Wednesday, January 25, 2017

A world with tariffs can be better

The corporate media and governments stated the return of tariffs and protectionism will be disastrous. They are exaggerating.

Consumes now pay the price of goods plus GST. When tariffs are re-introduced, GST can be reduced or removed. Consumers will pay the same price.

The difference is that local producers will benefit. That will be good for creating jobs in each country. The government can get some revenue by introducing a payroll tax but it should be lower than the tariffs.

Global producers can still sell their goods because they enjoy economy of scale through large production. Take a product X that sells for $500. If tariff is $100, the imported cost is $600. The cost of local production may be higher than $600, so the global producers can still compete.

It is clear that the global companies will not make the large profit margins that they enjoyed in the past. Why should global companies make so much profits when the ordinary workers can get jobs at decent wages?

The new global order will be better than the existing one.

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