Guest Opinion: Why a Market Access Charge Would Have Greater Benefits Than Tariffs

The uproar over President Trump’s tariffs reminded me of another proposed way to balance trade, the Market Access Charge (MAC)  created by John R. Hansen, PhD, Founding Editor of Making America Competitive Again. I met John in 2017 at the annual trade conference of the Coalition for a Prosperous America when he was on CPA’s Advisory Board,, and we have been keeping in touch ever since.

I have written previous articles about the MAC and included a description of the MAC in one of the chapters of my book, Rebuild Manufacturing – the key to American Prosperity. For first-time readers, I explained that the MAC is “a small charge that would be collected on all foreign-source money entering America’s financial markets…which would probably start at two percent and would be collected by U.S. banks receiving foreign money transfer orders via systems like SWIFT.”

I recently connected with John to find out the status of the MAC, and he expanded on the description of the MAC saying, “it is an import tax of probably 1-3% on inflows of all foreign-source money. The MAC would moderate gross inflows of “trash cash, like the trillions of Chinese RMBs and Japanese JPYs, of about $90 trillion per year. This money is “trash cash” because only about two or three percent of these inflows are used to finance real physical investments such as new or updated factories that can be counted as true foreign direct investment (FDI). The remainder goes into America’s “Capital Casino” aka financial sector. We need moderation because speculative portfolio investments such as bonds are money that we do not need and the MAC would reduce the undervaluation of foreign exchange monies relative to U.S. Dollar.

In other articles, I’ve written about how other countries such as China, Vietnam, Korea, and Japan have undervalued their currencies, making their products more competitive in the global marketplace, while our overvalued dollar makes American products more expensive in the global marketplace.  Low exchange rates for foreign currency mean that the dollar prices of foreign goods and services fall relative to the dollar prices of made-in-America goods and services. This makes the dollar prices of foreign-made goods cheaper, hurting the ability of made-in-America goods to compete with foreign-made goods both in domestic U.S. markets and in foreign markets for our exports.

As a result, we import more products than we export, causing the increasingly large trade deficits of the past 25 years. Trade deficits have grown from $451 Billion in the year 2000 to more than double at $918.4 billion for 2024. The increasing dependence on debt from foreign countries causes severe risks for America’s financial, economic, political, and social future.  Our national debt has nearly doubled since 2020 and was $28.1 trillion at the end of 2024.

In contrast, John explained, “The MAC would make America-made goods more competitive against imports in the U.S and against foreign-made products as exports. The MAC would be a “duty on financial imports” that would be set on a quarterly basis — much as the FED sets interest rates. Upon initial implementation, the FED would set the rate to a low non-zero rate if the trade deficit was greater than 1% of GDP. On a quarterly basis, the FED would review trends in the US trade balance (much as it does with interest rates and inflation). If the deficit was greater than 1% of GDP, the MAC rate would be raised by an amount judged to be small enough to not cause a crisis and large enough to move the trade deficit in the right direction.
 
Conversely, once the trade deficit began to trend downwards towards zero, the MAC rate would be reduced gradually towards zero. The rate would be publicly available on government websites on a 24/7 basis, and at any point in time, only a single rate would apply to all financial inflows, regardless of currency, country of origin, amount, ownership, or intended use.

The MAC would always remain in effect — even at a zero rate. Then, if changing global conditions led to new U.S. trade deficits greater than, for example, 1% of GDP, the FED would simply move the MAC rate back to a non-zero rate and immediately publish the decision. It would be a perfect blend of ‘temporary’ and ‘permanent,’ both required by the IMF for capital flow management tools (CFMs) such as the MAC. The MAC tax would be collected by U.S. banks receiving foreign money transfer orders via systems like SWIFT.”

In our conversation, John clarified a misunderstanding about the word “investment.” He said, “The rich, especially those in the banking community who sponsor America’s “capital casino,” — seem to call all money “investment.” However, this term can be very misleading because it fails to distinguish between money that builds America’s physical productivity and money that the rich use for speculation.

Depending on the year, of America’s roughly $90 trillion of gross annual inflows of “money” from abroad, only 1-3% actually goes into fixed capital formation such as construction or physical improvement of factories, farms, infrastructure, and office automation as defined by BEA.”

He explained, “The vast bulk of the capital inflows — the remaining 97-99% of them — go primarily into portfolio investments such as bonds, non-controlling shares of stock, bank deposits, etc. These speculative financial investments, which have exploded over past decades relative to GDP, make rich speculators even richer (or poorer if they place their bets wrong), increase risk and volatility, increase the risk of massive economic meltdowns for America like the one of 2008, and help drive inflation ever higher. However, such investments do virtually nothing to increase America’s physical productivity or its real GDP.”

He added, “The MAC would target the most important cause of the growing U.S. trade deficits, the decline of U.S. jobs that produce internationally traded goods and services, and the shrinking U.S. budget revenues. Expenditures by foreign direct investors to acquire, establish, or expand U.S. businesses totaled $151.0 billion in 2024, according to preliminary statistics released today by the U.S. Bureau of Economic Analysis. Expenditures decreased $24.9 billion, or 14.2 percent, from $176.0 billion (revised) in 2023 and were below the annual average of $277.2 billion for 2014–2023. As in previous years, acquisitions of existing U.S. businesses accounted for most of the expenditures.

I asked John what would be the benefit of the MAC compared to tariffs, and he listed the following: