Mr. Scott Adams
Mr. Adams:
Commenting on Pres.-elect Trump’s threats to punitively tax American consumers who purchase imports from U.S. companies that offshore some or all of their production, Rep. Justin Amash (R-MI) Tweeted “American consumers are taxed even if no companies move. Tariff increases production costs & limits competition. This is basic economics.”
In response to Rep. Amash, you disagree, Tweeting “No, the whole point is that no company would move with that risk hanging over them. So no tax is triggered.”*
Rep. Amash is right and you are wrong. Although no formal tax collection is triggered if Mr. Trump’s threats prevent all offshoring, Trump’s tariff – by restricting competition – would artificially reduce outputs and raise prices. American consumers would pay unnecessarily higher prices, an outcome inseparable from the very purpose of the tariff. That consumers pay these extra, unnecessary amounts to domestic producers rather than to domestic customs agents is irrelevant: the tariff forces all consumers of these products to pay extra, unnecessary amounts to some small group of fellow Americans who, rather than earn these higher payments, extract them using threats of state coercion.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
