“Although this is a complex issue, the fundamental dynamic is clear from the obvious fact that a flat tariff would almost certainly trigger the relocation back to the U.S. of some industries but not others. For example, a flat 30 percent tariff (to pluck a number out of thin air) would not cause the relocation of the apparel industry back to the U.S. from abroad. The difference between domestic and foreign labor costs is simply too large for a 30 percent premium to tip the balance in America’s favor in an industry based on semi-skilled labor. But a 30 percent tariff quite likely would cause the relocation of high-tech manufacturing like semiconductors. This is the key, as these industries are precisely the ones we should want to relocate. Therefore a flat tariff would, in fact, be strategic.
The exact level at which to set the tariff remains an open question. Thirty percent is suggested here because it is in the historic range of U.S. tariffs and is close to the net disadvantage America’s trade currently faces due to America’s lack of a VAT. The right level will not be something trivial, like two percent, or prohibitive, like 150 percent. But there is absolutely no reason it shouldn’t be 25 or 35 percent, and this flexibility will provide wiggle room for the compromises needed to get the tariff through Congress.”