Trump and Tariffs

The secret upside of tariffs is you can use them to extract more campaign donations.

There are a lot of smart economists in this world, so I don’t have much to say about purely economic questions. But I want to comment on a political issue involving tariffs.

Eight years ago, Trump failed to exploit the potential covert political benefits of tariffs. He got some upside from the overt aspect of creating a few more manufacturing jobs in some places and thus getting more votes, but did little in the traditional 19th Century Republican way of rewarding friendly American capitalists and punishing unfriendly ones and thus getting more campaign donations.

One interesting question is: Why today do so many zillionaires like, say, Sergey Brin of Google want to be on Trump’s good side compared to eight years ago? Perhaps Trump has made clear to them that his tariffs will be used more tactically this time?

So, far, though, all we’ve seen are strategic threats of tariffs, such as today’s announcement of 25% tariffs on NAFTA partners Canada and Mexico and 10% on global rival China.

Still … Trump’s new favorite President (other than himself, of course) is William McKinley, who won an absolute barn-burner of an election in 1896 over 36-year-old orator William Jennings Bryan, with 79.3% of the voting age population turning out (a mark that hasn’t been topped since).

Bryan gets made fun of a lot for his role in the Scopes Monkey Trial decades later, but he had a fine issue to run on in 1896: because the economy was expanding faster than the supply of gold, the gold standard was causing deflation, which raised the real interest rates that borrowers, such as farmers, had to pay to bankers. Inflation is bad, but deflation tends to be even worse because it’s harder to adjust for. So, Bryan promised bimetallism (adding a silver standard), which would have caused inflation, helping the masses of borrowers out at the expense of lenders.

As it turned out, the 1898 gold rush in the Yukon increased the supply of gold and the crisis faded away, such that bimetallism has become a byword for esoteric political issues of the past, of interest only to the few folks who want to know what The Wizard of Oz was really about.

But that was all in the future in 1896. That year, McKinley’s campaign manager, Senator Mark Hanna, shook down robber barons for unprecedentedly large campaign contributions, which helped the GOP to mount a huge campaign, one that excited even some previously apathetic immigrant groups to vote Republican.

Here’s the paywall: