Tariffs are Bad — Not Because Trump Is Good or Bad — But Because Tariffs Are Always Bad.
The Trump Administration levied tariffs on steel and aluminum last month through an executive order. Imported steel is subject to a 25 percent tariff and aluminum to a 10 percent tariff. A tariff is a tax on the American people. The money is paid for out of citizen’s pockets and does more harm to Americans than it does to their trading partners.
There are several arguments President Trump and his supporters use to defend the tariffs. Economist Walter Williams says that one of these arguments are that they help domestic steel and aluminum industries. Increasing the price of foreign steel and aluminum reduces the supply and makes it easier for domestic firms to compete. Williams then debunks this claim by arguing the increased profit of domestic firms comes at an aggregate cost to Americans. Artificially higher costs on steel and aluminum make the prices of other goods go up that use them. The argument that it helps steel and aluminum producers in the U.S. is true, but it ends up hurting the economy overall.
Another point that deserves rebutting is one made by Trump. NPR quoted Trump saying, “A strong steel and aluminum industry are vital to our national security.” Defense Secretary James Mattis said, “Military demand for steel and aluminum can be met with just 3 percent of domestic production.” The notion of autarky, that the U.S. needs to produce all of what it needs instead of trading, greatly limits the economy’s potential and as a result may limit future defense capabilities.
The New York Times reported that Trump also claims that shifts in trade policies are necessary to make countries like China engage in fair trading. However, there is no such thing as fair trade, only free trade. Free trade is the voluntary exchange of goods and services between people in different countries. It allows one region or firm’s comparative advantage to create more of something at a lower cost, benefiting everyone. Free trade produces mutual benefits to all parties involved. Trade isn’t a zero-sum game that has losers and winners. A great quote that summarizes this concept is one by sociologist Franz Oppenheimer , “The first method [of acquiring wealth] is by producing a good or a service and voluntarily exchanging that good for the product of somebody else,” aka: the free market. The other method being stealing taking someone else’s property.
The Trump Administration wants you to artificially pay more for certain goods. Cans of soda, construction, and countless other things we pay for everyday are going to be more expensive. Free trade is a part of capitalism. Trump’s campaign was full of protectionist rhetoric, so it isn’t surprising that he followed through with it. What is disheartening is the hypocrisy of the media and politicians. President Obama’s tariff on tires did not see the same scrutiny from the mainstream media as Trump’s tariffs have. On the flip side, some from the right-wing media have not been critical about the tariffs simply because they’re Trump’s. Many in the Republican Party who claim to be capitalists and conservatives have supported the tariffs as well. Trump’s tariffs are bad, not because Trump is good or bad, but because tariffs are always bad. Government interference in consensual interactions between people is wrong whether it’s by Republicans or Democrats.