Here’s a letter to a reader of my blog:
Mr. B__:
Thanks for your e-mail.
You ask “wouldn’t it be better economically to encourage Americans to buy Chinese EVs subsidized by their government (assuming no US tariffs)? Would the loss of US automaking jobs be offset by consumers spending their savings on other US products creating jobs elsewhere?”
Yep.
To the extent that Beijing subsidizes the production of EVs in China, Beijing compels Chinese citizens to offer gifts to Americans. While I pity the Chinese people, who are made poorer by being forced to offer gifts to us Americans, the U.S. government, which also taxes its citizens to dispense subsidies to politically favored producers, has no legitimate grounds for preventing Americans from taking advantage of these gifts – gifts that unambiguously enrich us.
And, yes, the money that American consumers thereby save on EV purchases would indeed be spent on other outputs – or invested – in ways that would ‘create’ jobs elsewhere in the U.S.
It’s curious, isn’t it?, that among the people who roar most loudly in opposition to subsidized imports are people who proudly shout “put America first!” You’d think that everyone who admires Donald Trump’s alleged genius at re-arranging trade so that we Americans “win” at the expense of foreigners would be delighted at the wealth transferred to American consumers by foreign governments that subsidize their countries’ 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
