffs on foreign goods that raise prices at home.

Republicans, traditionally the champions of free markets, are dangerously abusing economic nationalism. Protectionism is nothing more than big-government interference in the market, and it runs counter to conservative principles.

Free trade is a cornerstone of economic freedom, driving competition, innovation and lower prices. Conversely, tariffs stifle growth, increase government control and burden businesses with unnecessary costs.

​The way forward is clear: reduce government spending, lower the budget deficit, embrace free trade and let markets work. Tariffs are a failed policy; history has shown they do more harm than good.

Originally posted to National Review. 

The November 2024 election delivered a mandate for change. Voters, grappling with persistent inflation, stagnant real wages, and a bloated federal government, were looking for new direction. The Trump administration began addressing these issues on day one with a flurry of executive orders and the pace has not eased up.

To truly let America prosper, Trump must advance a free market agenda rooted in limited government, fiscal discipline, and economic freedom.

As someone who worked in Trump’s first White House Office of Management and Budget and collaborated with national and state-level think tanks and experts across the country, I have seen firsthand what works — and what doesn’t. The best strategies are clear: cut government spending, simplify taxes, restore energy independence, expand free trade, overhaul immigration, and slash burdensome regulations. Together, these policies will unleash economic growth and create the conditions for a more prosperous future.

Many of today’s economic challenges lie in Washington’s out-of-control spending. Federal outlays exploded under Trump from $4.5 trillion in 2019 to over $6.5 trillion during the pandemic, and they remain near $7 trillion today. This unsustainable trajectory fuels inflation, crowds out private investment, and burdens future generations with crushing debt.

Trump must act immediately to reduce spending to pre-pandemic levels. Through executive orders, the administration can freeze unnecessary expenditures, claw back unspent Covid-19 funds, and direct agencies to identify and eliminate wasteful programs. He can also use the bully pulpit of the presidency to push Congress to make cuts proposed by the new Department of Government Efficiency (DOGE) or veto legislation without those cuts.

Because Congress is invested with the power of the purse, it must take the lead by cutting government spending to at least $4.5 trillion and passing a reconciliation bill to impose spending caps tied to population growth and inflation. These sustainable budgeting practices would force policymakers to confront the true drivers of our debt crisis: “entitlement” programs like Social Security, Medicare, and Medicaid, which account for nearly 70 percent of federal spending. Without reform, these programs will bankrupt our economy and destroy any hope of future prosperity.

The 2017 Tax Cuts and Jobs Act delivered historic relief, but it only scratched the surface. Trump and Congress must make these tax cuts permanent and build on them with reforms that reduce complexity and support growth.

Reducing the corporate tax rate from 21 percent to at least 15 percent, as Trump has been advocating, would attract investment, create jobs, and ensure that the U.S. economy remains one of the most competitive in the world. Simplifying the individual income tax code by flattening rates, eliminating deductions and credits, and indexing capital gains for inflation would lower compliance costs and increase economic efficiency. Making full expensing permanent would encourage long-term business investment, while ending the state and local tax (SALT) deduction would ensure a more equitable tax system.

These reforms would boost economic activity and allow Americans to keep more of their hard-earned money — an essential step in restoring trust and optimism in the economy.

Energy independence was a hallmark of Trump’s first term — and is shaping up to be a hallmark of his second. Upon his return to the Oval Office, Trump immediately began the restoration of America’s energy dominance by declaring a national energy emergency. While this declaration may not have been necessary to achieve real reform, Trump has paved the way to reduce regulatory hurdles quickly. In order to mitigate the impending effects of Biden’s policies, the administration should reopen federal lands and offshore areas for oil and gas exploration, expedite permits for pipelines and refineries, and eliminate green-energy subsidies. These steps would help lower energy costs, create high-paying jobs, and strengthen national security. A free market energy policy will help stabilize prices and ensure the U.S. can meet its energy needs without relying on hostile foreign powers.

Trade policy, however, is an area in which Trump’s first term made only marginal progress, and there’s a clear danger that this may be lost if the administration continues weaponizing tariffs. Tariffs on intermediate goods and consumer products act as hidden taxes and cost the economy during the first administration at least $80 billion annually.

Rather than doubling down on protectionism and raising costs for Americans, Trump should instead prioritize expanding free trade agreements with allies in Europe and the Asia-Pacific. Removing tariffs will enhance market competition, lower consumer prices, and strengthen America’s position in the global economy. This approach would also allow the U.S. to apply strategic pressure on China to improve its flawed trade practices without resorting to tariffs on China or other countries that harm Americans or starting a trade war that hurts domestic manufacturers.

While securing the border is essential, immigration reform should go beyond enforcement. America needs a market-driven immigration system that aligns with labor market demands. Expanding H-1B visas for high-skilled workers in STEM fields and implementing a merit-based system for all immigrants would help address critical workforce shortages, boost innovation, and ensure the U.S. remains competitive globally while helping people improve their lives. At the same time, reforms should also create pathways for legal entry of unskilled workers to meet the demands of industries like agriculture and construction. A balanced, market-oriented approach to immigration will strengthen the economy while ensuring border security.

Deregulation was one of Trump’s greatest successes in his first term. However, much of this progress was reversed under Biden, as the regulation costs under his administration totaled over $1.8 trillion. Trump now favors expanding his previous “two-out, one-in” rule with a ten out for every one in. While he has started this process with a regulatory freeze, more should be done. Establishing a regulatory “budget”  that prioritizes the elimination of outdated and burdensome rules would be another move in the right direction. Removing superfluous or unduly burdensome regulations will help foster an environment in which businesses are more productive and thus more competitive domestically and internationally.

The November 2024 election wasn’t just about rejecting Bidenomics; it was about embracing a new vision for America’s economy — one more deeply rooted in the principles of free markets, limited government, and fiscal responsibility than before. Trump’s second term offers a historic opportunity to reset the country along those lines and set the stage for long-term prosperity. In some areas, most notably, perhaps, tariffs, Trump will have some different priorities. But that does not alter the fact that cutting spending, simplifying taxes, restoring energy independence, expanding, yes, free trade, reforming immigration, and slashing regulations are not just policy priorities — they are the building blocks of a competitive, dynamic economy that allows all Americans to thrive.
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This historic opportunity must not be wasted. It’s time to let people prosper.

Originally published at NBC News with my quote below.

​President Donald Trump has repeatedly criticized the nation’s trade deficit, which the Commerce Department reported Wednesday reached a new record high. 
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But the same Commerce report showed the value of American exports had also hit a new record, indicating there’s still strong demand for U.S. goods and services abroad.

A trade deficit simply means a country is importing more than it is exporting. As the Congressional Research Service reported in 2018, Trump’s fixation on reversing the deficit “contrasts with the views of most economists.”
Maintaining a deficit usually says little about the state of a country’s economy. The U.S. trade deficit reflects strong domestic growth and consumption, especially relative to the weaker economic performance seen in many parts of the world, including most other Western developed countries. 

“Trade helps us to be better off,” said Vance Ginn, an economist and adviser in Trump’s first term.  Whether it is sourcing goods that the U.S. no longer produces or which can be produced more cheaply elsewhere, large American import levels reflect strong demand from consumers for stuff — and the U.S. economy as a whole generally benefits from this arrangement, Ginn said.

Countries with large trade surpluses, such as China, Russia and Saudi Arabia, tend to be heavy exporters of natural resources with relatively lower rates of domestic consumption. 
Trump has indicated he may prefer the U.S. to more closely resemble this group of nations. In his executive order last week laying out his new administration’s trade priorities, “investigating the causes of our country’s large and persistent annual trade deficits in goods” was the first item listed. 

Asked what Canada and Mexico needed to do to avoid sweeping new 25% tariffs, Trump said Sunday, “They have to balance out their trade, number one. We have deficits with almost every country — not every country, but almost — and we’re going to change it.”

Because Americans tend to buy more and save less than those ib other countries, a deficit persists. Economists are nearly unanimous that Trump’s call for tariffs to reverse the deficit would raise costs for U.S. consumers — and the president himself recently acknowledged their imposition would likely lead to “pain” for some time.  
  
Trump often cites William McKinley, a former U.S. president who, as a congressman, helped implement massive trade duties, as his lodestar for how he believes the U.S. economy should be run. McKinley was indeed successful in raising large sums of money for the U.S. government several decades before the first national income tax was implemented. 

However, by the time McKinley was sworn in as president in 1897, the country’s transition from an agrarian to an industrialized economy had accelerated, and he ultimately abandoned the use of tariffs in favor of reciprocal trade agreements. 

There may have been a point in the 1980s and 1990s when America’s widening trade deficit began to cause problems again. In testimony before the U.S. Senate in 1998, Robert Scott, an economist with the left-leaning Economic Policy Institute, said trade imbalances had likely contributed to 2 million manufacturing job losses between 1979 and 1994, with hundreds of thousands resulting from the 1992 North American Free Trade Agreement alone — a pact Trump repeatedly criticized before replacing it with the United States-Mexico-Canada-Agreement in 2018. His latest volley of tariffs would contravene that very deal, which is up for review in the middle of next year.

Along with the lost jobs was the effect on wages, Scott said. Since 1979, Americans’ inflation-adjusted earnings have risen only by 12%, even as the size of the overall U.S. economy has grown exponentially during the same period. Wealth inequality, too, accelerated during this time.

The Wall Street Journal’s right-leaning editorial board has noted the “contradictions” of Trump’s economic policies. 
“Mr. Trump likes tariffs and wants more of them, but he also wants a weaker dollar to promote U.S. exports, and the two desires are in conflict,” it said this week. 

Most economists, left and right, believe that at this point, it would be extremely difficult to bring back a meaningful number of manufacturing roles — and that those that still exist currently benefit from lower trade barriers and, in some cases, recent federal programs designed to prop up key industries like semiconductor manufacturing. 

“It would be better if Mr. Trump and his crew dropped the strong dollar-weak dollar chatter and focused on a stable dollar,” the Journal’s editorial board wrote. “That’s what inflation-weary Americans elected the President to do.”

​Watch my interview in NTD News on 1/31/2025.

​What if everything you thought you knew about tariffs and taxes was wrong? In this episode of the Let People Prosper Show, Erica York, senior economist and research director at the Tax Foundation, unpacks the truth behind tariffs, the future of the Tax Cuts and Jobs Act, and why states compete to lead on tax reform.

If you want to understand how these policies impact your wallet and why states like Texas and Kansas are shaking things up with bold reforms, this episode is for you. Erica’s insights go beyond the headlines, offering a clear picture of what’s driving economic change—and what it means for your future.

See show notes at vanceginn.substack.com.

(0:00): Intro: The real impact of tariffs and tax policies
(3:20): Why tariffs hurt Americans more than they help
(8:45): The smarter alternative to tariffs: Free trade agreements
(12:10): How the Tax Cuts and Jobs Act changed the economy
(18:30): What happens when the tax cuts expire?
(22:45): State-level tax reform: Flat taxes and property tax reductions
(29:00): Why competition among states matters for growth
(36:05): Practical reforms that create long-term prosperity
(40:50): Final thoughts: How policy drives opportunity

Listen here!

On this episode of the podcast, Vance Ginn, former Trump White House economic advisor, dives into the pressing economic challenges facing the new Trump administration and offers solutions rooted in pro-growth policies. Ginn outlines strategies to curb inflation and address the staggering $36 trillion national debt, emphasizing the need to cut government spending, implement tax reform, deregulate industries, and pursue free trade agreements. The former Office of Management and Budget Chief Economist also evaluates the impact of Trump’s plans to impose new tariffs, the effectiveness of Trump-era tax cuts, and the Department of Government Efficiency's role in reducing wasteful spending. Ginn makes a bold case for eliminating the federal minimum wage to foster competition and create new jobs.
See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Originally published at AIER. ​

Tariffs, often promoted as a tool to protect American jobs and industries, are a hidden tax that disproportionately burdens consumers and producers alike. Both the Trump and Biden administrations have embraced these protectionist policies, and future administrations may likely do the same. But these policies do more harm than good, undermining the very people they are designed to protect.

Recently, protectionist policies have been championed by the Trump-Pence administration, continued by the Biden-Harris administration, and likely doubled down upon by Trump-Vance or Harris-Walz. Tariffs may seem like a good way to shield domestic industries from foreign competition by making imports more expensive, but the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are inevitably passed down to the consumer. When the federal government imposes tariffs, it raises the prices of goods that many American businesses rely on, leading to higher costs. This isn’t just an abstract economic concept — it affects every American who buys a car, electronics, groceries, or other everyday items.

In 2023, the US imported over $3.8 trillion of goods and services while exporting $3.05 trillion. This nearly $7 trillion in trade volume highlights how imports and exports play a role in the US economy, supporting millions of American jobs, but is a relatively small share of the $27.3 trillion economy. While the US ran a current account deficit as imports exceeded exports by $773.4 billion in 2023, this amount doesn’t tell the whole story. 

For instance, the US had significant trade surpluses with regions like South and Central America ($54.9 billion) and countries like the Netherlands ($43.7 billion) and Hong Kong ($23.6 billion). Conversely, it recorded deficits with China ($279.4 billion), the European Union ($208.2 billion), and Mexico ($152.4 billion). Notably, while substantial, trade with China represents only 8.4 percent of the total US international trade volume, even as it accounts for 36 percent of the current account deficit. This deficit and the total trade deficit are met with a capital account surplus, with funds flowing into the US, including investments that help finance the national debt, support lower interest rates, and support capital to businesses.

International trade provides mutually beneficial exchanges between people in different countries, supporting peace and prosperity.

The Real Economic Impact of Tariffs
Proponents of tariffs often argue they are necessary to rebuild America’s manufacturing sector, but the problem isn’t foreign competition — it’s at home. US manufacturers’ core issues stem from excessive government spending, high taxes, inflated minimum wages, overregulation, and a lack of right-to-work laws. Instead of addressing these root causes, tariffs exacerbate the problems by acting as an additional tax on American businesses and consumers.

When tariffs are imposed, the costs of imported goods rise. These goods are finished products, raw materials, and components that American producers rely on in their supply chains. This increased cost of production ripples through the economy, making American goods more expensive both domestically and internationally and hurting US businesses’ ability to compete.

Take, for example, the tariffs on steel, which were implemented to protect US steel producers. While they may have helped some steel manufacturers, they raised costs for industries that depend on steel, such as the automotive and construction sectors. These industries were forced to pass on these costs to consumers, making American-made goods more expensive and less competitive. Rather than revitalizing manufacturing, these tariffs hinder growth, slow job creation, and harm consumers.

Moreover, tariffs fail to address the real reasons behind the loss of manufacturing jobs. Automation and technological advances have displaced many jobs, allowing US manufacturing output to reach record highs with fewer workers. The Rust Belt’s loss of manufacturing jobs is less about foreign competition and more about the evolving nature of the global economy, tariffs do nothing to solve these domestic challenges.

When tariffs increase, they tax what we purchase from other countries. This tax directly affects producers and consumers who rely on foreign goods. The process reduces the demand for foreign currencies to purchase foreign goods while raising demand for the dollar, especially when the federal government runs deficits that result in higher interest rates. This results in an appreciated dollar by roughly the size of the tariff itself. This currency appreciation helps keep the cost of the taxed goods from rising too quickly, but it simultaneously disrupts the supply chain and other factors of production. As the dollar appreciates, US exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the goal of balancing or reducing the trade deficit with the targeted country or others.

Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This creates direct costs and increases economic and political uncertainty — something businesses dread when planning for the future. Although tariffs don’t directly cause inflation — an issue controlled by the Federal Reserve’s monetary policy — they raise prices on specific goods through the added tax. These increased costs can ripple through the supply chain, affecting many products. International trade is complex, and protectionist measures like tariffs only exacerbate the complexities, worsening the situation.

The current account deficit with other countries is balanced by a capital account surplus, where foreign savings flow into the US, helping finance our national debt and keeping interest rates lower than they would otherwise be. However, the flow of funds is slowing as some countries shift away from the US dollar, opting for gold and other assets. This trend poses a risk to the US economy by potentially restricting our ability to trade with other countries and raising the cost of borrowing as interest rates rise. This shift from the dollar, known as de-dollarization, underscores the importance of maintaining strong international trade relationships and avoiding protectionist policies alienating trading partners. As global confidence in the US dollar wanes, the economic benefits of foreign investment could diminish, leading to higher costs for Americans.

Tariffs Worsen Broader Problems at Home
As noted above, the broader economic problems facing the US stem from high taxes, overregulation, and government policies that make it more expensive for businesses to operate. Tariffs worsen these problems by raising costs for American businesses and consumers. By taxing imports, tariffs increase the prices of goods that US producers need to remain competitive. This adds to the burdens already imposed by high taxes and government mandates, effectively taxing Americans twice — once through tariffs and again through the costs of domestic overregulation.

Rather than addressing the domestic policy environment that has hindered US competitiveness for decades, tariffs only complicate matters. US companies struggle with excessively high corporate taxes, incentivizing them to move operations overseas. Before the Tax Cuts and Jobs Act of 2017, the US had the highest corporate tax rate in the developed world. While the Act lowered the federal corporate tax rate to 21 percent, proposals to raise it to 28 percent would once again make US companies less competitive globally.

Like Texas, right-to-work states in the South have demonstrated how pro-growth policies can attract manufacturing jobs by creating a business-friendly environment. These states have attracted jobs lost from the Rust Belt by fostering lower taxes and fewer regulations. On the other hand, tariffs stifle economic growth by driving up costs, making it harder for these states to sustain their competitive advantage.

In sum, tariffs don’t solve American businesses’ real issues — they make them worse. Instead of protectionist measures, the US needs to focus on reducing domestic costs by lowering taxes, cutting red tape, and fostering an environment that encourages innovation and growth.

Protectionism: A Failed Policy
The economic data between 2016 and 2021 highlight the failure of protectionist policies, including raising tariffs that began in 2017. 

Consider that global manufacturing output was $14.1 trillion in 2016, with China leading at $4 trillion and the US following at $2.3 trillion. In 2021, it rose to $16 trillion, with China’s part increasing to $4.9 trillion and the US’s to $2.5 trillion. Global manufacturing output grew by 13.5 percent. While China’s manufacturing surged by 22.5 percent, the US had a more modest increase of 8.7 percent. Of course, this period had significant initial and retaliatory tariffs between these countries and lockdowns in response to a global pandemic.

Since 2017, the Trump and Biden administrations have imposed $79 billion in tariffs as part of protectionist policies meant to shield domestic industries. Despite these efforts, global manufacturing continued to grow, and the economic pie expanded — but China captured a larger slice, increasing its share from 28.3 percent to 30 percent. The US trade deficit with China continued to widen, undermining the asserted goal of protectionism. Meanwhile, US manufacturers struggle with higher production costs, passed down to American consumers through increased prices on specific goods.

The Case for Free Trade
The US should abandon protectionism and embrace free trade policies that foster innovation, improve efficiency, and lower costs for consumers and businesses. When countries engage in free trade, all parties benefit from the specialization of labor and resources. Protectionist measures like tariffs distort markets, raise costs, and create uncertainty, hurting American consumers and producers.

Free trade doesn’t mean ignoring unfair trade practices by bad actors like China. However, the best way to address these challenges is not through blanket tariffs but by expanding trade with allies and non-hostile nations. For example, the Trans-Pacific Partnership (TPP) offered an opportunity to strengthen economic ties with 12 countries, pressuring China to play by the rules or risk losing access to major markets. Unfortunately, withdrawing from the TPP in 2017 was a missed opportunity to enhance American competitiveness while holding China accountable.

Conclusion
Tariffs are not the right tool to address the challenges facing American industries. They are a tax on imports, raising costs for consumers and producers while failing to tackle the real issues at home: excessive government spending, high taxes, overregulation, and outdated domestic policies hinder US competitiveness. By embracing free-market solutions — eliminating tariffs, reducing spending, reforming taxes, and cutting regulations — the US can create an environment where American businesses can thrive without relying on harmful protectionist measures. The path forward lies in pro-growth free trade efforts — unilaterally or through agreements with other countries — and domestic reforms, not in tariffs that hurt those they aim to protect.

Originally published at Pelican Institute. 

​Louisiana’s economy, deeply reliant on global trade, faces unique challenges under the weight of federal tariffs. As recent protectionist policies continue to gain traction, Louisiana finds itself vulnerable to the unintended consequences of these measures, which often do more harm than good. While these tariffs are marketed to protect American industries, they act as a hidden tax that burdens consumers and producers, ultimately stifling economic growth and prosperity.

At first glance, tariffs might seem like a tool to bolster domestic industries by making imported goods more expensive and less competitive. However, the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are passed down to consumers and businesses. When the federal government imposes tariffs, it raises the prices of goods that Louisiana’s industries rely on, leading to higher production costs. This isn’t just an abstract economic concept—it affects every Louisianan who buys a car, electronics, or even groceries.

Louisiana’s Trade Profile

In 2023, Louisiana exported over $122 billion worth of goods, making it the 3rd largest exporter among U.S. states. The state’s top exports included liquefied natural gas (LNG) at $22.2 billion, light petroleum distillates at $16.3 billion, and soybeans at $14.4 billion. These exports underscore Louisiana’s significant role in global energy and agricultural markets. On the import side, Louisiana purchased $38.2 billion of goods from foreign countries, ranking as the 24th largest importer among U.S. states. The top imports included petroleum oils ($5.78 billion), light petroleum distillates ($4.63 billion), and copper cathodes ($1.31 billion). This robust trade activity highlights imports’ critical role in supporting Louisiana’s industries, particularly in energy production and manufacturing.

Despite this impressive trade performance, Louisiana faces a substantial trade deficit driven by the high volume of imports relative to exports. The state’s reliance on imported petroleum and other raw materials exposes it to the direct impact of federal tariffs, which increase the cost of these essential goods. While a trade deficit is often considered a detriment to an economy, these imports are important to the production process and consumers who desire the goods. What’s more important is that the total trade volume in Louisiana is $160 billion with other countries to satisfy the needs and wants of Louisianans. Recall that people trade, not countries or states, so they trade only when both parties mutually benefit.

The Economics Behind Tariffs

When tariffs increase, they tax the goods Louisiana imports, impacting both producers and consumers who depend on these foreign products. This tax reduces demand for foreign currencies while increasing demand for the U.S. dollar, especially when federal deficits drive interest rates higher. This dynamic results in an appreciated dollar, which, while keeping the cost of taxed goods from rising too quickly, also disrupts supply chains and other production factors.

As the dollar appreciates, U.S. exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the questionable goal of balancing or reducing the trade deficit with the targeted country or others. Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This scenario is particularly detrimental to Louisiana, where trade is crucial to the state’s economic health.

Although tariffs don’t directly cause inflation—an issue controlled by the Federal Reserve’s monetary policy—they raise prices on specific goods through the added tax. These increased costs ripple through the supply chain, affecting many products. As highlighted by the Tax Foundation, tariffs can also reduce economic output, lower wages, and lead to job losses in affected industries, further illustrating the negative impacts of such policies.

Navigating Federal Uncertainty with Fiscal Conservatism

Given the federal uncertainty and the complexities of international trade, Louisiana must focus on improving its competitiveness to navigate these challenges effectively. The state should consider pro-growth policies of spending less, cutting taxes, and supporting a workforce for careers that align education and training programs with the needs of key industries. This will help Louisiana develop a skilled workforce that attracts businesses and supports existing industries. A well-trained workforce is critical to maintaining the state’s competitive edge, which will be helped by the recent passage of the LA GATOR Scholarship Program to empower parents with school choice.

Another vital step is reducing regulatory burdens at the state level. By streamlining regulations, Louisiana can offset some of the negative impacts of federal tariffs, fostering a more business-friendly environment that encourages investment and job creation. Moreover, promoting Louisiana’s status as a right-to-work state helps maintain its competitive advantage. The flexibility offered by right-to-work laws is attractive to businesses, particularly those looking for a more favorable labor environment. Diversifying trade relationships is also essential. While trade with major economies like China is significant, Louisiana must continue to expand its exports to other regions and countries. By doing so, the state can reduce reliance on any single market, mitigating the risks associated with global trade tensions.

Conclusion

Tariffs, while intended to protect American industries, ultimately function as a tax that harms consumers and producers. For Louisiana, where the economy is deeply integrated with global trade, the negative effects of tariffs are particularly severe. Louisiana must embrace fiscal conservatism, improve competitiveness, and address the real domestic issues hindering growth to secure the state’s economic future. By doing so, Louisiana can ensure that its industries remain competitive, its economy is resilient, and its citizens are prosperous in a global economy.

​In episode 77 of This Week's Economy, I break down the flawed economic promises of presidential candidates who ignore that nothing is truly free. From proposed AI regulations and fracking policies to tax plans and protectionism, I explore the impact these issues have on innovation, energy independence, and economic growth while highlighting why free-market solutions are key to prosperity. Get the show notes and more information at vanceginn.substack.com.

​Originally published at Kansas Policy Institute. 

As the debate over tariffs continues to dominate political discussions, Kansas finds itself caught in the crossfire of these trade policies. Though touted as a way to protect American industries, tariffs often act as hidden taxes that ultimately burden consumers and largely restrain economic growth and prosperity in the state.

Kansas, known for its strong agricultural and manufacturing sectors, is particularly vulnerable to the economic impacts of tariffs. While tariffs may seem like a tool to give local products a competitive edge by making foreign goods more expensive, the reality is that these costs are passed down, increasing the prices of goods essential to Kansas families and industries. This isn’t just theoretical; it affects every Kansan, from the prices paid for everyday goods to the costs of doing business by the tariff rate over time.

Kansas’ Trade Dynamics
In 2023, Kansas exported over $14 billion worth of goods, making it the 32nd largest exporter among U.S. states. Especially given the overall size of the state, Kansas is punching above its weight. The state’s top exports included aircraft parts ($2.63 billion), fresh or chilled boneless beef cuts ($970 million), maize/corn ($537 million), frozen beef cuts ($422 million), and soybeans ($365 million). These figures highlight Kansas’ vital role in both aerospace and agriculture. On the import side, Kansas brought in $13.4 billion in goods, ranking as the 35th largest importer in the U.S. Significant imports included unspecified commodities ($1.54 billion), aircraft parts ($671 million), turbo-jet engines ($403 million), communication apparatus ($331 million), and electrical machinery ($302 million). This trade activity underscores the importance of imports in supporting Kansas’ diverse industries, particularly in aerospace and technology.

Despite Kansas’ robust trade performance, the state is not immune to the economic strain caused by tariffs. These trade barriers increase the cost of imported materials and components crucial to its industries. While trade deficits often draw negative attention, the focus should be on Kansas’ overall trade volume of $27.4 billion, which supports jobs and drives economic activity across industries and the state. Trade is not just about deficits or surpluses; it’s about the mutually beneficial exchanges that allow Kansans to thrive.

The Economic Impact of Tariffs
Tariffs, by design, impose a tax on imported goods, impacting both producers and consumers. This added cost reduces demand for foreign currencies while increasing demand for the U.S. dollar, especially when federal deficits push interest rates higher. A stronger dollar can mitigate some price increases caused by tariffs but also disrupt supply chains and raise production costs. As the dollar appreciates, Kansas’ exports become more expensive for international buyers, reducing demand for these goods abroad. This can lead to a decline in Kansas’ export volume, undermining efforts to balance trade deficits. Additionally, tariffs often trigger retaliatory measures from other countries, further complicating trade relationships. For Kansas, where global trade is integral to the economy, such disruptions can have serious consequences.

Although tariffs don’t directly cause inflation, as the Federal Reserve creates inflation by printing too much money, tariffs increase prices on certain goods by the amount of the tax hikes on them over time. These higher costs ripple through the supply chain, affecting a broad range of products. As noted by the Tax Foundation, tariffs can also lead to reduced economic output, lower wages, and job losses in affected industries, illustrating these policies’ broader negative effects on Kansas.

Strengthening Kansas’ Economic Future
Kansas must proactively enhance its competitiveness in response to federal trade policy uncertainties. Of course, the state cannot set interest rates or tariff policies. The state should focus on policies that promote growth through fiscal responsibility—reducing unnecessary government spending, lowering taxes, and aligning workforce training with the needs of key industries like agriculture and aerospace. A skilled workforce is essential for attracting businesses and supporting Kansas’ existing industries.

Additionally, reducing the regulatory burden on businesses can help Kansas offset some negative impacts of federal tariffs. Creating a more business-friendly environment encourages investment and job creation, ensuring long-term economic resilience. Expanding trade relationships and exploring new markets is another critical strategy. Diversifying export destinations reduces reliance on a few large markets, mitigating risks from global trade tensions. It’s nice that many state leaders attend the occasional international air show or economic confab, but these taxpayer-funded trips don’t help “sell” Kansas. However, sound economic policy will “sell” the state, making it easier for a business to expand in The Sunflower State than in The Palmetto State. 

Finally, Kansas leaders should advocate for federal trade policies that support free trade and minimize reliance on tariffs. Supporting global trade agreements will help secure Kansas’s prosperous future and contribute to a stronger national economy.

Conclusion
While tariffs aim to protect American industries, they function as a tax that burdens consumers and businesses. For Kansas, which is deeply tied to global trade, the negative impacts of tariffs are particularly significant. By focusing on fiscal responsibility, enhancing competitiveness, and addressing domestic challenges, Kansas can ensure its industries remain strong, its economy resilient, and its people prosperous in the global market.

​Originally posted here: https://www.politicsandparenting.com/p/the-economy.

​Today on the show I am joined by Vance Ginn, Ph.D. A leading economist and advocate for free-market principles and fiscal conservatism. He is the former associate director for economic policy at the White House’s Office of Management and Budget and chief economist at the Texas Public Policy Foundation.   He is the founder and president of Ginn Economic Consulting and host of the Let People Prosper Show podcast, providing high-impact economic consulting that dives deep into pressing issues with top influencers. He lives in Round Rock, Texas, with his family, championing policies that promote economic freedom and prosperity.

We discuss inflation, debt, minimum wage, currency, and tariffs. This is a great episode for average citizens trying to get a handle on this complex topic. Be sure to follow Vance on X and Substack, and check out his new article out in the Freemen-News Letter.

Originally published at AIER. 

​Both major presidential candidates, Joe Biden and Donald Trump, have leaned towards protectionism, a stance recently echoed by Terry Schilling in The American Conservative. Unfortunately, this perspective misses the mark. 

Protectionism is not the solution to revitalize American manufacturing or the economy. The real culprits are flawed internal policies — excessive government spending, high taxes, and stringent regulations — that stifle growth and innovation.

Politicians from both sides of the aisle often scapegoat countries like China and Mexico for the decline in US manufacturing. This narrative overlooks reality. 

Technological advancements and productivity gains are the primary drivers of change in manufacturing, and that’s a good thing for the many beneficiaries at the expense of the few. Industrial production in manufacturing has remained relatively flat, indicating stable output despite economic fluctuations, while manufacturing employment has declined significantly, reflecting the sector’s increased productivity and automation.

In short, we don’t need as many hard jobs to provide the same output, and those displaced individuals can find better avenues to flourish, even with tough transitions. While it would be great if there were a way to protect everyone’s job, this is a fool’s errand resulting in control by politicians and bureaucrats in government at the expense of everyone else. 

Free-market capitalism is needed now more than ever, not big-government socialism, which is already sending us down the road to serfdom. American manufacturing’s decline is largely due to domestic policies that reject free-market capitalism, thereby hindering economic growth. 

Progressive policies have led to excessive government spending, high taxes, and overregulation. The federal government is spending about 25 percent of GDP and running nearly $2 trillion deficits, including paying about $1 trillion in net interest payments annually, even with record-high tax collections. Add to this how the Competitive Enterprise Institute reports federal regulations cost the US economy $1.9 trillion annually, equivalent to 7 percent of GDP. Spending and regulations shackle about one-third of our economy, creating perverse incentives for businesses and workers to compete and innovate. 

The Trump administration’s efforts to boost manufacturing through tariffs led to trade wars that aimed to bring jobs back to the US. These measures backfired, however, increasing costs for American businesses and consumers, as tariffs are just taxes on Americans. Manufacturing output saw little sustained improvement, and employment gains were modest and short-lived. 

Deficit spending, which contributed to an appreciated currency from foreigners’ demand for the US dollar, made it cheaper to purchase foreign goods, exacerbating the trade deficit. The trade deficit expanded even after Trump imposed tariffs on Chinese goods. Similarly, the Biden administration’s attempts to revitalize the sector through initiatives like the American Jobs Plan and the Inflation Reduction Act have yet to do more than drive up the deficit and prop up specific markets. 

Despite potentially good intentions, these policies have yet to deliver the promised results, often perpetuating the same issues of overregulation and high spending.

The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA and mentioned in the piece, introduced more protectionist measures than its predecessor. The USMCA’s stringent labor and content rules have complicated trade and increased production costs, undermining its effectiveness in promoting free trade. These provisions counter what should have been done to promote more trade and prosperity.

It is wise to remember that free trade has provided the best opportunities for people to prosper and has significantly reduced extreme poverty globally, including in China. 

America should not isolate itself from other countries, as we benefit from a growing global demand for our products and the supply of goods we can purchase from abroad. Consumers and producers in America are better off with more domestic and international trade. As we don’t want to produce everything we consume daily, trading with others is the most efficient way to meet our needs.

Our national debt, driven by excessive government spending, is a significant economic burden. This debt will continue to grow without the resolve to cut spending and implement a strong spending limit. The Federal Reserve’s monetary policy, which has reduced purchasing power and higher inflation, also impacts manufacturing and should be regulated through a monetary rule. 

The PROVE IT Act aims to ensure that carbon emissions from imports are accurately measured. Still, the underlying assumption of a need to tax carbon dioxide — a necessary component of life — is flawed. Pigouvian taxes are problematic because they often target the wrong factors at incorrect tax rates, essentially serving as tools for government overreach rather than effective economic policy. 

The focus should be on minimizing government control over economic actions, which create more problems. A carbon tax or one of its spinoffs is a misguided attempt to control what the EPA doesn’t consider a pollutant, leading to worse outcomes for everyone, especially the poor.

Another way to improve relationships with countries and put more collective pressure on China to liberalize while meeting the needs of consumers and producers in America would have been to approve a version of the Trans-Pacific Partnership (TPP). 

This trade agreement negotiated by the Obama administration allowed expanded free trade with 11 other Asia-Pacific countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). By partnering with multiple countries, America could have promoted free trade practices that fostered a more robust economic environment that competes with China, Russia, and other potential adversaries. 

The TPP, as detailed by the Council on Foreign Relations, aims to enhance trade and economic integration across the Asia-Pacific region, providing significant benefits to all member nations. The TPP would reduce tariffs, establish common trade standards, and open new markets for American goods and services, ultimately leading to greater economic growth and job creation at home. 

Unfortunately, Trump rejected the TPP when he took office in 2017 instead of trying to negotiate the TPP better. While America was left out, the other 11 countries joined trade agreements after TPP’s demise, a major setback for Americans that could have been avoided.

Revitalizing American manufacturing requires addressing internal policy failures rather than blaming foreign competition.

We can ensure long-term prosperity by reducing government interference, embracing free trade, and fostering a competitive environment. The better path forward with fewer trade-offs lies in free-market principles, which have the power to drive innovation, efficiency, and economic growth. 

It’s time to shift the focus from protectionism to fostering a robust, open market that benefits everyone.

Watch interview at NTD News. ​

Vance Ginn, president of Ginn Economic Consulting and former chief economist for the White House Office of Management and Budget, offers his analysis of the latest U.S.-China policy after the Biden administration recently announced a 100 percent tariff on Chinese electric vehicles.