Tariffs: Good or Bad?

Warning: This first paragraph is a bit of a digression from the topic at hand, but I feel it is necessary…you can skip it if you’d rather. A few months ago (May, to be precise) I started what we call a Mises Circle. We (usually 8-10 people) get together at a local restaurant once a month to talk about economics. This last meeting was sort of a free-for-all, there wasn’t any specific topic, everyone just shared their ideas, articles they had read, etc…One of the many topics was covered was (finally, here we go!) tariffs!

I never like to agree with people (I know…now you’re wondering if you actually want to meet me, doesn’t sound very nice does it?), because that gets rather  boring. So at the Mises Circle we were talking about how America needed tariffs to keep the Chinese from taking over the country. The argument was that China is unfair in keeping their wages so low and because of that, they have taken over the American market. We have to enact tariffs to “even the playing field” for everyone. I immediately pulled out my ArachnoMac (aka a Macbook Pro) and looked up some articles on LewRockwell.com about tariffs.

The bottom line is: Free trade means free trade. Tariffs = taxes. Taxes ≠ Free trade.

I know that’s a rather brief reply, so I’ll add some more detail. Rep. Ron Paul does in this article. “Make no mistake about it, these tariffs represent naked protectionism at its worst, a blatant disregard of any remaining free-market principles to gain the short-term favor of certain special interests.”

And here: “We’ve all heard about how these tariffs are needed to protect the jobs of American steelworkers, but we never hear about the jobs that will be lost or never created when the cost of steel rises 30 percent. We forget that tariffs are taxes, and that imposing tariffs means raising taxes. Why is the administration raising taxes on American steel consumers?….We should recognize that the cost of these tariffs will not only be borne by American companies that import steel, such as those in the auto industry and building trades. The cost of these import taxes will be borne by nearly all Americans, because steel is widely used in the cars we drive and the buildings in which we live and work. We will all pay, but the cost will be spread out and hidden, so no one complains.”

This from Wilson Brown and Jan Hogendorn in this book, “Importers pass on [most of] their costs to buyers, and industrial buyers pass those costs on in the form of higher prices. . . . Consumers, hit directly or indirectly, include the inflationary price increases in their wage and salary demands. Everybody tries to pass the tax to someone else. The only group that is powerless to pass the costs on further are the exporters, who have to sell at world prices, and swallow those costs. In essence, a tax on imports becomes a tax on exports.” (Emphasis added)

So I think that this is a subject that deserves more attention than just, “yeah, let’s make the Chinese suffer! We’re Americans!” While I sympathize with the anti-Walmart, anti-China movement (not anti-China itself, but anti-China-selling-everything-to-us-and-we’ll-have-to-pay-for-it-later) I think there’s much to be said for both sides of the issue.

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