Reductio ad absurdum is a rather potent tool. You take the premises of someone’s flawed argument and push them to their extreme. Everyone can see it doesn’t work, and you’ve destroyed the argument. Consider minimum wage laws. As long as the legal minimum wage is below the market wage, no harm no foul. When it raises above the market wage it messes everything up. “But,” the economically illiterate cry, “everyone deserves a living wage. People need to make at least $15 an hour. Let’s pass a law.”
OK. If the law can create jobs that pay above a certain level, why stop at $15? Shouldn’t the government, if they really cared about us, make the minimum wage $15 million an hour? Whatever objection you have for the latter will apply to the former.
The same principle applies to tariffs. I admit they look like a brilliant idea, if you’re only looking at part of the equation (just like a $15 million an hour wage requirement). It’s terrible that those Japanese sell better cars for less money than American manufacturers. It’s evil that Canadian lumber costs less than American lumber. How dare those Germans build superior, cheaper cuckoo clocks to our American made ones? Something must be done.
You should be able to see the problem already. Tariffs are built on the premise that the way to prosper a nation is to have its citizenry pay more for inferior goods. If foreign goods, without tariffs, dominate a market, what explanation could there be other than the foreigners who made the goods do it better and/or cheaper? And wouldn’t it help the economy for us to buy goods that are better and/or cheaper?
But wait. There’s more. Every good that is imported to this country has a corresponding good that is exported from this country. Those trucks bringing lumber, those ships bringing cars and cuckoo clocks to the United States do not return empty. They return with the goods that Americans are able to produce better/cheaper than those nations that import our exports. Every job you “save” by driving out foreign competition is a job you lose for a company that beats foreign competition overseas. You are losing better jobs to save worse jobs.
Back to the experiment. If tariffs are such a boon to the economy, why these petty halfway measures of 25% or 50% tariffs? Why not charge Japan $1 million per car they wish to import here? Why not charge Canadian companies $1 million for every two by four they want to send here? Think of all the tariff income we’d bring in.
The free market is that market which will always and everywhere maximize prosperity. Every form of tinkering with it by the clumsy hands of government will throw sand in the gears, every, single, time. You might make a case that this form of taxation is less destructive than that form of taxation. What you cannot do is claim that any form of taxation creates a net gain for the economy. Tariffs are intrusive, expensive, oppressive government over-reach, something I thought we’d decided to put behind us.
This is part and parcel of what it means to love your neighbor. You don’t ask the government to make them pay an extra tax so that your business can beat his business. You encourage the government to stay out of your neighbor’s business.
Respectfully disagree. We have been providing our goods to other countries and it’s a difficult sell, not so much because of quality like you elude to. Volkswagens and BMW autos are not “better” than American cars – JD Power will reveal that. That may have been the case in the 70’s and 80’s. We have provided so much to so many countries, especially in subsidies, that it is time that America stop getting the short stick. I could go on, but that ‘s my view and I certainly know that better and smart economic minds than your and mine has thought this out better. We’ll see.
As do I, with you friend. I define “better” as more desired by people. JD Power doesn’t measure the actual decisions people make with their own money. Do you not agree that two people should be free to make economic trades without interference? As for better minds, every great economist agrees tariffs are destructive.
I can understand the sentiment behind the US imposing tariffs on imports. The decline in parts of the country is clear to see. Why not try to get jobs for honest, decent, hard working Americans who have been disenfranchised by the changing economic structure of the last 30 years. However, I do think (and I’m no economist) that America has benefited greatly from global trade but the wealth has accumulated in the big cities like New York, Austin & Seattle. Perhaps this is more an inequality problem. The UK had this problem in the 70’s and 80’s when the coal mines had to close and Thatcher had to take on the unions in order to restructure the economy. RC I also like free market thinking but it’s sad when whole communities suffer because their main industries become uncompetitive. Is this not a big weakness in capitalism? Should the church be more vocal on these subjects? I like the way you bring economics into your blogs, I find it really interesting.
No, what is sad is when gov’ts get in the way. When Henry Ford came along, what happened to wagon makers? When Drake struck oil in PA, what happened to the whale hunters? Technology changes, and when left alone, always for the better. When people use violence, whether through creating violent picket lines, or asking the state to tax competitors, they use the force to defeat their competitors. It is wicked to do so, and harmful to everyone who simply wants to work.
Hello Brother R.C.
In general I agree with your assessment. While I understand what President Trump is trying to do – balance the trade between countries – in some cases may work, in many will not.
While taking a macroeconomics class in college we were assigned some articles regarding the impacts of tariffs, most of the articles referred to tariffs enacted in the 1970’s. These tariffs were primarily protectionist tariffs. Since it removed the competitive tension, it allowed US manufacturers to produce inferior products at a higher price. One of the articles was in regards to Korean Steel vs. American Steel. At the time American Steel was of somewhat inferior quality and expensive. Add tariffs and American Steel companies had no incentive to improve processes or quality. Then there are unintended consequences – tariffs on sugar from the Philippines for example. As a result of the tariffs American sugar manufacturers were able to raise prices, making baked goods and soda more expensive, and thus providing a reason to switch to high fructose corn syrup. Which our body does not handle very well (this being one of several reason obesity started increasing in the 70’s). But the tariffs also shut down the main export destination of sugar from the Philippines, harmed the sugar cane farms, and eventually was a leading factor in the strong Muslim ascension in some of the Southern Islands of the Philippines.
I enjoy your articles.
So if I hear you right, interfering in market processes had not only intended negative consequences, but unintended ones as well. What a surprise. There are many things to be thankful about President Trump. This is certainly not one of them.
RC, in a purely economic analysis where you’re trying to understand and predict optimal human financial flourishing, you’re right. Factor in sin, however, and the framework changes.
Tools can be applied in a variety of ways for better and worse purposes. A screw driver can drive a screw well, pound a nail poorly, or test a electric outlet fatally.
A tariff is a tool, and one that would ideally not have to be used if only all men and their nations states were angels. When nations behave badly, however, there seems an imperative to reach into the toolkits of last resort like tariffs, sanctions, and even war, and hopefully in that order.
I don’t presume to know President Trump’s mindset, and whether he truly believes the tariff should be a favored economic policy, or whether he regards it as one of many tools — perhaps even a favorite tool — in his Art of the Deal toolkit to procure benefits for the country. To be fair to not only American history, but world history, there are a lot of tools that ultimately have to be applied with both good effects and horrible collateral damage. I don’t presume to know if or when a tariff should be applied; I’m also suspicious about their effectiveness.
If, however, we have this thing called a just-war theory to inform how we wage war, maybe we need also a just-tariff theory to inform how and why we project economic power.
Sincerely,
Chris Mann
Amateur Economist
I have most certainly factored in sin. Give the state the power to decide who may trade with whom and sin is already at work. As I noted in a tweet earlier today, if the goal is to goad other nations to get rid of tariffs and all this is just negotiating bluster, maybe it will work. But by work we mean fewer, smaller or no tariffs. Which means my point, tariffs are bad, remains sound.
“Tariffs are bad” tries to morally characterize a morally inanimate tool. The lead pipe is not bad. The living room is not bad. Professor Plum is bad, who did a bad thing with the lead pipe in the living room. The state does well to now exercise its Romans 13 power to decide who may trade with the professor -and who may not, which is “nobody” because the state put him jail (and maybe even worse). If we agree that the state has the Romans 13 authority to wield that tariff sword to project domestic power for good, does it not have a similar authority to project international tariff power to do good?
A tariff is an act, not a thing. It is, in fact, theft.
True in effect, but theology is a priori to economics, and Romans 13 is a priori to Milton Friedman. Nation states can launch mortars and levy tariffs. We hope they don’t not have to kill people and break things but sometimes they have to and if so, we hope they abide by just war theory and just plunder theory.
Yes, that God grants the state authority to rule civilly does not mean He grants the state the right to wage unjust war or to interfere with a man creating and disposing wealth. That I oppose tyranny does not make me an anarchist.
I think you are conceding that God gave the state the right to wage just war under just war theory and just tariffs under just tariff theory. Therefore, you would concede that not all tariffs are created equal. Some are just, presumably like tariffing Nazi Germany during World War II, and some are not, like India today penalizing American goods and services as high as 250% which, according to Victor Davis Hanson, is current policy, not only by India on the United States but many countries on the United States, including China. Hanson argues that the Trump administration‘s tariffs are reciprocal in nature, not first strike/preemptive in nature. He compares our situation to Ukraine, which defends itself from invasion by Russia. Would Milton Freedman expect Ukraine to hammer out free trade agreements with Russia while Russia kills its people and steals its children? Or is the tariff part of a legitimate tool kit for the state projecting power in the form of self-defense?
Thus, not every tariff is a “dumb economic idea,” as the title of your essay suggests.
https://youtu.be/JrTBU7Nsdus?si=dgQwfkYEl5OMT8Fd