Tariffs Are Bad

Related: vaccines are good

Photo by Markus Winkler on Unsplash

Tariffs are bad. It’s that simple. They are bad. They make countries worse off. They make people poorer. Free trade is good. Raising tariffs is not so much throwing out the baby with the bath water as it is burning down the house to roast the pig. And unfortunately, for at least 12 consecutive years, the United States will have a president who favors tariffs and a congress that has handed over authority to alter tariffs to that president as he sees fit.

During the first Trump term, tariffs were mainly used to extract concessions from trade partners. He found some inequalities, where other countries were putting tariffs on our goods but we didn’t put tariffs on theirs and “leveled the playing field”. Other times he threatened to put tariffs on countries, such as Mexico, to get them to change policy that had nothing to do with tariffs. In this Trump was moderately successful. The tariffs that he instituted weren’t too high, some concessions were made, and the economy grimaced from the paper cut and moved on. It made society poorer, but not by much.

After Biden continued and increased some of those tariffs, Trump 2.0 is back with a vengeance. According to our president, “The word tariff is the most beautiful word in the dictionary.” Tariffs will “make our country rich” while “costing America nothing”. At least, they were supposed to cost America nothing. Now, as large tariffs the likes of which the US hasn’t seen in living memory come into effect and the stock market dives, the story is changing. We may be in for “a period of transition” or even a recession as the economy rebalances. The stock market is going down because there needs to be short-term pain to achieve long-term gains. Never mind the obvious fact that a government policy that involved short-term pains but long-term gains would make the stock market go up, not down.

What’s going on?

The problem is tariffs are seductive. They rely on faulty reasoning, appeals to emotion, and cherry-picked facts. Meanwhile, economists have known the effects of tariffs for decades, bordering on a century. That tariffs are bad is as clear of fact as vaccines being good. Are tariffs bad for everyone all the time? No. Of course not. Just like vaccines make some people very sick. But overall, it isn’t even close. The net benefit of free trade and vaccines is overwhelming. Arguing otherwise is just silly, and needs to be denigrated as such.

So what about tariffs give them a continual appeal? There have always been politicians who support tariffs. Traditionally these were left-of-center ones like Bernie Sanders but today they exist on both sides of the aisle. First, and economists need to do a better job of explaining this, tariffs do help some people. There are tens of thousands of people who will benefit, and benefit significantly, from the types of tariffs that Trump is enacting. The problem is that tariffs benefit the chosen few at the expense of the many.

To see why, think about eggs. The US has tariffs on eggs. If a farmer in a different country wants to sell those eggs to US consumers, somewhere along the way the eggs will be taxed by the US government. This raises the price of imported eggs. Now, not only do foreign farmers have to pay increased transportation costs to get their eggs to US markets, they have to pay an additional tax as well. This benefits US egg producers - the international competition has to pay two costs, international transport and the tariff, that domestic producers don’t have to pay.

If the government were to suddenly announce that tariffs on eggs were being removed, American egg farmers would protest. With that extra cost now removed, foreign producers would now be able to undercut American producers. Cable news shows would show a fourth-generation egg farmer looking despondently out at his hen house, as he solemnly explains that the bank might seize his farm if the tariff cuts go through. The egg lobby will say that American egg farmers will go out of business and that this will just help foreign corporations at the expense of the American worker.

Tariffs are seductive because none of these people are lying.

Especially if existing tariffs are high, removing them will have significant negative impacts on domestic industry, doubly so in the short term. People will lose their jobs. Firms will go bankrupt. So why is getting rid of tariffs a good thing? Because everyone else benefits. How many egg producers do you know? Compare that to the number of egg consumers you know, which is everyone you know who isn’t a vegan. We all benefit from lower egg prices because eggs are in so many foodstuffs. By removing the tariffs on eggs, we hurt thousands of egg farmers while helping hundreds of millions of egg consumers.

It’s important to stress that this is not an opinion. It has been rigorously studied by economists for a long time. The benefit to the consumers far exceeds the loss to producers when import tariffs are removed. The problem is that the benefits are spread out to hundreds of millions of people, while the losses are felt by the few. If tariffs were removed from eggs, almost every American sees the price of eggs decrease by a small to moderate amount, while egg producers take a punch to the face.

The obvious rebuttal is that maybe we should have tariffs anyway to protect those egg farmers. Those jobs should be prioritized over making eggs a bit cheaper. This is a specious argument. It’s easy to say we should prioritize making a few people significantly better off rather than almost everyone slightly better off, but then that logic should extend to everything. All industries should have significant tariffs on them. Who cares if the price of food doubles, so long as we employ an additional 100,000 people? Let’s have the cost of clothing triple, so we can put more Americans to work in garment factories. Hopefully the flaw in this reasoning is clear. By continually helping a few at the expense of the many, prices skyrocket and keep everyday citizens not in a preferred industry poor. Secondly, it’s important to note foreign eggs come from other countries, not other planets. Not only do American consumers benefit from lower egg prices, but foreign egg producers are better off as well.

Tariffs make a country poorer. They prop up inefficient industry at the expense of the American consumer. The Trump tariffs are going to do the same.