Thursday, August 22, 2019

What Purpose Tariffs?

If the United States makes blivets, and some other nation makes blivets and is shipping them to this country at a price lower then the ones we make here, then import tariffs on blivets make very good sense. They protect the American makers of blivets by making foreign blivets less competitive with our own and discouraging the foreign country from exporting them to this country.

But when no one in America makes widgets, putting import tariffs on widgets merely results in the American consumer paying a higher price for widgets. The country making the widgets and shipping them to this country could not care less. In this instance, tariffs do not “punish the exporting country.”

Apparently, someone in the White House does not understand that simple principle, because, while some of the things he is putting tariffs on are produced in this country, he is also slapping tariffs on things that we do not produce in this country. In many cases we could produce them, and in some cases we used to produce them, but presently we don’t produce them.

1 comment:

The Arthurian said...

"... he is also slapping tariffs on things that we do not produce in this country. In many cases we could produce them, and in some cases we used to produce them, but presently we don’t produce them."

One could see these tariffs as an attempt to adjust prices so that it becomes profitable to resume domestic production of such things: to increase the profitability of producing them in the US, relative to producing them elsewhere.

I'm not defending tariffs: Changing the "relative profitability" changes the incentive to produce domestically. But it does not necessarily address the root cause. It does not necessarily solve the problem. And I don't think it does.

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