Preface

1. I am not an economist, and likely another victim of Dunning-Krueger.
2. This is not an endorsement of the incoming Trump administration’s proposed tariff ‘plan’.

The Manufacturing Trident

The discourse around tariffs has made it clear that they will raise prices for consumers. Full stop. However, if they were surgically implemented to target nations that US corporations have been strip mining for cheap labor, combined with federal corrections to the minimum wage, and followed by a small business grants program for new US-based manufacturers, it could be the jump start we need.

Tariffs for Labor Protection

For decades, US companies have been taking advantage of the labor force in developing nations. The consequence of this practice that is relevant to this topic is that is has resulted in a race to the bottom to produce the cheapest product possible. Many a frugal consumer will always choose the cheapest option available, so the market for locally produced goods that cost 2-3x as much rapidly evaporated.

Tariffs that raised the cost of these goods to match the price of what domestic manufacturers would be able to compete with could open the door for a new era of American made goods, but uh-oh, prices have gone up so how can anyone afford anything? Let’s look at wage corrections.

Federal Minimum Wage Correction

It’s no secret that the minimum wage has not kept pace with inflation. In order to implement tariffs, citizens would need to make enough money to afford American goods, so the first step would be correcting the embarrassing federal minimum wage of $7.25/hr, with annual adjustments thereafter to keep pace with inflation. To what extent would the minimum wage need to be raised? I have no clue. Maybe $20/hr? Whether that would be implemented immediately, or with a rev-up period, I will leave to those more educated on that topic than I.

Will raising the minimum wage also increase prices? Almost certainly, but a secret many business don’t like to talk about is that while employee wages have not kept up with inflation, the prices of their goods and services certainly have. Since employee wages have not been raised in parity, the business gets a nice little boost to their profit margins each time this cycle takes place, at the direct expense of their labor.

So yes, prices will go up, but I suspect businesses will begrudgingly compete to limit ‘sticker-shock’ and be forced to cut into their inflated profit margins, restoring a bit of equilibrium.

Federal Grants for Small Manufacturing

Finally, to plant something into this ground we prepared, I would propose a slew of federal grants that would unleash the budding entrepreneurs across our country to go out and build shit. In my fantasy land, this would all be funded by a war chest filled by raising taxes on corporate profits.

The End

Am I an ignorant fool, or does this concept have some merit? Odds are good that it’s the former, but it’s nice to dream of simple solutions to complex problems. If you made it this far, thanks for joining me for the ride!