At the stroke of midnight on Thursday Aug. 7, the world woke up to a new world trading order. Under the newly implemented Tariff plan, goods imported into the U.S. will face an average 18.6%, the highest since the Great Depression.
More details are to be worked out over the next few weeks and goods loaded into ships just before Oct. 7 are not subject to the new tariffs implying that many shipments arriving onshore all the way until October may not face them.
Talks with Mexico and China are still on while India faces an additional 25% penalty beginning Aug. 27 for its import of Russian oil.
Still, the world of commerce was different yesterday.
Tyranny of wealth over income and employment got us where we were.
Our triumph in World War II was driven in part because of our economic and industrial strength. After we vanquished the Axis powers, we rebuilt war-ravaged lands using the same industrial capacity as an arsenal of democracy, peace, and stability.
We built the world economy on the backs of our women and men toiling in our farms and factories. They too enjoyed the riches of their labor as a rising tide lifted boats globally.
Then our economic thinking changed, in effect.
In the decades thereafter, our corporate titans moved jobs and factories — even technical know-how — abroad, ostensibly for lower production costs.
It's not like these are the only costs they faced or that they had readily available infrastructure.
Somehow, they chose to ignore that, or worse, they spent out of pocket to bring a supposedly low-cost location to a quality they demanded.
Pretty much every single U.S. business of note shipped their facilities to China and elsewhere.
We called them visionaries of the business world, we emulated their experiences, we cheered their presumed triumphs over obstacles.
Nobody noted that their adversities abroad were their own doing.
We, and them, turned a blind eye when U.S. technologies were blatantly stolen and repurposed for sale under foreign flags.
We rewarded them handsomely on the stock market, forgetting completely that it is near impossible to repatriate money back for many of these places in the frontiers of global business.
We celebrated wealth creation, however phony that wealth is, over the incomes of our brothers and sisters, especially in the heartland of America.
The financials the "market" was studying did not bother to review the ledger of the common man or woman on the street.
Our jobs are more than a paycheck, they are our identity, our dignity, the cornerstone of our communities, our life. We've lost these things over time, but nobody cared.
As the victims languished, some retreated to the depths of substance abuse, yet we repeated the "winning" formula across industries and across geographies.
Our economic models gave us a theoretical underpinning of this travesty.
Economic Models do not count job growth as the top marker of success.
They do not have the median-income of the worker as a variable to study explicitly.
In grouping them as a homogenous productive resource, models refuse to see workers as individual productive entities.
So-called open-economy models do not care if following them causes decimation of domestic production and job losses.
Today, goods pile up because we totally ignored the price we paid in loss of dignity and self-worth, in breakdown of family, faith and community.
Corporate titans were handsomely rewarded in the stock market since finance models of wealth creation dutifully reflected flawed economic models.
Make no mistake that from where we are today, a journey back to reasonableness will be onerous. Costs will increase in the short term, but competitiveness of the U.S. as an economic powerhouse shall improve in the long term.
It's projected that the U.S. Treasury will earn close to a quarter of a trillion dollars that may be used to reduce the burden low-income households will face as the administration has already proposed.
I'm not certain if proposed tariffs are large enough to force U.S. corporations to bring manufacturing back.
Instead, President Trump is bringing in trillions of dollars of investment commitments, recognizing a significantly higher tariff may be debilitating for the U.S. economy in the near term.
This time there will be gains, real jobs, real income, and real skills-development for real people. Who can say no to that?
In a previous column I proposed "Make America Make Again" Bonds as a complement to the Tariff program. It harkens back to "War Bonds" that the U.S. issued to finance World War II. Now that we have a tariff program wrapped up, I recommend we study that as a logical next step.
All opinions are of the Author alone, and do not necessarily represent that of any organization he may be part of. The author alone is responsible for any error or omission.
Partha Chakraborty, Ph.D., CFA is an economist, statistician, and a financial analyst by training. Currently he's an entrepreneur in the field of water access, AI/ML, and wealth management in the U.S. and India. Dr. Chakraborty resides in Southern California. Read Partha Chakraborty's Reports — More Here.
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