Many American companies are asking for exemptions from President Donald Trump’s latest round of tariffs. That’s because, even though the administration insists otherwise, American businesses bear the burden of the president’s taxes on trade.
Trump said in his State of the Union address this year that tariffs are “paid for by foreign countries.” Commerce Secretary Howard Lutnick has said businesses and foreigners “eat the tariff.” Treasury Secretary Scott Bessent has even claimed that tariffs aren’t taxes at all.
Despite their insistence that Americans benefit from tariffs, it is U.S. companies lining up to petition the government to ease them.
When the Supreme Court heard the challenge to Trump’s invocation of the International Emergency Economic Powers Act, it wasn’t foreign exporters who said they were injured by Trump’s actions. The cases were brought by American small businesses.
John Early’s letter in today’s Wall Street Journal is excellent:
Crystal FitzSimons’s letter “Fewer People on Food Stamps Isn’t Good News” (June 23) claims that SNAP lifts 3.6 million out of poverty. That is impossible because the Census Bureau refuses to count $1.6 trillion in government subsidies, including SNAP, as income. No matter how much the government might give poor families, the official measure of poverty would remain unchanged.
Ms. FitzSimons’s claim uses an experimental poverty measure that counts SNAP as income while omitting $1 trillion in other welfare, arbitrarily subtracts some spending, and capriciously raises the income defining poverty thresholds.
The $100 billion spent on SNAP in 2024 added nothing to national well-being. It merely redistributed it. If left with the original earners, it would either be consumed with the same effects, or it would be saved and invested, creating additional well-being, which it wouldn’t with SNAP.
While decrying the minimal adjustments to SNAP to prevent abuse, Ms. FitzSimons ignores the 60% of food stamp recipients who aren’t poor, even by the overstated Census metric.
Suppose you’re an entrepreneur in the beverage industry trying to create a new soda. One day, a rogue food scientist bursts into your office and demands money for his flavor research. He doesn’t ask politely or offer you a contract; he points a gun at you and takes your money. Years later, he develops a delicious new synthetic flavor. You discover it, add it to your soda, and your company takes off, making you a multimillionaire.
Does the food scientist now own part of your company because you used his flavor? Of course not. There’s no doubt your business benefited from his research. Without the flavor he created, your soda might never have existed. But the scientist has already been paid — and it’s worth remembering that he obtained that payment by force. The idea that he’s entitled to additional compensation because you successfully used his research is absurd. Contributing an input does not automatically confer ownership over everything built with that input. Likewise, the fact that government-funded research contributed to AI development does not automatically give the government ownership rights in AI companies.
In fact, the “government investment” argument fails even in a friendlier scenario that doesn’t involve coercion. Imagine that you voluntarily hire the food scientist to develop a new flavor. You agree to pay him $100,000 for his research, and he accepts. You then use the flavor he creates to launch a highly successful soda company.
Again, the food scientist does not own part of your company merely because he contributed to its success. He is entitled to whatever compensation the agreement specifies — nothing more and nothing less. If the contract grants him an equity stake, he has a claim to it. If it doesn’t, he doesn’t. That’s how market exchange generally works. Suppliers of inputs do not automatically acquire ownership of outputs. If the government wants to fund research in exchange for equity, it can try to negotiate those terms in advance. But that’s very different from claiming, after the fact, that successful companies partly belong to the government because some of the knowledge they relied upon emerged from government-funded research.
If merely contributing to a business entitled someone to partial ownership, every business would face endless competing claims from the countless people who helped make it possible.
Sam Gregg is favorably impressed by Pope Leo’s humanity, but not so much with Pope Leo’s economics. A slice:
Yet wealth inequalities are not unjust in themselves. For instance, some people are wealthier than others because they worked harder than others or chose to take risks that others declined to take. Such people are surely in an entirely different category than, for instance, the individual whose wealth proceeds from being the president of a country that he has systematically looted
Then there are important features about the nature of wealth in modern economies that MH [Magnifica Humanitas] does not recognize. For instance, very little of the wealth possessed by the “billionaires and trillionaires” regularly denounced by politicians of all stripes is actually consumed by such people. A great deal of this wealth takes the form of stock. That means it is not easily turned into liquid cash. It also reflects the market value of companies in which many immensely wealthy—and countless numbers of far less wealthy people—have invested, or, in the case of someone like Elon Musk, played an indispensable role in creating and then scaling. Many of these companies are also able to provide employment and, therefore, work and income for millions of people, precisely because they possess so much wealth. Small and medium-sized businesses cannot perform this function on anything like the same scale.
