Hey, Governors: Fight Back with Negative Tariffs!

V.2, N.75

What’s the best way to contain a fire? Not with fire, but with fire retardant. And the best response to Trump’s tariffs might be anti-tariffs.

Northeast governors and Canadian provincial heads met this week to figure out how to respond to the Trump tariffs. They gave beautiful speeches to each other, but concluded empty-handed. I have a suggestion: Negative tariffs.

If California put into place a -1% tariff, an importer who faced a 10% tariff from Trump would get one percent covered by the state of California. Whaa? Why would California want to subsidize imports? Because suddenly every exporter in the world would want to take advantage of California’s new policy. Goods would surge into California’s airports and ports, benefiting California’s consumers and industries.

Other states would surely take notice. One result might be an arms race of negative tariffs with other states. Washington state might go to -2%, Maine to -3%, and Minnesota to -4%. Alternatively, a group of blue states could enter an interstate compact to set a uniform negative tariff. And bit by bit, the negative impacts of the Trump tariffs would be blunted by more globally minded blue-state governors.

Meanwhile, red state governors who go along with the national tariffs would saddle their consumers with higher-priced goods and erode the competitiveness of their own companies. Tough luck, folks! But guess what, you can join the blue-state resistance as well.

Is this legal? I don’t see why not. If California applied its negative tariffs to some countries but not others, then perhaps it could be construed as an unconstitutional interference with foreign policy. But a nondiscriminatory negative fee wouldn’t have this problem.

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Our lead news article this week asks, “Why Haven’t Trump’s Tariffs Raised Prices Yet?” The answer can be summed up in one word: Inventory. Retailers are still selling pre-tariff goods at pre-tariff prices. But expect higher prices to kick in around August. And if trade deals don’t come through as the Mad King insists, prices could skyrocket.

Paying subscribers will also find other great stories:

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• Small businesses that want to buy out their obnoxious landlords are discovering numerous obstacles. Katherine Raz, who blogs at “Storefront Revolt,” has some solutions.

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  create “Trump accounts,” give every child a $1,000 investment at birth, and allow the child’s family to add thousands more in tax-deferred contributions.

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• Two authors, one a Democracy Collaborative fellow and the other a city council member in Iowa, offer a blueprint for how cities can help strengthen community wealth-building in an era of deep federal budget cuts.

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