The Modern 'Case' for Tariffs

Over at RealClear Markets this morning, I encountered a link to a blog post titled "Tariff Men."

This was quite an interesting read, but not for any sound argument in favor of tariffs. Rather, its interest lies in its being an excellent précis of the case Trump's acolytes and cheerleaders are making on behalf of the President -- who seems allergic to addressing the electorate as if we were adults but in fact just doesn't know what the hell he is talking about.

Perhaps the most striking things about the piece are (1) the complete absence of argument or explanation as to what tariffs are or why they are supposed to be good for the economy; and (2) a highly ... selective ... consideration of the history of tariffs in America that reminds me somewhat of a contemporary school of "analysis" of the historical record of the Lincoln Presidency.

The Founders used tariffs to avoid outrage over a (more obvious) tax? Whether or not they truly believed tariffs weren't taxes, that doesn't mean tariffs aren't taxes or that the Founders were right to do this.

Britain become great through protectionism? Really? Call me crazy, but that greatest of British exports, rule of law, applied to an entire empire that presumably didn't levy tariffs against itself, probably had a lot to do with its rise to prosperity. (See "dropping domestic barriers" below, but on a glocal scale.) Dropping tariffs against the rest of the world would be an extension of the same policy, and not some kind of bolt from the blue.

Say's Law? Never heard of it.

Trade as mutually beneficial? Isn't it obvious that people become wealthy by stealing crumbs from the destitute and building mansion, yachts, and private jets from them?

The piece dismisses the entire discipline of economics -- Today it is widely claimed that Trump's tariffs will lead to trade war and commercial ruin: the policy is decried as archaic mercantilism... -- but reveres the shallow arguments of a single school of that discipline:

McKinley's understanding of economics grew out of the American School of Political Economy: a school of thought which argued that measuring wages, prices, and production against each other was the best way to understand the health of an economy. With this in mind, the American School argues for intense protection around the walls of America's economy: tariffs prevent products made by low-wage workers from undercutting American products and workers. But the American School also counters left-wing hostility to capital by minimizing domestic barriers to commerce, allowing productivity and wages to rise faster than prices.

What's so magical about an international border that the same benefits that come from "minimizing domestic barriers to commerce" don't also accrue from minimizing international barriers to commerce with friendly nations?

I don't know, either, but I somehow doubt that Donald Trump -- who seems ready to exterminate Canadians, but also wants Canada as a state -- does, either.

Henry Hazlitt, whose Economics in One Lesson, deserves wide circulation, gives a tantalizing lead at the start of his chapter against tariffs:

From another point of view, free trade was considered as one aspect of the specialization of labor... But whatever led people to suppose that what was prudence in the conduct of every private family could be folly in that of a great kingdom? It was a whole network of fallacies, out of which mankind has still been unable to cut its way. And the chief of them was the central fallacy with which this book is concerned. It was that of considering merely the immediate effects of a tariff on special groups, and neglecting to consider its long-run effects on the whole community. [bold added]

See also the previous quote.

-- CAV