Bastiat’s broken window fallacy wasn’t originally about tariffs, but it could have been. The logic is identical: Whether breaking windows or blocking imports, the visible gains in one sector come at the expense of unseen losses elsewhere. In the former case, resources are diverted towards less desirable uses (repairing windows). In the latter, they are diverted to less productive ones.
Should the goal of U.S. trade policy be to raise an army of millions of Americans to assemble iPhones, as Commerce Secretary Howard Lutnick suggested? Not if it comes at the expense of better jobs — for example, designing iPhones. If a $25,000 assembly job displaces a $125,000 design job, Americans aren’t $25,000 richer — we’re $100,000 poorer, and plus we will be stuck paying much higher prices for iPhones. Dave Chappelle had it right: Americans want to buy iPhones, not make them.
Today’s protectionists echo this fallacy with uncanny precision. The fact that trade gets such a bad rap in American politics today is a sad testimony to this myth’s resilience. Tariffs are a clever way for politicians to smash economic windows, then brag about the jobs they create to fix them.
President Trump’s tariffs are one of the broadest claims of executive power in American history, taxing imports from anywhere on his personal whim. The problem is he doesn’t have that power under the law or the Constitution, as the Court of Appeals for the Federal Circuit ruled late Friday in V.O.S. Selections v. U.S.
This is a crucial moment for the Constitution’s separation of powers. A 7-4 majority upheld a lower-court decision striking down the tariffs that Mr. Trump imposed under the 1977 International Emergency Economic Powers Act (IEEPA). In February he invoked the law to slap taxes on imports from Mexico, Canada and China, supposedly to address a fentanyl emergency. He later declared the U.S. trade deficit an emergency to justify tariffs on the rest of the world.
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Mr. Trump denounced the decision and blamed partisan judges, but judges nominated by Presidents of both parties were on opposite sides of the ruling. The court also left the tariffs in place for now and told the lower court to reconsider its universal injunction under the terms the Supreme Court recently laid out Trump v. CASA. But on a policy as consequential as these tariffs, the ruling can’t merely apply to the plaintiffs in this case alone.
Mr. Trump is bloody-minded on tariffs, and he’ll use whatever other statutes he can. He recently expanded his use of Section 232 national-security power to impose tariffs on “derivative” steel and aluminum products, including bulldozers, furniture, railcars, appliances, air-conditioning parts, butter knives, spray deodorants and strollers. Who knew that baby buggies were a threat to the homeland?
Johan Norberg’s Hayek Book Prize lecture – delivered in Manhattan this past June – is superb.
Here’s Timothy Taylor on Nathan Goldschlag’s Q&A with John Haltiwanger about economic statistics.
National Review‘s Andrew Stuttaford understandably celebrates Buc-ees.
