US Policies: A Historical Throwback

Will the start of U.S. President Donald Trump's second administration lead to a foundational change in U.S. trade policy?

- TAKENORI INOKI

Both Japanese companies and their counterparts elsewhere in the world have strong interests in and serious fears about what will eventually happen. It is quite difficult to predict how the returning president will affect the world economic order in the medium and long terms.

One area of interest is what structural changes will occur in global trade and production as a result of the additional tariffs on exports to the United States. Setting higher tariff barriers means the forceful exercise of a sovereign right of a nation. But it cannot be ignored that the sovereignty of the United States is weakening. This is because mega companies with global operations have gotten around various regulations at home and abroad, and accumulated swathes of confidential information regarding national security and financial transactions. They are U.S. titans that have achieved rapid growth by accelerating industrial transformation through the development of information and communications technology.

When we think about the United States' further tilt toward trade protectionism via additional tariffs, we cannot overlook the U.S. history of utilizing tariffs as the economic basis of governance for a long time after its foundation. Trump's remark that "Tariff is the most beautiful word" other than "religion" or "love" doesn't sound like a joke.

Going back to the 19th century, tariffs accounted for almost 90 percent of federal government revenue until the Civil War. Historically speaking, tariffs were a primary revenue source for the federal government; the United States made it possible to levy income taxes for the first time when a relevant constitutional amendment was ratified just before World War I.