In the tangled web of economics, a rare consensus emerges: tariffs burden consumers and benefit only politicians, asserts Daniel Freeman. While economists rarely align, they rally against tariffs—taxes levied on imports. This united front highlights how tariffs increase costs for both consumers and domestic producers reliant on foreign inputs, divert investments from productive sectors, and hinder economic specialisation, stunting growth.
Despite this clarity, the United States, under President Trump, seems to swim against the tide, imposing tariffs on various goods, including a substantial 25 per cent on cars from the UK. Trump justifies this by arguing that decades of reduced tariffs led to a weakened manufacturing base, as Americans favour more affordable, superior foreign goods, leading to a trade deficit which he frames as detrimental.
However, this perspective overlooks the positive outcomes of increased imports: while manufacturing amidst richer nations like the US has risen, so too has growth and employment in higher-value sectors. The notion that running a trade deficit equates to exploitation is fundamentally flawed; it’s akin to lamenting the money spent at a favourite local takeaway without reciprocal purchasing.
Politicians like Trump may champion tariffs out of nostalgia for the past, reminiscent of the high tariffs of the Gilded Age. However, evidence suggests industrialisation thrived independently of such economic barriers. The allure of tariffs also lies in their ability to cast politicians as champions of certain industries, often at a hidden cost to society. For instance, Trump’s washing machine tariffs ostensibly created jobs, yet the hidden reality was each new role cost consumers over $800,000 annually in inflated prices.
Ultimately, tariffs foster a dependency on state intervention, potentially solidifying political support while obscuring the true economic toll on consumers. Freeman aptly concludes that political claims of foreign blame distract from the reality that trade is mutually beneficial, and when it is stifled, everyone pays the price.
Tariffs serve only political interests by burdening consumers and stifling economic growth. Economists across the board oppose them, highlighting how tariffs raise costs and diminish trade benefits, as seen in the current US policy under Trump. While this may appeal to nostalgia for past protectionism, the evidence shows higher imports often lead to economic growth and new opportunities. The true costs of tariffs underscore their inefficacy, showing that trade enriches all involved, not just imposed industries.
In summary, tariffs impose a heavy burden on consumers while offering little benefit beyond political posturing. The consensus among economists underscores the negative impacts of tariffs on both industry and the economy at large. Despite the current wave of protectionist policies, evidence shows that free trade yields greater wealth for all stakeholders. Ultimately, understanding the real costs of tariffs can help consumers navigate the complexities of trade policy and its implications.
Original Source: www.cityam.com
