Before President Trump was inaugurated, Alibaba’s head Jack Ma made headlines by promising the President-elect he would bring one million jobs to America in the next five years. President Trump ballyhooed the announcement as a sign that his mere presence was enough to put more Americans to work.
With new tariffs imposed this week on China, Ma is backing out of his promise.
“The promise was made on the premise of friendly US-China partnership and rational trade relations,” Ma told Chinese news site Xinhua on Wednesday. “That premise no longer exists today, so our promise cannot be fulfilled.”
Ma, who recently announced that he will step down as Alibaba chairman within a year, added that the company would “not stop working hard to contribute to the healthy development of China-US trade.”
Using tariffs in the modern world will never generate the same results they did in the middle of last century. The negatives greatly outweigh the positives even if you take out the foreign relations challenges they create. When you add in bad blood forcing defensive decisions, you get what we’re seeing today.
A million potential American jobs just evaporated.
On top of the strain on foreign relations, there’s the question of who ends up paying for tariffs. No, it’s not the foreign companies who pay. It’s the consumers, in most cases American citizens and businesses, who end up paying higher prices to compensate for the artificial costs of tariffs.
The only valid, albeit unnecessary use of tariffs by the United States is as a deterrent for certain industries to import materials rather than using domestic alternatives. For example, sugar tariffs are intended to make food companies use American sugar in their products. It doesn’t create more jobs, but it does protect some. Moreover, it keeps the production flow from relying on foreign materials. I’m not defending this as a “good” use of tariffs or domestic subsidies, but it’s at least understandable.
We have to remember who were are and the time we’re in. America is a consumer nation. There will always be a trade deficit with everyone because we need their products and they need our money. That’s why a healthy free trade relationship is beneficial to both sides. Tariffs disrupt the synergy.
There are definitely protectionist measures that can and should be taken in certain circumstances to prevent as many jobs as possible from leaving the country, but those measures are targeted. They should be beneficial rather than detrimental; it’s better to financially encourage companies to hire American than to punish the ones that don’t.
Few in the media will publicize this huge story because both sides are having trouble reconciling a Republican administration that pushes the leftist concept of tariffs. Senator Bernie Sanders and President Trump agree on trade, so the media will be silent through the confusion.
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JD Rucker – EIC