MAGA And Tariffs

MAGA—what does that mean? It’s not just a slogan, it’s a typical part of Trumpian political strategy—it’s a slogan that everyone gets to plug their own meaning into. And, in a populist sense, most of us are right, even when we disagree with each other. But what does MAGA mean to Trump?

Commenter St. Mudphud linked this morning to a very helpful substack that lays it all out. Recall that yesterday I was suggesting that Philip Pilkington was on to something with his ideas on Trade Imbalance and his preference for Balanced Trade. PP isn’t necessarily keen on the Trump Tariffs—he prefers the “bancor” solution that was considered (and rejected) at Bretton Woods in 1944. The point of Balanced Trade is to put an end to Beggar Thy Neighbor mercantalism. Question: How do you get all the important nations in the world to get together and agree to something like that? Well, one way would be to have another world war. Uhhhh. Sane people say ‘No Thanks!’ to schemes like that but, short of shock therapy of some sort, the reality of human nature is that you won’t get nations to consult together for the common good—and even if they do, they’ll probably reject the common good, just like at Bretton Woods.

So that’s where Trump’s Tariffs come in—shock therapy that is intended to direct the world toward balanced trade and get Beggar Thy Neighbor mercantilism—as famously practiced by China—under control. Trump thinks that Balanced Trade will MAGA. He may well be right—unless destructive mercantilism has already gone too far, in which case our decline continues. This is where the substack article comes in, because it sets out the theoretical case for the Trump Tariffs. Given that a global Bretton Woods style confab is pie in the sky and won’t happen, tariff shock could be the way to get us common folk out from under the thumb of mercantilist trading “partners” and our complicit ruling class who enrich themselves at our societal expense. Trump’s bet is that the US remains sufficiently hegemonic to force balanced trade on the rest of the world. Contra some of the non-establishment naysayers, the benefit to much of the world would be real—an end to neocolonial predation.

Let’s check the article out.

Balanced Trade

Understand the Method Behind the "Madness" of the Liberation Day Tariffs

I highly recommend a close reading of this article. The author first sets the stage:

A central part of President Trump’s 2024 election campaign was his pledge to make place tariffs that would raise revenue, protect American manufacturing, and restore balanced trade to our global economy.

On April 2,2025, a day he dubbed “Liberation Day for American trade,” Trump made good on this promise. His executive order "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits” places a duty on all imports from all trading partners that starts at 10% and increases to rates as high as 50%.

Soon after the unveiling of Trump’s executive order, the forces of neoliberal globalism orchestrated a counterattack of such rhetorical fierceness and economic malignity that it is virtually unparalleled in the history of fiercely malign economic rhetoric.

Predictably, the grifting neoliberal Wall Streeters, who have been running a casino for years—the top 10%, max, constitute the House, fueled by the sell off of American manufacturing to mercantilist China—are all clamoring for an immediate return to “free trade”. They want you to believe that the grift that enriched them was “free trade,” but it was anything but.

I’ll skip down in the article to the point at which the author explains that there’s a book—written back in 2014—that explains the Trump Tariff strategy for arriving at Balanced Trade. The author quotes the book extensively, but I’ll skip most of that in the interests of (relative) brevity. Note, however, the title of this section and its reference to “theory”. Trumpian rhetoric typically eschews “theory” in preference for sloganeering—but there’s usually theory behind that sloganeering, which is simply intended to get a critical mass on board with the policy that flows from the theory.

The Theoretical Basis for Trump’s Tariffs

The theoretical basis for the Liberation Day tariffs can be found in the book Balanced Trade: Ending the Unbearable Cost of America’s Trade Deficits. Written in 2014 by three economic professors, Jesse Richman, Howard Richman, and Ryamond Richman, the book challenges the orthodox theory that free trade is always beneficial and argues for an alternate policy they call balanced trade. The authors write:

The key problem is mercantilism—the ancient and continuing efforts of countries to twist mutually beneficial international trade to a one-sided advantage. ...

Neoclassical economists agree that the science is settled and that free trade is safe and effective against mercantilism. But the Richmans reject the neoclassical consensus on this issue:

...

Our massive trade deficit is destroying significant segments of American industry and eliminating badly needed jobs. This is happening because we are slow to recognize an unpleasant reality: We do not live in a world of textbook free trade. ...

They reject the notion that unilateral free trade is justified by the benefits to consumers:

…

The main trouble with this argument is that it is short-sighted. Although the victims of mercantilism do get increased consumption in the short run, they pay for that increased consumption with their industries and financial assets. In the long-run they get stagnant economies, financial crises, and reduced consumption.

And they argue that mercantlism isn’t abandoned because it doesn’t work, but because it works so well it becomes no longer necessary:

Many economists assume that mercantilism is just a developmental strategy —that it will eventually be abandoned by its practitioners once they develop… ...

But the fact that countries eventually give up mercantilism after destroying the economies of their trading partners is cold comfort to their trading partners. Spain never again was a world power, the Dutch never again led Europe in technology and trade, Britain is now a shadow of its former self, and the United States may never fully recover.

I would add that economies are ultimately made up of people organized in societies. By destroying the economies of their trading partners, mercantilist countries are also destroying the societies of those hapless “partners”.

They provide a game theoretic explanation of why mercantilism beats free trade, even while trapping the free traders into continuing to trade with the mercantilists.

...

The long-term result of unilateral free trade with a mercantalist is, they make clear, disastrous for the free trading party:

For the last several decades, the United States has generally played a cooperative strategy on trade with China and other mercantilists. ...

… it is obvious that China has no incentive whatsoever to voluntarily shift from exploitation to cooperation ... In return for Chinese products, Americans go ever deeper into debt.

The Richmans then build on this game theoretic model to develop their own proposal:

To get to the objective of free and balanced trade (mutual free trade), the U.S. government must adopt a game-changing strategy that provides mercantilists with incentives to cooperate in return for American cooperation. ...

The remainder of the book is devoted to the presentation and analysis of a number of different policy proposals. Among the policies they evaluate are currency rate reform, such as the 2009-2001 Currency Reform for Fair Trade Act; the national strategic tariff proposed by Ian Fletcher in his book Free Trade Doesn’t Work (which I’ve written about and recommended in my own policy proposals); restrictions on foreign asset purchases to adjust the flow of foreign capital; the use of countervailing currency limitations to balance trade; and cap-and-trade style import certificates, famously recommended by Warren Buffett.

After rejecting each of these for various reasons, they propose their own solution: The scaled tariff. The Richmans explain their policy like this:

…

Do you see? Trump’s Liberation Day tariffs are are calucalted with the exact same formula as the Richmans’ scaled tariffs.

In fact, if you read Trump’s executive order, it reads as if it was written by the Richmans - ...

The only difference is that Trump has also included a national strategic tariff of 10% as a baseline. Trump trade policy is simply Ian Fletcher’s Free Trade Doesn’t Work combined with the Richmans’ Balanced Trade!

The long and the short is that Trump is rejecting “Free Trade”—because it doesn’t work. He’s opting for balanced trade to MAGA by protecting us against predatory mercantilist practices. The attraction for most of the world is that they, too, will benefit from balanced trade. Notice that yesterday, when the Chinese retaliated, Trump told them they were being dumb—it was an emotional reaction by the Chinese, who will probably come to their senses, as other countries are quickly doing. The Richmans actually explained this years ago:

The Scaled Tariff is nearly immune to counter-tariffs. Any country that enacts a counter-tariff would be increasing the U.S. tariff on its products. Instead of starting a trade war, the Scaled Tariff would provide automatic responses that would end the trade war that is currently being conducted upon the United States by the mercantilist countries. In terms of the game of chicken example developed in chapter 7, the Scaled Tariff is equivalent to a policy that automatically responds to the competitor’s move with the identical move. In the face of such a policy, the response with highest payoffs for trading partners is to cooperate by reducing trade manipulations.

And so we’re seeing stories like these popping up:

The First of Many – Vietnam Negotiates Zero Tariff Policy

“Wealthy nations will attempt to maintain exports against President Trump tariffs by subsidizing their industries. Corporations have deeper pockets, and the politicians are used to the bribes, we call it “lobbying.” …

... Each of these nations will in turn, eventually, devalue their currency.

However, poorer nations will be faster to lower import tariffs on USA goods because they have lower lobbying (bribe) income from corporations to govt. That’s what we should expect to see.”

Or this one:

‘Liberation Day’—For Mexico

The Mexican president smells economic opportunity.

“This is great for the country,” Mexico’s President Claudia Sheinbaum said the next day. Mexico and Canada, as part of the USMCA free trade agreement, avoided the imposition of any additional tariffs during Trump’s announcement Wednesday, while the average tariff rate on U.S. imports is set to skyrocket to 29 percent from just two percent previously.

While Mexico does still face a 25 percent on steel and automotive exports to the U.S., the country is not subject to any tariffs whatsoever on exports compliant with the USMCA. With immediate access to the massive import American market—the largest in the world—a relatively inexpensive labor force, and uniquely favorable terms of trade, Sheinbaum sees Mexico as well placed to be the largest beneficiary of the new American tariff regime.

So far so good. But recall that part and parcel of all this is Trump’s plan to end the income tax. Stephen Soukup argues today at AmCon (What Trump Got Right—And Wrong—About the Income Tax) that Trump is right about the income tax, but his plan won’t work. What he means is basically this. Trump is right that the income tax was specifically designed to subject Americans to an all powerful and vastly expanded Prog American government. I would therefore argue that what we’re seeing with DOGE and other measures is Trump hacking away at the overgrown federal government. As part of that effort—and we’re already seeing how massively wasteful Prog government is, based on confiscating private property—Trump is leveraging the Constitution to wage a legal counteroffensive that forces a generally originalist oriented SCOTUS to address fundamental issues of Executive authority to help him dismantle the Administrative Prog State.

Soukup’s counter, having admitted that Trump is right, is that: The government is so overgrown that it can’t be dismantled in the way Trump is attempting to do. Better, Soukup says, the Reagan approach of simply trying to limit government—even though he admits that the Reagan approach has failed catastrophically:

Most of us, however, understand that this is not going to happen and that the best we can do is slice away at the size and scope of the federal government over time. The tariff regime Trump so admires simply cannot be re-created. Even if one believes that reciprocal tariffs are economically preferable to free trade, there is no way that they can raise enough revenue to fund today’s federal leviathan. And as Reagan found out the hard way, “starving the beast” works better in theory than in practice.

Read it all—it’s very interesting on the income tax. Re Reagan, I would simply add that Reagan’s Simple Simon Libertarianism contributed mightily to the crisis that America finds itself in. That’s exactly what Trump wants to rescue us from so that we can MAGA.