The Discussion About Tariffs

I will interrupt my discussion on MVOSSTE and AI to create a new business to discuss an area that should be given a great deal of attention.

The current White House administration is using tariffs to "make America wealthy again" and to insure our national security.

Regarding making America wealthy again, it should be noted the U.S. is the wealthiest nation on earth and that it has about 30% of the world's wealth and less than 5% of the world's population. It should be noted that in 1960 the U.S. had 40% of the world's wealth and its share has declined. This decline, however, is not due to the U.S. economy shrinking it is due to economies in the rest of the world expanding at a faster rate than the U.S. This makes sense since smaller economies can double in size and still be very small when compared to the U.S.

Back in the 1960s the advanced economies recognized it was important to help third world countries grow their economies so they could provide their citizens with an acceptable standard of living. The U.S. led the way by providing support and access to the U.S. market. There were benefits for U.S. companies and building the U.S. role as a world leader. I think these benefits will endure as long as the U.S. continues its leadership role.

Now regarding the need to insure national security. Part of our security is knowing that we have allies that support our worldwide leadership and allow us to have military establishments in their countries. It is true however that certain industries need to be kept in the U.S. because they insure our security needs and allow the U.S. to be leaders in critical industries. Keeping these industries in the U.S. also allows them to have easy access to U.S. research universities which are the envy of the world.

Now speaking as a manager, it seems it would be important to consider all approaches to address these concerns. As I point out in my MVOSSTE framework it is important to be methodical and consider all alternatives in order to increase the probability of having an optimal solution.

Consider using tariffs as the major tool to achieve the afore stated objectives. One cannot reasonably expect other countries to simply accept new, higher U.S. tariffs and reduce their economy so that America can get wealthier. The likely outcome would be retaliatory tariffs and those tariffed countries finding new trading partners that might not be in the best interest of the U.S.

Neither can the U.S. expect that tariffs on certain industries will prevent other countries from developing these industries.

So the question is, "are there alternatives solutions that use other tools including tariffs to achieve these goals?" Since I believe AI can be used as a tool, I asked it that question regarding national security and it provided this response:

To deter industries vital to national security from offshoring purely for cost efficiencies, a nation can use a mix of policy, financial, and regulatory tools. Here’s a structured list of approaches, grouped for clarity:

---

1. Financial Incentives (Carrots)

• Tax Breaks/Subsidies: Offer tax credits, deductions, or direct subsidies for companies that produce domestically.

• Grants & R&D Funding: Provide funding for innovation and modernization to help offset higher domestic production costs.

• Loan Guarantees or Low-Interest Loans: Make capital investment more affordable for domestic operations.

---

2. Regulatory Requirements (Sticks)

• National Security Regulations: Impose restrictions or reviews (e.g., CFIUS in the U.S.) on foreign investment or offshoring in sensitive sectors like semiconductors, defense, energy, or critical infrastructure.

• “Buy National” Mandates: Require government procurement to favor domestic suppliers for critical goods.

• Export Controls & Licensing: Limit the ability to export production or technology related to sensitive industries.

---

3. Strategic Stockpiling & Domestic Procurement

• Strategic Reserves: Build and maintain stockpiles of critical goods (e.g., medical supplies, rare earth elements).

• Government Contracts: Use long-term contracts to guarantee demand for domestically produced goods.

---

4. Infrastructure and Workforce Development

• Invest in Specialized Infrastructure: Create or upgrade facilities like industrial parks or logistics hubs to support targeted sectors.

• Workforce Training Programs: Fund technical training and upskilling to ensure a competitive domestic labor pool.

---

5. Trade Policy Tools

• Tariffs on Imported Equivalents: Use tariffs selectively to level the cost playing field for goods produced abroad.

• Anti-Dumping Measures: Enforce trade rules to prevent unfair pricing by foreign producers.

• Local Content Requirements: Mandate a certain percentage of components or labor must be domestic.

---

6. Public-Private Partnerships (PPPs)

• Foster collaboration between government and key industries to share risk and ensure alignment on strategic goals (e.g., CHIPS and Science Act in the U.S. for semiconductors).

---

7. Transparency and Risk Disclosure

• Disclosure Requirements: Mandate companies disclose the national security risks of offshoring certain production capabilities.

• Risk Assessments: Require scenario planning or security risk disclosures to boards/shareholders.

---

Examples

• United States: The Defense Production Act, Inflation Reduction Act, and CHIPS Act are modern examples of these tools in action.

• Japan: Provides subsidies to companies relocating critical manufacturing from China to Japan.

• EU: Uses “strategic autonomy” policy to keep pharmaceutical and energy sectors within the bloc.

---

 It seems the Biden administration was using the whole tool box including keeping some tariffs from the preceding administration.

I next asked AI to give its idea of the best practices to increase the U.S. economy and national security and this was the response:

To increase both U.S. economic strength and national security, the best approach is a strategically balanced, long-term industrial and innovation policy. Here’s a summary of the most effective levers, combining economic growthwith resilience and national defense goals.

---

🧭 Strategic Objective:

Strengthen U.S. economic competitiveness while ensuring the nation's strategic independence in critical sectors.

---

🔧 Best Approaches

1. Invest in Critical Industries (Economic Base & Security Backbone)

• Semiconductors, AI, biotechnology, rare earths, advanced manufacturing, energy independence (especially nuclear and renewables).

• Use public investment (e.g., CHIPS Act-style programs) to attract private capital.

• Prioritize reshoring or “friend-shoring” of supply chains in these sectors.

2. Modernize Infrastructure

• Invest in transportation, digital networks (5G/6G), broadband, and smart grids.

• Ensures economic fluidity, rapid military logistics, and resilience against cyber or physical attacks.

3. Drive Innovation & R&D

• Increase federal funding for basic and applied research, especially via:

  • NSF, NIH, ARPA-H, DARPA, and DoE labs.

  • Public-private partnerships with universities and tech hubs.

• Promote commercialization of new technologies domestically.

4. Secure Talent & Workforce Development

• National STEM and skilled-trades workforce strategy.

• Align education policy with critical industry needs.

• Immigration reforms to attract and retain top global talent in science, engineering, and cybersecurity.

5. Strengthen Strategic Trade Policy

• Pursue smart tariffs, export controls, and trade alliances to protect key sectors and gain market access for U.S. goods.

• Use trade rules to defend against unfair practices (IP theft, state-owned enterprises).

6. Build National Stockpiles and Resilience

• Create or expand national reserves of essential materials (e.g., medical supplies, rare earths, food, fuel).

• Diversify sources and increase domestic capacity for strategic goods.

7. Encourage Responsible Corporate Behavior

• Incentivize domestic investment with:

  • Tax credits for U.S.-based R&D and production.

  • Penalties for offshoring critical capabilities.

  • ESG metrics that include national interest benchmarks.

8. Expand Defense Industrial Base

• Strengthen supply chains for weapons systems, munitions, aerospace, and space capabilities.

• Support dual-use technologies that benefit both civilian and military applications.

---

📈 Long-Term Impacts

Policy Lever	Economic Impact	Security Impact
Infrastructure	Job creation, productivity	Resilience, mobility
Innovation	Global competitiveness	Tech edge in warfare
Talent	High-wage economy	Cyber and AI readiness
Industry	Supply chain strength	Independence from rivals
Trade	Balanced global strategy	Protection from manipulation

---

I encourage anyone reading this post to consider all of the factors that affect our economy and security, do the research, find the facts and then decide what you would do. My guess is that you wouldn't rely so heavily on tariffs.

Personally, I doubt that increasing tariffs, reducing foreign aid and eliminating university research funding  will help the U.S. economy, its leadership role in the world or its leadership in developing new technologies.