Whose Side Are You On, Anyway? TIME TO GIVE TARIFF POLICY A FAIR HEARING By: James C. Denton, CFP®May 31, 2019 I am thoroughly disgusted and more than a little bit discouraged. I just listened to the mauling by the CNBC illuminati of Peter Navarro. If you do not know, Navarro is “Director of the (White House) Office of Trade and Manufacturing Policy”, one of the President’s three top advisors on economics and trade policy. In this morning’s news, the White House announced a potential new 5% tariff on all goods imported from Mexico. The purpose of the new policy is an effort to incentivize or even to coerce Mexico to work to reduce illegal immigration through Mexico into the US. Navarro was tasked by the White House to announce and explain the policy. The response of CNBC’s commentators was, to the person, negative, and brutally so. Now, Peter Navarro is among the most hawkish of the President’s advisors, and not very much liked by the press to begin with. But the questioning was not objective by any definition of the term; rather it was pejorative in the extreme. Let me start by saying I am neither a supporter of or against the President’s tariff policy. The discussion is a nuanced one, and entirely theoretical on both sides. Who is paying the tariffs, who is most harmed by them, and how effective are they likely to be as a bargaining chip for trade negotiations? The historical record is mixed and economists are all over the map on these questions and I confess, I’m not smart enough to sort it out. Neither are the economists it seems, or they would not be in such radical disagreement with one another on the subject. So I don’t know how these CNBC beautiful people can be so perfectly aligned against them. Let’s be honest, there is very little objectivity in the press. As things go, however, CNBC seems to me to be the most balanced of the major cable news outlets. So when the questioning this morning was so completely against the initiative it wasn’t a big surprise. But it is terribly frustrating for me as an observer when a seasoned and experienced expert like Navarro is badgered by multiple reporters, all of whom are intelligent, no question, and informed on the issues, but who have no practical experience whatsoever in the areas in which they seen to hold themselves out as experts. Just about anyone more than two or three years out of college (or any other training experience) and into the workplace recognizes that there often is a serious divide between academic theory and the real world. Experience is a brutal but effective teacher. Someone who has been a reporter their entire career may have a wealth of theoretical education but absolutely no practical experience in the area they report. Your perspective changes when you transition from theory to practice and you begin to be held responsible for productive results. As I have often said, we need to set aside our political views on the President’s person and practices. Both Barack Obama and George W. Bush had a good idea every now and then. Maybe Donald Trump does too. Let’s talk right now about his goals for his tariff policy … the productive results he is seeking and for which he will be held responsible. Set aside the rhetoric. Is reducing illegal immigration an appropriate goal? Is fair and equal trade for US companies in the global market place desirable? Should the president be concerned about the protection of US technology and trade secrets? The protection of intellectual property? The ability of US firms to compete on equal terms with state-owned enterprises in foreign countries? Are any of these not worthy goals for US foreign policy? We’ve been working on all of these issues for years. Through administrations of both parties, with Republican and Democratic leadership in either or both houses of Congress. Without any productive results. But the press’s focus seems to me is entirely and improperly on the short-term effects rather than potential long-term results. One question was “How does a corporate executive plan for the impact of these tariffs?” It’s hard to argue that there are not short-term costs for tariffs to business and consumers alike. But in my view, tariffs are, or should be, a temporary measure; the problems they are being used to attack are long-term, intractable costs to our economy. Another question was “Why punish consumers for …”, the suggestion being that the cost of the tariffs will fall solely on consumers. I was reminded of a fairly senior non-commissioned officer who worked for me when I was an Army company commander. When I required him to give his soldiers regular physical training he asked the same question … “Why are you punishing us”. It’s not punishment, Sarge, it’s preparing you to do your job under difficult conditions. Similarly, while some of the short-term pain of tariffs may fall on consumers, there’s no question that the long-term effects and real economic costs of the trade discrepancies, or in this morning’s discussion, illegal immigration, fall heavily on us all. I think most of us should understand that a few pushups and an extra mile on the running track may go a long way towards preparing you to face a battalion of armed Viet Cong, Russian or Taliban troops. Two very solid examples come to mind: China is stealing our technology and using it to create competing products, then introducing those products into the global economy undercutting the research and development efforts of US firms. This is Chinese government policy, their business plan if you will, and it is tremendously expensive to our economy at large. Similarly, the long-term impact of illegal immigration to the US budget, Medicaid, Medicare, Social Security, unemployment policy, all of our social services and safety net programs is equally undeniable. The problem, to me, the source of my frustration, seems to be the press shaping rather than simply reporting the news. It’s time for the fourth estate – especially the business news sector – to recognize that they bear a responsibility to the public, not just to tend to their “right to know”, but also their right to understand and their right to their own opinion. Interpreting is fine, even appropriate to a point, but the interpretation needs to be balanced and fair. There needs to be more of an effort to present both sides of the issue. The CNBC producers this morning would argue that Navarro was there to present the administration’s side of the argument, and the press is responsible to press him and provide the other side. OK, fair enough. Except that the CNBC team – multiple reporters - came at him from all different directions, interrupting his answers with new questions from different perspectives, inappropriate or questionable assumptions and biases, and often not allowing him to complete an explanation or viewpoint. I was reminded of a pack of jackals attacking a lion. Several of the questions were terribly uninformed, but all of them seemed to start from an assumption that “tariffs are bad”, giving no credence whatsoever to the possibility that there may be positive aspects, or whether they may achieve the purposes for which they are intended. Again, we don’t know. And we won’t know until we try. There’s one last issue I would like to address but in the interest of time will save for another time. This constant bickering and internal resistance stirred up by the press to the policies of our executive gives aid and comfort to our foes. The Chinese in the trade war, the North Koreans in our negotiations with them, even our allies, are either incentivized to wait out rather than negotiate with the current administration, or reluctant to show their hand in negotiating in good faith on the chance that a new administration will have a different perspective and set of objectives. I’ve written before about our tendency as a nation to be short sighted in our national policies, never giving a strategy or initiative an opportunity to play itself out and then to evaluate the results. Change is usually painful and difficult, the pain generates political upheaval, and the opposition party seeks to leverage that dissatisfaction for their own short-term gain, rather than for the common good. But there’s rarely any gain without a little pain. It’s time to give tariffs a chance.The opinions expressed are those of the author and do not necessarily represent the views of LPL Financial or it’s affiliated firms. This article is not intended to provide investment advice. You should consult with your personal investment advisor before acting on this or any information.