Here’s a letter to The American Mind:
Editor:
Dan McCarthy writes that “tariffs create opportunities for new domestic competition” (“What Trump Should Do If He Wins,” Oct. 23).
Nonsense.
Tariffs protect particular domestic producers from competition – that’s why the policy is called “protectionism.” By artificially protecting particular producers from competition, the rise in the prices those producers charge might well incite new firms to enter this domestic market, which must be what Mr. McCarthy means by “opportunities for new domestic competition.” But all resources and capital drawn into protected industries by tariffs are necessarily drawn out of other domestic industries. Among the results in these contracting industries are lower outputs and higher prices, which are precisely the baneful consequences that economic competition, when allowed to operate, prevents.
This outcome, however, isn’t a zero-sum expansion of protected industries and contraction of others. The outcome is a negative-sum expansion of industries at which domestic workers and capital have a comparative disadvantage and contraction of industries at which these workers and capital have a comparative advantage. Protective tariffs stifle, not stimulate, economic and real-wage growth by obstructing the competitive forces that alone ensure that workers and capital are used in their most productive ways.
It gets worse. The more ready is government to dispense protective tariffs the less ready are businesses to compete for customers by improving their outputs and enhancing the efficiency of their operations. Without protective tariffs, businesses engage in healthy and honest competition for the favor of investors and consumers who put their own resources on the line. With protective tariffs, businesses engage in wasteful and cronyist competition for the favor of politicians and bureaucrats who put other people’s resources on the line. In short, the chief “opportunities for new domestic competition” created by tariffs are opportunities to lobby government officials for special privileges that come at the greater expense of the general public.
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
