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“We’ll Injure Ourselves If You Injure Yourself!”

Here’s a letter to the New York Times:

Josh Bivens errs when he asserts that Trump’s tariffs may “do some good” because they provide “temporary relief for specific sectors (steel and aluminum) facing a specific problem (global excess production capacity, propped up by foreign governmental subsidies)” (“Don’t Worry About Trump’s Tariffs,” March 5).

To the extent that foreign steel-making capacity is the result of foreign-government subsidies, that capacity isn’t excessive from Americans’ perspective.  Instead, it’s foreign-governments’ way of giving to us Americans gifts of steel and aluminum – gifts that we should welcome just as we welcome the sun’s gift to us of light and warmth.  Nor is there any reason to believe that that steel-making capacity is temporary.  The political forces and economic misunderstanding that propel governments to subsidize industries are notoriously tenacious.

But if this alleged excess capacity is indeed temporary, steel and aluminum companies should turn to private financial markets.  Supplying financing to weather passing commercial storms is among the core roles of financial markets.  By taxing American buyers of metals in order to relieve American producers of the need to seek and pay for such financing, our government does exactly what it deplores other governments doing – namely, subsidizing the operations of their politically powerful domestic producers.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030