Monday saw John Michaelson, Chief Investment Officer at Michaelson Capital Partners (WA:CPAP), advocating for the strategic use of tariffs in an op-ed for The Wall Street Journal. Michaelson argued that tariffs have historically played a significant role in America’s economic prosperity and could be instrumental in addressing current trade deficits and the loss of American manufacturing jobs.
In his piece, Michaelson highlighted the success of high-tariff regimes in the United States during the 19th and early 20th centuries, dismissing the notion that the tariffs of 1930 caused the Great Depression. He pointed out that both President Biden and President Trump have used tariffs against trading partners, a practice that dates back to the post-World War II era when it was beneficial for European and Japanese reconstruction.
The CIO underscored the shift in America’s trade position since the 1970s, marked by the rise of foreign manufacturing and the subsequent impact on the U.S. economy, including large trade deficits and the decimation of the industrial heartland. Michaelson emphasized the need for a trade policy that provides businesses with the certainty needed to invest in domestic production and workforce training.
Michaelson criticized both the Biden administration’s top-down industrial strategy and the Federal Reserve’s monetary policy over the past 50 years. He contended that other countries are unlikely to abandon trade practices that benefit them economically in favor of American interests. He also noted the use of various barriers by countries like Germany, Taiwan, and South Korea to protect their own industries while limiting American exports.
The investment officer highlighted the adverse effects of deindustrialization on American society, including increased inequality and the loss of innovation. He argued that the decline of American industry threatens national security, as the U.S. has outsourced much of its industrial capacity critical to defense.
In advocating for a return to tariffs, Michaelson described them as advantageous due to their simplicity, minimal bureaucracy, and ability to let private actors respond to market signals. He called for tariffs that are high, consistent, sustained, and predictable, allowing businesses to plan long-term. Michaelson proposed a broad application of tariffs, with exceptions for close allies like the U.K. and Australia, and for essential raw material imports.
Through the application of well-planned tariffs, Michaelson believes America can counter neomercantilist strategies used by trade partners and foster a more resilient and prosperous nation.
