0:00:01 – Announcer

You are listening to the National University Podcast.

0:00:09 – Kimberly King

Hello, I’m Kimberly King. Welcome to the National University Podcast, where we offer a holistic approach to student support, well-being and success – the Whole Human education. We put passion into practice by offering accessible, achievable higher education to lifelong learners. Today we’re talking about tariffs and the economic impact they have on our economy and, according to an article in Brookings, the Congressional Budget Office, the CBO, says that the effect of tariffs on output can be ambiguous. On the one hand, some consumers end up buying domestic goods instead of imported goods and tariff revenues make more resources available for private investment by decreasing the national deficit. On the other hand, the purchasing power of consumers goes down as goods are more expensive. Retaliatory tariffs decrease exports and some businesses delay new investments out of caution. A very interesting conversation coming up on today’s show.

On today’s episode, we’re talking about tariffs and the effect they have on the economy. Joining us today is the chair of the Department of Accounting, Finance and Economics at National University, Dr. Brian Simpson. Dr. Simpson has a PhD in economics from George Mason University, an MBA from Pepperdine University and a BS in aerospace engineering from Syracuse University. His research focuses on monetary and banking theory, the business cycle, the philosophical foundations of economic ideas and creating constitutional protections of individual rights and freedom. He’s authored a book called A Declaration of Constitution for a Free Society, which modifies the Declaration of Independence and US Constitution to make them fully consistent with the protection of individual rights. And we welcome you back to the podcast, Dr. Simpson. How are you?

0:02:08 – Doctor Brian Simpson

Good. Thank you very much. It’s good to see you, Kimberly.

0:02:11 – Kimberly King

Yes, you as well. Why don’t you fill our audience in a little bit on your mission and your work before we get to today’s show topic?

0:02:20 – Doctor Brian Simpson

Yeah, like you said, I’m the chair for the Department of Finance, Economics, Marketing and Accounting at National University, that’s in the School of Business and Economics. And we have a number of programs within that department and within the school. We have a bachelor of Business Administration, master of Business Administration, bachelors in Accounting and Finance, bachelor’s in accounting and finance, and our mission is really just to provide the best possible education for students at National University that’s possible, to help them further their careers, help them gain promotions, obtain better jobs and really just to improve their lives for themselves and their families. So we’re really dedicated to that Whole Human education philosophy and implementing that philosophy that National University embraces.

0:03:17 – Kimberly King

That’s great. Well, I’m looking forward to speaking with you today about tariffs, a very relevant topic right now. And what are tariffs, Dr. Simpson?

0:03:28 – Doctor Brian Simpson

Yeah, I mean. A tariff, in its most basic form, is a tax imposed on imports. So just so everybody understands what we’re talking about here, imports are goods and services produced abroad but sold domestically, and exports- the opposite of imports- are goods and services produced domestically but sold abroad. So a tariff is a tax imposed on goods coming into the country, and obviously tariffs are very much in the news these days.

President Trump has imposed a number of tariffs on goods coming into the country. He’s imposed a 25% tariff on various imports from Mexico and Canada as of March 4th just a couple of days ago. He has also imposed a 20% tariff on a variety of Chinese goods as of March 4th as well. He increased it by 10% on March 4th. It had been a 10% tariff that he had imposed prior to that. And he’s also proposed a number of additional 25% tariffs on industries including steel, aluminum, and possibly some other products such as automobiles, computer chips, and my understanding is that the 25% tariff on steel and aluminum, for instance, is supposed to start March 12th.

Now that could change, but as of now that’s what we’re facing, on March 12th and right now, and the president has also proposed retaliatory tariffs on a country-by-country basis. So retaliatory tariffs being, if a country imposes tariffs on us, then we would create a reciprocal tariff, and China and Canada have already imposed retaliatory tariffs in response to the tariffs that President Trump has posed on them, and Mexico has said that it will consider, by March 9th on Sunday imposing retaliatory tariffs.

0:05:42 – Kimberly King

And I know this is a fluid situation as we’re talking about this right in the new administration. I was reading some headlines earlier this morning that maybe some of these tariffs that have been discussed may be taken off the table. So again, it’s fluid. But so what are the economic effects of tariffs?

0:06:05 – Doctor Brian Simpson

Yeah, there are a number of economic effects of tariffs. The basic effect is that tariffs raise the cost of bringing goods into the US, so they make goods more expensive to purchase in the US and that means they’re going to lower the standard of living for the average person in the US. You know, the basic idea is you’re imposing a cost at the border to bring the good into the country that wouldn’t otherwise exist.

So if you impose a 25 percent tariff, that’s an additional 25 percent cost that the importer whoever is importing the good has to face. And it’s important to understand here and one thing I don’t often see in the discussion is that tariffs also protect inefficient domestic producers. They do this by restricting competition from foreign producers. By making goods more expensive, they keep inefficient domestic producers in business who would otherwise not be able to stay in business, or they allow them to remain larger and engage in more business than they otherwise would be, and this is a part of making goods more expensive.

The basic idea in terms of basic economic analysis is that tariffs reduce the supply of goods in the country, and when you reduce supply you increase price, and tariffs have harmful effects both on consumers, who would buy the affected imports, but also on domestic producers who purchase the affected imports for inputs in their production process, and that’s not something that you often hear about.

You often hear that, well, consumers are going to have to pay X percent greater for these goods because the producers have to cover the cost of the goods. But about 50% of all imports- about half- are purchased by domestic producers as inputs in their production process. So a significant amount, and that’s going to increase their costs and reduce their ability to produce, because now, if you have to use more money to purchase an input, a resource that you use, that means you have less money left over to purchase other imports, like hiring workers, and so in these industries you’re going to see employment reduced and production decreased in those types of industries.

And, of course, I mentioned which is another effect I mentioned previously that other nations typically do retaliate with tariffs. So, like I said, China and Canada already have and Mexico is threatening to do so, and we really need to understand here, with regard to trade, that we benefit from trade with other countries because we gain access to less expensive products or products that simply can’t be produced in the US, such as products that require natural resources that we simply don’t have within our borders.

So we’re not getting as much benefit from that. International division of labor and a division of labor is very important to the gains we get economically from our society. A division of labor society and that kind of society firms, regions of a country or even nations. They focus on producing goods that are relatively less costly for them to produce and trade to obtain goods that are relatively more costly for them to produce. So we specialize, we do something one thing or maybe a few things at most and become more expert at that.

So I specialize in providing education services and economics. I teach economics, and when you have that greater specialization, you get higher productivity and a higher standard of living. And the productivity- that’s important. Productivity is measured by the amount of output you get per unit of input. So you can think of it as how much is produced per worker is one way to measure it, and the more we can produce, the better off we’re going to be, the higher standard of living we’ll be, and that’s what the division of labor makes possible.

And we want to take advantage of the international division of labor, because there are many talents and abilities and resources outside the US that we can benefit from and a division of labor society, so we’re focusing on just producing one or a few things and we can become more expert at it. We become better at it by studying that activity, by using specialized machinery and things of that nature. So we focus on where we have an advantage and we can all grow richer together as a result of that.

0:11:05 – Kimberly King

Yeah, and I have a couple of questions. You know, the positive side of possibly what is about to happen with these tariffs, if you can talk to that. And also, did some of the countries have tariffs on the US before we imposed these tariffs on them?

0:11:23 – Doctor Brian Simpson

Yeah, I mean, some countries did have tariffs on us and that’s often what President Trump is responding to, but tariffs harm their countries as well, and it’s not a good idea really to harm ourselves if other countries are harming themselves. We want to be able to take advantage of that division of labor both within the country and outside the country, and we can do that to a much better extent if we get rid of restrictions, trade restrictions like tariffs and quotas. Quotas are another type of trade restriction where you don’t tax the incoming good, you just limit the amount of goods, say, a quota might be- and there are quotas, I think on like cane sugar being imported from Brazil- So maybe only 1,000 metric tons of cane sugar is allowed to come into the country each year from Brazil. It’s a little different way of restricting trade. There’s no revenue raise, but it has the same basic effect: it restricts supply, increases price.

0:12:34 – Kimberly King

Okay, so what about can we assess tariffs from, or how can we do this from a moral perspective?

0:12:35 – Doctor Brian Simpson

Yeah, and that’s an important topic understanding tariffs from a moral perspective, not just an economic perspective. We see from an economic perspective they have a harmful effect, and to understand how morality applies to tariffs, you really have to take into account and to understand morality itself, you have to take into account the requirements of human life, and human life has certain requirements. We have requirements in terms of being protected from the elements. We don’t want to be living in freezing conditions, we won’t live very long, we have nutritional requirements and we have moral requirements. Morally, human beings have to act in their rational self-interest or egoistically to further their lives and well-being. For instance, we have to use our minds, our basic tool of survival, our reason, to think and act and produce the values our lives require. And based on this knowledge, we can say it’s moral to act in our rational self-interest. The opposite of that sacrificing yourself to others or sacrificing others to yourself that stands in opposition to the requirements of human life. It harms human life. Think of it if I produce some food to further my life but I give it to others and I do that consistently, well you know you won’t last very long. You’d starve to death. So, based on this knowledge, you know sacrifice is immoral, whether sacrificing yourself to others or others to yourself. And to apply this to tariffs, tariffs they do what is known as initiating physical force. They use force, they violate rights by forcibly preventing or making it harder for people to act in their self-interest, by enacting government-imposed restrictions on the purchase of goods made by forms. And we need our rights and our freedom protected so we can again think and act on our rational judgment. Tariffs make it harder to do this. So, based on this objective approach to morality, tariffs are immoral because they forcibly prevent people from acting in their self-interest.

So there’s this real integration of economics and morality. I mean people, people have the right to trade with whomever they want, even with foreigners, and different, a little different perspective. But to emphasize the point here, if I trade with a foreigner, say- say, I want to buy a Toyota as a voluntary exchange, nobody forces me to do that. No one forces the foreign producer to trade. Toyota does so voluntarily.

Nobody’s rights are violated. It’s a beneficial trade to both parties. It’s a win-win relationship. Now if the government imposes a tariff, it’s using force to make beneficial trades harder to engage in, and therefore reducing the amount of beneficial trades that take place and lowering the standard of living of both parties. We’re both worse off because we can’t make that trade that we prefer to make. So the government is sacrificing purchasers of goods, foreign products, to inefficient domestic producers, because that’s generally why they’re imposed.

You know, they’re preventing people from acting in their self-interest and preventing us from furthering our lives. So you know, we see this integration of economics and morality what’s harmful from a moral standpoint or bad from a moral standpoint or bad from a moral standpoint leads to economically harmful results. It lowers our standard of living. When we sacrifice people to some, people to others, with beneficial, economically protecting rights and making it so people can act in their self-interest, it helps us economically. We can further our lives and well-being.

0:16:19 – Kimberly King

We can further our lives and well-being. It’s so interesting and again it’s an area that you know it’s interesting to hear the economic side from your standpoint. Are these tariffs meant to increase domestic production?

0:16:33 – Doctor Brian Simpson

Well, they are meant to increase domestic production, right, so they will protect some domestic producers, but you can’t just look at the producers that are protected. You have to also consider the fact that they’re going to harm some domestic producers, and that’s often what politicians often focus on- just those who benefit, those producers who benefit from the tariffs. But, like I said, about 50% of all imports are used by domestic producers as inputs, and so those producers are going to be harmed. And so, overall, the overall supply of goods available due to some increase in production, and that’s going to be with regard to inefficient producers, because they’re the ones that usually need the protection that people want to protect. They’re the ones that can’t handle the competition from foreign producers. So you’re going to get an increase in inefficient production, a decrease in more efficient production and overall, you’re going to have less produced domestically and a lower standard of living as a result.

0:17:46 – Kimberly King

Do tariffs create jobs then in the economy that imposes them? That’s kind of what I think we’re just talking about a little bit, but I don’t know. If that is yeah, does it create jobs?

0:17:58 – Doctor Brian Simpson

Yeah, I mean we were hitting upon that a little bit. And so again, and because it relates to this issue of we have to look at all the effects of tariffs. We can’t just focus on the companies or the workers that benefit from tariffs. So tariffs do create jobs. They create jobs that are less productive in the inefficient industries that the tariffs are protecting, but at the same time they’re going to eliminate jobs in the more efficient domestic industry, so where we have more productive jobs. So, again, domestic producers that use foreign goods as inputs, their business is going to shrink or it’s going to go out of business if they can’t handle the increased costs. So you know, from that standpoint you have to look at both sides there. They create some jobs, but they also destroy some jobs.

And there’s also another effect with regard to tariffs. So to the extent that consumers are purchasing imported goods, now, consumers are going to have to pay more for those goods If they continue to buy them from the foreign producers. Ultimately, they’re going to have to pay more because the producer has to cover the cost of the tariff or they’re going to purchase the good domestically, most likely from a more inefficient producer. It’s going to cost more. I mean otherwise, they purchase the foreign produced good. That’s why people generally do that, and so when we don’t have the tariffs, there’s some savings that consumers get and that savings can be used to purchase other goods, domestic, and so there’s going to be a decrease in demand in domestic industries that would have benefited from the savings of not having a tariff on various goods, and so less demand means less employment in those industries, and so you get reduced jobs there. So on net, tariffs, they don’t create or eliminate jobs on net. The basic effect is what we’ve talked about: they reduce the supply of goods available in the US and lower the standard of living.

So you have to look at all the effects of tariffs. You can’t just consider those who compete with foreign producers, you have to also consider those who purchase goods from foreign producers, including businesses, other businesses and consumers. The tariffs change the pattern of employment, creating more jobs in inefficient industries and reducing the amount of jobs in the efficient industries. They don’t create jobs on that, and that’s true of free trade as well. If you had free international trade, a lot of people think that, well, that eliminates jobs domestically. No, it eliminates jobs in inefficient industries but increases jobs in the efficient industries. So that’s important to consider. And it’s also important to consider here that nobody has the right to a job. No one has the right basically to force people to buy their products or hire them, including domestic producers and workers. You know that should be based on voluntary trade, so that everybody’s rights are protected.

0:21:16 – Kimberly King

So that leads me to my next question, and that is are tariffs a legitimate negotiation tool to be used to gain concessions from other countries?

0:21:26 – Doctor Brian Simpson

Yeah, I mean and that’s something that President Trump highlights that idea that, oh, these are just a negotiation tool that I use, that he uses to gain concessions from countries, from countries, and you don’t want to negotiate by using force to harm your citizens economically. That’s what you’re doing when you use tariffs. That’s not a good negotiation strategy, because the government really here becomes an enemy of the people because it goes against the fundamental requirements of human life, here. It goes against the freedom people need to think and act and further their own interests. And in terms of its essential features, using tariffs as a negotiation tool is like the negotiation an armed robber engages in when he points a gun at you and says give me your money or I’ll shoot. And I’m not being hyperbolic here, I’m serious in terms of the essentials.

Both the government and the armed robber- they initiate physical force, they violate individual rights. So they’re a first user of force and we want to prevent that. We want to protect freedom. Freedom means the absence of the initiation of physical force. If this is really a part of the immorality of tariffs that initiation of physical force and violation of rights.

0:23:10 – Kimberly King

So where does the money go from the tariffs? And we’ve heard about the external revenue service, but will this money we get from these tariffs help lower the deficit that we have here in the United States?

0:23:21 – Doctor Brian Simpson

Well, certainly, yeah, revenue that comes in through tariffs, they’re taxed, so revenue is generated and that will go into the government’s, the federal government’s operating budget, so they can use that. But in terms of as a revenue generating device for the government, tariffs are extremely minor. I think in the latest data, just from 2024, maybe one and a half percent of government revenue generated came from tariffs. Tariffs used to be more significant really at the founding of the country and prior to World War I, anywhere from between 50% to 90%. In fact, founding the country, virtually all the money, the revenue that the government generated, came from tariffs. But we have many other taxes, as everybody knows- property taxes, income taxes, sales taxes, so forth and so on, excise taxes. So yeah, it’s very minor. Rarely does it anymore go above 2% of revenue generated.

0:24:26 – Kimberly King

Interesting, so do tariffs need to be imposed for national security reasons?

0:24:33 – Doctor Brian Simpson

Yeah, and that’s a good question. I mean, the government is supposed to protect our rights from again from the initiation of physical force. They’re supposed to protect us, including from foreign aggressors, so from terrorists or, you know, foreign aggressors like Vladimir Putin and Russia. That’s a proper function of government and doing that doesn’t require tariffs. I mean, if the government determines, for instance, that it’s best to buy some defense products domestically to protect the rights of American citizens from foreign aggressors, it could just do that. It doesn’t need tariffs and it does that quite frequently. But it may be better to buy less expensive products in some cases from foreign producers and stockpile products or spare parts if you need them in time of war.

Now in the US, it’s a large economy. It generally doesn’t need to do that, but it could be possible. Or it could be possible that maybe the best scenario is a combination of that. We produce some defense products domestically and we purchase some from abroad to gain access to less expensive products. But again, you don’t need tariffs to do that. The government could just pass legislation and put it in the spending bills, which is a piece of legislation, and just do that. And apart from tariffs, also sometimes the government might want to prevent selling weapons to aggressor nations, because that’s a part of protecting individual rights, and again, it could just do that and does that routinely today, without tariffs. We don’t want China or Russia to get a hold of the latest technology that we developed for our military, for obvious reasons, and companies have to get approval to sell, say, the latest fighter aircraft to nations. We want to sell them to friendly nations, not to nations that might try to do us harm, and again, they could just do that. You don’t need to oppose a tariff to do that.

0:26:43 – Kimberly King

So I guess you’re kind of talking about this. But what is a better way to trade with other countries like China, because they have monopolies on a lot of goods like prescription drugs, et cetera?

0:26:54 – Doctor Brian Simpson

Right, yeah, I mean, China is a tough one because you know from, obviously, they at one point they were fully a communist country, a socialist nation, starting in 1949 with Mao Zedong. But upon his death in the 70s, you know, they started relaxing some of their communist and socialist control. So they became somewhat less totalitarian and started to free up some of their market to some extent and they expanded rapidly. As a result, we were able to buy many products from them and with the rise of Xi Jinping they’ve moved toward greater controls and that’s been problematic. They’ve become more, they move more toward communism and socialism again.

So you do have to be careful, obviously selling a technology to the Chinese, because you don’t want them to use that technology against us militarily. So I mean, there might be cases where, like I mentioned, it’s legitimate to restrict the selling of technology to Chinese or Chinese companies. So it just has to be done, I think, in a careful way where people- you allow them to trade with the Chinese, but you also understand that if they’re going to continue to move more toward communism and socialism, that we need to make sure that we’re thinking about protecting our rights and to some extent you’ve seen, even on their own. Some companies moving out. It becomes more expensive to produce there. Now they lose a competitive advantage, because that was one of their big competitive advantages. You could produce products very inexpensively and even with the shipping costs back to the US or to Europe they would still be less costly. But now countries like India, Vietnam, they become relatively less expensive and so more trade and production is opening up there.

0:29:22 – Kimberly King

So what can we do to increase domestic production here without imposing these tariffs, and how can we compete?

0:29:30 – Doctor Brian Simpson

Yeah, that’s a great question. I mean overall, if we impose tariffs it won’t. I just want to make sure everybody understands that it won’t increase production overall. It’ll actually decrease production. Like I mentioned, it increases production in inefficient industries but decreases it in efficient industries. So the net result is less production. But if overall we want to try to improve production in the economy, it’s really we need to focus on freeing up the economy, deregulating the economy, reducing taxes to the extent we can.

We should be also reducing government spending as well, so we don’t take on more debt because government debt it takes basically credit out of the credit markets that private businesses or individuals can borrow and makes it harder to borrow overall and it undermines the productive capability. So in general, we want to free up the economy, free up the labor markets to a great extent. We talked about on a previous podcast the harmful effects of minimum wage laws that artificially inflates the cost of labor and makes it more expensive to produce. So even reducing or even eliminating minimum wage laws, which what doesn’t mean wages are going to go to zero, they would go down to a certain level, but people generally, when they get minimum wage type jobs, they’re quickly gaining skills and moving up the wage ladder. So freeing up the market in the US is the best way to improve our competitive ability on the global economic stage.

0:31:12 – Kimberly King

So interesting. Is it in the nation’s self-interest, then, to impose tariffs?

0:31:38 – Doctor Brian Simpson

Now, to understand this, though, you have to remember that it’s in our self-interest to protect the rights of Americans to buy products that best serve their self-interest, so they can further their lives and well-being in the best way possible. And the proper policy with regard to international trade is one of unilateral free trade, meaning we free up our borders, we have a free trade policy, no restrictions on goods coming into the country, and we get the most benefit that’s possible in that situation from the international division of labor. Now, we can’t control what other countries do. We can advocate and push them to eliminate. Their other countries might hamper their own citizens and make it harder for their own citizens to engage in beneficial trades. An analogy I use, for instance you can think of, well say that you’re a runner. And you’re running a race, you’re running a marathon. Well, if your competitor shoots himself in the foot, you don’t want to shoot yourself in the foot. So if he’s going to harm himself, you don’t want to harm himself-

0:33:00 – Kimberly King

Let him do it, not you, right?

0:33:08 – Doctor Brian Simpson

Right. We shouldn’t be violating the rights of our own citizens just because other governments violate the rights of their own citizens. So we want to set a good example that our government protects the rights of our citizens and other governments should do the same. And I would even say that- and this is something important because it’s not often discussed- is that it’s not even in the self-interest of domestic producers, who would be protected from foreign competition by the tariffs, to have those tariffs. It’s not in their self-interest. Sure, they might gain in the short run because their business might expand, but in the long run they’re going to be harmed.

They’re going to be harmed because the rate of economic progress will be lower, as I talked about overall. The overall effect of tariffs is less production, fewer goods and services because of the effect on the more efficient producers who use the imports as inputs, and so that’s going to have a long-term negative effect, and the rate of economic progress, that’s important to consider. I mean first of all, even in the short run, those who benefit from the tariffs, the producers that benefit. They’re going to purchase a lot of goods, most likely that are harmed or their costs are raised by the tariffs, so they’re going to be buying more expensive goods as consumers.

In the long run, though, because production is lower, due to these higher costs, that rate of economic progress declines, and the rate of economic progress- it’s like it’s important to understand it, it has a compounding effect. It’s like the interest you earn on your savings account. So you know, interest compounds. It goes up exponentially, not just linear, and so just a small change in the rate of increase and that’s what the rate of economic progress, just so everybody understands- it’s the rate at which our ability to produce, year to year, increases. So is it increasing? 2% a year, 3% a year, so that’s very important to our standard of living, and just a small change to say the rate goes from 2% per year and then, with some tariffs, it goes down to just 1.5% per year. Now that doesn’t sound like a very big change in the short run- just 0.5%- but over the long term, if you know anything about the compounding effect on interest that you earn in your savings account, it’s the same as true with regard to the supply of goods we can produce. It can have a very big effect on our standard of living in the long run. So, even those who benefit from the tariffs in the short run, it’s not in their self-interest.

And also, you have to understand that violating rights is a slippery slope to really to a police state, I would say a more authoritarian state. Yeah, you might benefit from the violation of rights that are imposed through tariffs and that might benefit you, but that opens the door to more violations of rights. Because now we’re saying, oh, it’s okay for the government to violate rights. Well then, what about? And of course, many people will be clamoring for various controls, government controls that favor them. So if everybody starts clamoring for controls and violations of rights, then it’s the so-called race to the bottom. That’s why I say it’s a slippery slope toward greater and greater violations of freedom.

And just one last point I want to make to emphasize this idea that it’s not in our self-interest.

I have to emphasize this point because it’s a point that addresses something that President Trump raises over and over again. President Trump has referred to trade deficits as a loss, as if we lose money by buying imports. He does this routinely. He did it in his first presidency. He put out well, tweets at the time, on Twitter. You know it’s now X, of course, but he did it in the campaign run-up to his second presidency and he’s made statements like this in his second presidency as well.

So he has this belief that trade deficits are a loss. And just so everybody understands what a trade deficit is here, the idea of a trade deficit that exists when the value of imports coming into the country is greater than the value of exports going out of the country. So when you’re importing more than you’re exporting, that’s known as a trade deficit. And that view that a trade deficit is a loss, that we’re losing money- it really demonstrates a lack of understanding of the nature of trade. Obtain goods produced by foreigners because we get the goods. That’s a beneficial trade, like I talked about with my trade with Toyota. That’s why I trade with Toyota.

That’s why I would buy a Toyota. Saying that we lose when we have a trade deficit is like saying we lose when we have a trade deficit with the local grocery store. Because every week I have a trade deficit with the local grocery store, right, because I buy goods from him but he doesn’t buy any goods from me. But that’s not a loss, that’s a gain. I get food to eat and again, it’s a win-win relationship. Trade is mutually advantageous. The reason why I give up, say, $20 to buy food at the grocery store is because I consider the food more valuable than the money, and the reason why the grocer gives up the food to get the $20 is because he considers the $20 more valuable than the food. So that’s the mutual advantages of trade.

And imports from other countries are good, for the same reason that importing goods from, say, other states or other counties or other cities or other individuals like your grocer are good. I mean so. You know, I live in California, we all live in California. Well, it’s beneficial if we want to import, purchase some goods from people in Arizona or Nevada, and Californians often quote unquote “import” tourist services from Las Vegas, from Nevada. Right, there’s a lot of traffic going from Los Angeles and San Diego to Las Vegas. That’s really considered an input of that good, so that’s a benefit. Or when people in San Diego County, when they purchase agricultural products from the Imperial County, we benefit.

That’s what we consider the best option if we’re free to do that and that’s what we choose to do. Or when people who live in San Diego purchase goods from producers in Los Angeles, like when we see movies that are produced in Los Angeles. That’s again win-win relationship, so it raises our standard of living. That’s really the important economic aspect of free trade, including international trade, and that’s why tariffs are really harmful economically.

0:40:20 – Kimberly King

So my last question is, does a tariff have any effect on the dollar being the reserve currency?

0:40:30 – Doctor Brian Simpson

Yeah, I mean, in terms of a reserve currency, a tariff is going to probably increase the value of the dollar a little bit more because we’re going to have fewer purchases of foreign produced goods and more purchases of US produced goods, so it might cause the dollar to appreciate a little bit. That would probably possibly have a minor positive effect on the desire to use the dollar as a reserve currency is the idea of governments wanting to hold on to dollars, or foreign central banks like the Federal Reserve is the US central bank, where you have a bank of Japan, a bank of England. They might want to hold on to dollars as a part of their reserves that they hold, and generally the US dollar is used to determine the price of oil and things like that. Because it’s widely used, I mean it could have a small positive effect. The main effect, though, on whether the dollar is going to be used as a reserve currency is on the size of the US economy and the dominance of the US economy, and there you really want to be dominant and remain dominant, to have as free of an economy as possible.

But also, probably even more important, is whether the dollar is inflated, whether the money supply, the dollar money supply is inflated by the US government, the Federal Reserve, the central bank of the US. It really has control over how much money, specifically how much reserves for banks, are created. And especially since COVID but even, I would say, going back to as far as the creation of the Federal Reserve in 1913, the dollar has been inflated to a dramatic extent. The dollar is losing value very quickly. I’m not sure how much it’s lost since the Fed has created it, but a dollar today is probably worth maybe one or two cents relative to what a dollar was worth, say, at the founding, the creation of the Federal.

Reserve, and if you inflate your money supply drastically or dramatically, it loses value. People are going to tend not to want to use it as much. So you want a strong, stable currency, and that means not creating a lot of it, and to do that you have to really reduce government spending and not allow it to increase so fast as it has been increasing, especially since the COVID pandemic. I’d say it’s been increasing quite dramatically.

0:43:23 – Kimberly King

Yes, 100%. Well, this has been so interesting. Doctor, thank you so much. We appreciate you joining us and if you want more information, you can join National University’s website at nu.edu. And again, thank you so much for your time.

Doctor Brian Simpson: Thank you.

Kimberly King: You’ve been listening to the National University Podcast. For updates on future or past guests, visit us at nu.edu. You can also follow us on social media. Thanks for listening.