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Vernon Smith to Donald Trump: Your Steel Tariffs Won’t Enrich Americans

In today’s Wall Street Journal my emeritus GMU Econ colleague Vernon Smith applies a lesson from Bush II’s 2002 punitive taxes on Americans who buy steel to Trump’s recently announced punitive taxes on Americans who buy steel.  A slice:

Mr. Trump, your proposal can’t work. It’s bad economics and bad politics. A steel tariff will do great harm to the U.S. economy.

The White House event that Vernon refers to occurred in November 2002.  It was in honor of that year’s American Nobel-prize winners, one of whom was Vernon.  When I shared Vernon’s WSJ essay earlier today on Facebook, I did so with this note:

My emeritus colleague Vernon L. Smith offers a sound lesson about tariffs. By the way, I was among the George Mason University colleagues who attended the White House event that Vernon mentions here. And so I boast: with the GMU contingent assembled for a group photo with Bush, I was standing immediately behind Vernon when Bush said in a friendly way about Vernon (as I recollect it) that Vernon gave him “his two cents on the steel tariffs.” I immediately said, loudly enough for Vernon, Bush, and the whole group to hear, “Just two cents, Vernon?!” Bush turned to me, smiled, and said to the whole group, “Well, it was more like a dollar’s worth!” Go Vernon!

Vernon commented on my note:

Don, thanks for the correction. Yes, I remember that he used the “two cents” phrase, not “hard time.”

Of course, the substance of the lesson and the relevance of Vernon’s WSJ essay are unaffected by the particular term that Bush used on that long-ago day.  And that core relevant lesson is, to summarize, this: punitive taxes on Americans who purchase imports are harmful to Americans.