What the Markets Are Missing in a Painful Stock Selloff Triggered by Tariffs

President Trump has predicted that his tariffs could raise as much as $6 trillion over the next decade in federal tax collections. These include up to 104 percent tariffs on China, plus the combination of reciprocal tariffs — we charge them whatever they charge us. Also, don’t forget the protectionist tariffs on steel, aluminum, autos, lumber, etc.The tariff rates put on the table by Mr. Trump are higher than those at any other time in the last century, so it is no wonder we’ve seen a painful stock selloff, reducing asset values by well over $7 trillion.Yet what the markets are missing is that Mr. Trump has also announced that money raised from the tariffs will be offset by other tax cuts. If that is the case, then the net impact of the tariffs could end up being a positive for the economy.He’s on to something potentially big here that could cause an epic stock market recovery: a way to bounce stocks back to life and boost growth while also fulfilling Mr. Trump’s goal of freer and fairer trade.In other words, tariff revenues should be a major “pay for” in extending and expanding the tax cuts. It would obviate the need for any offsetting tax rate increases. If we were to raise, say, $500 billion from tariffs, that would pay for indexing capital gains, the 15 percent “Made in America” business tax and a reduction in the payroll tax.Another idea is a 15 percent flat tax on everything. Steve Forbes and I have advised that Trump should announce a bold new “15 percent plan.” Fifteen percent tariffs, 15 percent personal income tax, 15 percent corporate tax, 15 percent capital gains, dividends, death tax, etc. It’s a plan with a broad tax base and low rates so as to minimally distort economic activity. Imports would share some of the load — much as other nations do to us.Why not go all the way, though, and eliminate the income tax and pay for government the way we used to before we passed the 16th Amendment, which allowed for a federal income tax? Mr. Trump is right that this was one of the nation’s greatest mistakes. Prior to that, we funded government through tariffs and land sales.If this happened, taxes on work, saving, investment and entrepreneurship would largely disappear. Even getting halfway there would be a triumph for growth.If any of these plans were announced, the growling Wall Street bears would turn into raging bulls. Instead of any further short-term pain, we’d start to see shared long-term gain for everyone.Creators.com

What the Markets Are Missing in a Painful Stock Selloff Triggered by Tariffs

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