Here’s a letter to a correspondent from Virginia;
Mr. H__:
Thanks for sending me a link to Donald Trump’s announcement of his proposed “system of universal baseline tariffs on most foreign products that rewards domestic production while taxing foreign companies.” I can’t tell, however, if you think this proposal to be worthy or wacky. I hope the latter, because that’s just what it is.
To repeat for the umpteenth time, we ordinary Americans are made, not more prosperous, but poorer whenever government obstructs our access to economic outputs – which is just what tariffs do. Americans’ prosperity can no more be enhanced by “universal baseline tariffs” on goods, services, and inputs offered for sale in America by non-Americans than Virginians’ prosperity can be enhanced by universal baseline tariffs on goods, services, and inputs offered for sale in Virginia by non-Virginians.
That Trump apparently is blind to this reality is sufficient reason to dismiss him an economic ignoramus. But Trump triples-down on his ignorance by implying that his tariffs will tax only foreign companies and impose no costs on Americans.
Here’s the thing: If – as would not be the case, but as Trump wishes – his tariffs would impose no costs on Americans, then the prices of imports and of their domestic substitutes will remain unchanged. The result would be no protection of American producers from foreign competition. But if instead – as would be the case, and as Trump also wishes – his tariffs would protect American producers from foreign competition, then his tariffs would indeed tax Americans by artificially raising the prices of the goods they purchase. In this case, the tax would not fall, contrary to his ignorant implication, only on foreign companies.
It’s true that Trump is hardly the only economic ignoramus lusting after political power; the republic swarms with such pests. But the fact that the likes of Pres. Biden, Sen. Sanders, and Rep. Ocasio-Cortes are just as clueless as is Trump doesn’t reduce the unintentional hilarity of his recent pronouncement.
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
