When 2 - 3 = -1,000

Quote of the day, courtesy of the Mad King of Bankruptcy: “Trade wars are good, and easy to win.”

A neglected topic in U.S. education is financial literacy – an essential life skill and gateway to fascinating math.  If you have a young child in your life, here’s a simple lesson to help them understand tariffs.

The Setting:  You run a lemonade stand in YourTown, USA.  You purchase your raw supplies from China: cups cost $1 for a pack of ten; a can of frozen lemonade concentrate costs $4 and makes 10 servings. You sell lemonade for 75¢ per cup. 

Now, the U.S. President imposes tariffs:  50% on cups and 100% on lemonade concentrate. Here’s the background on how tariffs work: when an imported product arrives in the U.S., the importer (you, or a customs broker you hire) fills out the paperwork, and you then pay the tariff fee to U.S. Customs (a branch of the U.S. government).  To learn more about the impact of tariffs, explore the Smoot-Hawley Tariff Act of 1930. 

You go with answer d) – raise prices and explain to customers the impact of tariffs. Then, to your surprise, the POTUS calls you from the 13th hole.  

While most children do well on this lesson, it seems to have eluded a President who repeatedly claims, "The tariffs are paid for mostly by China, by the way, not by us." A lesson too taxing for Kevin Hassett, Trump’s Director of the National Economic Council, who in this video (starting at 4:25) is asked about Trump’s phone call to America’s Coward-In-Chief Jeff Bezos, after which Amazon shut down plans to level with customers about the impact of tariffs. Hassett’s explanation could pass as Ministry of Truth ‘Newspeak’ from Orwell’s novel 1984.  

Here’s an extra credit question for our Tariff Quiz:  

We’re just beginning to feel the consequences of chaotic, ever-changing tariff tweets. In coming months, the impact will disrupt supply chains, drive up inflation, compel businesses to delay hiring and capital expansions, diminish U.S. economic growth, and turn economic allies into enemies. There’s a real risk of a global trade war and a severe national — even global — recession. Brought to us by people in power who can’t grasp a financial literacy lesson that ten-year-olds easily master.

Nervously,

Ted