I get that subsidies are bad because the govt takes money from you but with a tariff the price of imports is higher and you buy locally.
Won't local producers use that extraa money and spend it at home rather than foreigners who spend it in their countries.
It may benefit the local competitors to the overseas product that is victim to the tariff, but only at the expense of the consumers who now must pay more for a good. Now consumers have less money to spend on other products and it just goes downhill from there.
By the way, you should read Hazlitts Economics in One Lesson. That's where I learned.
Why do you want to use the government to force people to pay more for an item?
"Anarchism misunderstands the real nature of man. It would be practicable only in a world of angels and saints" - Ludwig von Mises
Many local producers will have a much harder time exporting their products to the other country which will likely implement retaliatory tariffis.
Local consumers will have less to spend on other local producers' goods.
The only benefit will be to the local producer which the tariff is designed to protect.
Net loss for local society and a lose/lose proposition for countries involved.
You've had all night and day toConsider and prayYou've brought fire on my head andNow you must pay.
Babylon makes the rules where my people suffer
Poptech:Why do you want to use the government to force people to pay more for an item?
Why would you want to use government to force people to pay for undesired protection?
BA-ZING!
'It is difficult to imagine any normal person wishing to meet Marx for a third time.' - Alexander Gray, The Socialist Tradition
Laughing Man:Why would you want to use government to force people to pay for undesired protection?
Offtopic.
inquisitiveteenager: I get that subsidies are bad because the govt takes money from you but with a tariff the price of imports is higher and you buy locally. Won't local producers use that extraa money and spend it at home rather than foreigners who spend it in their countries.
Why should matter, to the sovereign consumer, where the goods came from? Tariffs infringe on his choice and decision making process artificially by limiting his options to what is being protected.
"La cuestión es siempre la misma: que el gobierno o el mercado. No hay tercera solución." -Ludwig von Mises
Poptech:Offtopic.
What can I say? I'm a radical, I strike at the root.
The point of a tariff is to increase the price of imported goods, in any given industry, to that of the domestic goods (without the tariff the domestic industry would contract and be replaced by more efficient foreign firms, leading to lower market prices). To illustrate the effects of trade tariffs I'll quickly go over the Bush steel tariff (30% constant tariff). Partial equilibrium analysis easily demonstrates both the negative and positive consequences of the tariff: The first effect is a reduction in consumer surplus: Price shifts from P*=x/ton to P2= x+T/ton (P* meaning equilibrium price, P2 means price after tariffs). The increase in price yields lower consumer surplus since consumers are paying more than they would have paid if the market was not disturbed by government interference. The second effect is an increase in producer surplus: An increase in the market price increases the profit margin for local firms unaffected by the trade barrier. The third effect is an increase in government revenues, as imports are taxed. The fourth and final effect is known as dead-weight losses: The trade barrier makes the steel industry larger than it should be, resulting in a misallocation of fops towards unwarranted economic activities, in this case the steel industry. The removal of the tariff would mean lower prices, higher consumer surpluses, cheaper production costs for the entire economy (since steel is needed for a lot of shit), and more capital and labor opened up to other, actually profitable sectors.
The costs clearly outweigh the benefits.
But foreigners will get dollars for sale in the USA and they have to spend them on something. They have to import something in return from the USA. So there is also an exporter that is suffering from the tariff.
azazel:But foreigners will get dollars for sale in the USA and they have to spend them on something. They have to import something in return from the USA. So there is also an exporter that is suffering from the tariff.
Exactly. I like what Milton Friedman had to say about imports:
"What would the people who sold us goods do with the money? They'd get dollars. What would they do with the dollars? Eat them?!"
Aren't dollars used in several countries now? So the money wouldn't necessarily be spent back in the US. I think that's kind of a weak argument.
The killer quotes that won me over are:
"Another fallacy seldom contradicted is that exports are good, imports bad. The truth is very different. We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports or, equivalently, from exporting as little as possible to pay for its imports. The misleading terminology we use reflects these erroneous ideas. "Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade."
The misleading terminology we use reflects these erroneous ideas. "Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade."
[Milton Friedman; The Case for Free Trade]
2.
"International protectionism, while obviously less destructive than a policy of interpersonal or inter-regional protectionism, would result in precisely the same effect and constitute a sure recipe for America’s further economic decline. To be sure, some American jobs and industries would be saved, but such savings would come at a price. The standard of living and the real income of the American consumers of foreign products would be forcibly reduced. The cost to all U.S. producers who employ the protected industry’s products as their own input factors would be raised, and they would be rendered internationally less competitive. Moreover, what could foreigners do with the money they earned from their U.S. imports? They could either buy American goods, or they could leave it here and invest it, and if their imports were stopped or reduced, they would buy fewer American goods or invest smaller amounts. Hence, as a result of saving a few inefficient American jobs, a far greater number of efficient American jobs would be destroyed or prevented from coming into existence."
[Hans-Hermann Hoppe; Democracy: The God That Failed, pp. 153-154]
3.
and the reductio ad absurdum, which I find hilarious to read:
"Just as different wage rates exist between the United States and Mexico, Haiti, or China, for instance, such differences also exist between New York and Alabama, or between Manhattan, the Bronx, and Harlem. Thus, if it were true that international protectionism could make an entire nation prosperous and strong, it must also be true that interregional and interlocal protectionism could make regions and localities prosperous and strong. In fact, one may even go one step further. If the protectionist argument were right, it would amount to an indictment of all trade and a defense of the thesis that everyone would be the most prosperous and strongest if he never traded with anyone else and remained in self-sufficient isolation. Certainly, in this case no one would ever lose his job, and unemployment due to “unfair” competition would be reduced to zero. In thus deducing the ultimate implication of the protectionist argument, its complete absurdity is revealed, for such a “full-employment society” would not be prosperous and strong; it would be composed of people who, despite working from dawn to dusk, would be condemned to poverty and destitution or death from starvation."
Irish Liberty Forum
Having some sort of barriers (say 10% import duties) to trade makes the range of products produced in each country more diverse because the chances of foreign companies being able to dominate your internal markets is reduced. In many ways this is bad because it reduces economy of scale and hampers the competition process. However, reduced trade would reduce the world's susceptibility to global crashes like the one we're having now. If countries are relatively less interdependent then a crash in one country is less likely to induce a crash in others.
In general the more free and cheap trade is between countries the more homogeneous the worlds goods will become. The whole world will drive Japanese cars, use American microprocessors, Chinese toys etc etc (as is largely seen today). But with some measure of resistance to trade than you may see Canadians driving Canadian cars and British driving British cars (not so largely seen today). Whether you think homogeneity is a good or a bad thing is for you to decide, but I think homogeneity and the ease of trade are inextricably linked.
mickanomics: Having some sort of barriers (say 10% import duties) to trade makes the range of products produced in each country more diverse because the chances of foreign companies being able to dominate your internal markets is reduced. In many ways this is bad because it reduces economy of scale and hampers the competition process. However, reduced trade would reduce the world's susceptibility to global crashes like the one we're having now. If countries are relatively less interdependent then a crash in one country is less likely to induce a crash in others. In general the more free and cheap trade is between countries the more homogeneous the worlds goods will become. The whole world will drive Japanese cars, use American microprocessors, Chinese toys etc etc (as is largely seen today). But with some measure of resistance to trade than you may see Canadians driving Canadian cars and British driving British cars (not so largely seen today). Whether you think homogeneity is a good or a bad thing is for you to decide, but I think homogeneity and the ease of trade are inextricably linked.
Nonsense, reducing international trade cycle volatility isn't difficult at all, just stop inflating. International trade, specialization, and economies of scale allow for greater production efficiency, and technological progression (which is the single greatest determinant of growth). Trade barriers always lead to reductions in consumer surplus' and dead-weight losses. The whole world doesn't drive Japanese cars (as if Japanese cars were homogeneous themselves), they drive German, Swedish, Italian, American, Japanese, Korean cars ect, ect.
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