Sunday, June 10, 2018

Explaining All This Tariff Talk

For most people, it's difficult to really sit down and grasp what Trump and the cast of characters are discussing and arguing over.  So my 'once-upon-a-time' script should settle that:

Once upon a time, there were five lands. Each led by one 'king'.  In each kingdom....they made and produced things.  Some of the five made bicycles.  Some produced ice cream.  Some heavily produced pickles.  And some made wonderous things called Pop-Tarts.

Each land had this plus-minus situation.  There were certain things that they could produce cheaply, and certain things which had a cost attached to them.

Along the way, these lands had decided tax the companies and individuals producing these items. It would be 'gifted' back to the common people of each land. As years passed....more and more taxes occured, to make the king and his 'players' look good.

So it came to pass that one land discovered that they could produce pickles more cheaply than any other land, and they pressed forward to be the chief pickle-producer of the five lands.  They were very lucky and profitable.  In a matter of five years....they had reached a level where the other four lands marginally made pickles.  In those four lands, the pickle industry 'soured'. 

So it came to pass that the kings of the four lands affected by the sour pickle industry problem decided to fix their problem.  They would make a pickle tariff....a tax on all imported pickles.  At first, it was 10-percent, and they discovered this really didn't eliminate their problem.  So eventually, it went to 25-percent.  At that point, the one kingdom that 'owned' the pickle industry...found itself in a bad situation.  They could no longer market their pickles, and they were in decline. 

Oddly, consumers in the four lands with the tariffs going on.....felt dismayed.  They just wanted top-notch pickles, for x-amount of money. 

A year or two would pass, and the king stuck with the sour pickle problem decided that he'd enforce a tariff as well.  From the one land that produced Pop-Tarts, he established a 10-percent tariff.  From the land that produced air conditioners, a 20-percent tariff. 

Months passed, and the four countries realized that they were now unfairly treated, and they reacted again.  Each month would pass, and they would create a new tariff.  And they were now hurting each other in various ways. 

To fix this?  Well....everyone needs to remove all tariffs.  And the five kings can't really agree on this because they each have built a unique production cycle, and extreme taxation scheme.....that would make them unprofitable if they went to the zero tariff idea.

And that's what this is really all about.  These G6 countries (even the US to some degree) have a taxation issue and without tariffs.....they can't collect the money, or 'gift' people from the profits made.  So to make up for the lack of simply talk about scandal or hope that the Trump-guy just goes away in 2020.  If he doesn't go away?  And if his replacement in 2024 goes along this same path?  Well....they are screwed....big-time. 

This is a poker game, where everyone is holding a marginal group of cards, and the longer that the game continues.....the more likely that everyone loses in the end.  The amusing that no one can afford to be competitive because that would screw up the whole taxation program and there would be no 'gifts' to hand out. 

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