Here’s a letter to National Review:
Editor:
Michael Brendan Dougherty suggests that we free traders are hidebound ideologues blind to the happy fact that tariffs and tariff threats are not just about economics, but can be used as “tools” to pressure other governments to do our bidding – such as getting Mexico to step up its effort to stem emigration from that country (“Re-Familiarizing Ourselves with Tariffs,” February 3). Hooray for us. (I’m curious, though: Has anyone bothered to tally the costs that this ‘victory’ will almost certainly impose on us Americans in the form of increased uncertainty for investors searching for opportunities in both Mexico and the U.S.?)
The fact is, while every serious free trader is aware that tariffs have multiple possible uses, we spend the bulk of our efforts debunking the naïve economic case for tariffs only because protectionists spend the bulk of their time peddling this case.
Review Trump’s pronouncements on trade going back decades. Review as well the core case for tariffs made by the likes of Oren Cass, Robert Lighthizer, Michael Lind, and Peter Navarro. Although these and other protectionists conveniently latch on to whatever excuses for tariffs might seem to address the concerns du jour, their foundational case for tariffs is economic: they insist that – through trade – foreigners ‘steal’ our jobs, lower our wages, saddle us with “trade deficits,” and, of course, “hollow out” our industries. These assertions are the core and constant foundational justifications offered for protective tariffs.
Yet although repeated ad nauseam, each of these protectionist assertions is demonstrably incorrect. Employment today is at an all-time high with the unemployment rate being quite low. Real wages are at an all-time high.* U.S. trade deficits – being net inflows of capital into America – are a boon rather than a burden. And America’s industrial capacity is also at an all-time high, while the real value of manufacturing output as a share of GDP held steady from 1947 through 2015 in a narrow range of 13.6% to 11.3%. Today it’s a tad bit lower, at about 10.0%, but hardly evidence of a “hollowing out.”
Let Trump stop complaining about America’s trade deficit with this or that country – let Oren Cass cease insisting that free trade causes America to produce suboptimally – let Robert Lighthizer and Michael Lind halt their baseless assertions that 19th-century American industrialization was fueled by protective tariffs – let Peter Navarro stop declaring that imports (of which more than half are inputs used by businesses in America) don’t contribute to GDP. Indeed, let protectionists abandon their ages-old relentlessly repeated argument that Americans’ access to low-cost goods from abroad threatens Americans’ prosperity, and we free traders will gladly spend a larger portion of our time discussing tariffs as strategic “tools” for use by clever practitioners of “economic statecraft.” Until then, because the foundational case for protectionism remains economic, we free traders will continue to do what we must, namely, expose the utter folly of this foundational case for protectionism.
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* Phil Gramm, Robert Ekelund, and John Early, The Myth of American Inequality (Lanham, MD: Rowman & Littlefield, 2022), especially pages 83-89.
