Tweet [1]
Here’s a letter to a new correspondent, in response (I believe) to this post [2]:
Mr. Van Valkenburg:
You ask: “Forget whether Pres. Trump’s tariffs are optimal or not, isn’t he right to crow about the revenues these tariffs bring in from foreigners?”
No.
First, whatever is the dollar amount of U.S. tariff revenues paid by foreigners, this amount must be set against the resulting welfare losses to American consumers. These losses come in the form of paying unnecessarily higher prices, and in no longer being able to afford to buy as many units of the protected goods as were bought before the tariffs were imposed. Only under the most unrealistic of circumstances will the amounts paid by foreigners exceed these welfare losses to fellow citizens.
Second, Trump’s crowing about his tariffs extracting greater payments to the U.S. treasury from foreigners reveals the man’s deep confusion about trade. Foreigners ultimately pay us with their exports. Yet Trump believes that we Americans are harmed by foreigners exporting more to us, especially if their exports to us increase by more than do our exports to them. And so Trump’s crowing about how his tariffs extract lots of revenues – that is, extra payments – from foreigners is nearly impossible to square with his incessantly expressed wish for American imports to fall relative to American exports.
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