Could Trade Protectionism Help Stimulate U.S. Manufacturing?

In ordinary times, trade protectionism is inflationary, discourages the efficient allocation of resources, and should be avoided. However, these are not ordinary times we are living in, and extraordinary times call for extraordinary measures.

The picture above is of the discharge from the Three Gorges Dam in China, which symbolizes the huge trade imbalance with China: manufactured goods flow from China to the U.S., but instead of manufactured goods, we are selling them U.S. debt instruments.  When money was cheap and fixed asset prices were rising fast, it made more economic sense to shutter a U.S. factory, sell the land, and ship the equipment off to China to have the goods manufactured and sold back to us cheaper than we could have bought them if we had made them here.  Initially a trickle, this became a huge flood that drained the lifeblood from the U.S. manufacturing sector and has resulted in high unemployment.

This loss of productive capacity has led to a debt crisis in this country that can only be fixed by getting back to what the U.S. has done better than any other country since the Industrial Revolution: MAKE STUFF.  However, bad domestic policies and government-subsidized manufacturing in China have bent the back of U.S. industry to the breaking point.

Therefore, I think we should seriously consider placing additional import tariffs on non-NAFTA goods to give U.S. manufacturers a fighting chance again.  While this could be inflationary in some sectors (those where we have lost almost all productive capacity), the Federal Reserve has proven that inflation is not currently the biggest short-term risk, but rather that deflation and general economic stagnation are bigger dangers. If we can jump-start the domestic manufacturing base, we can create jobs, allow the Federal Reserve and Federal Government to ratchet back their Keynsian stimulus policies and begin to work on a plan to put our country on a sustainable fiscal trajectory.