Why do higher trade barriers result in lower quality? For the same reason DIY haircuts make for cringeworthy yearbook photos and DIY repairs can morph into costly nightmares: Quality suffers when we substitute self-reliance and hubris for the genuine expertise of others.
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Protectionists may object that the quality of many domestic goods has improved over time. American beer has made great strides toward catching up to European brew. Fair enough. But their argument proves too much. Most brewmasters will tell you this improvement was spurred by foreign competition, not protectionist pampering. Foreign brewers pushed Americans to raise their game. This highlights another crucial aspect of the quality argument. Trade doesn’t merely give us access to top-notch foreign goods. It ensures the quality of our domestic goods keeps improving.
In a nutshell, protectionists brag of strength, but they sap it. True strength is the power to make world-class goods. Tariffs snuff that out.
The key to a strong economy is in letting markets, not politicians, determine where excellence lies. Free trade gives us access to the best the world has to offer. Protectionism forces us to settle for less. In a globally competitive economy, that’s a luxury no nation can afford.
Here’s the abstract of an important new paper by Alex Brill, Haroon Cheema, and Deborah Williams:
Tariffs on pharmaceuticals are under consideration following a Section 232 investigation into imports of medicines and active pharmaceutical ingredients (APIs). With US imports in 2024 totaling $210.8 billion in finished medicines and $36.2 billion in APIs, the threat of tariffs puts nearly $250 billion in trade at risk. Tariffs could raise list or net prices for pharmaceuticals, drive up insurance premiums, increase the risk of drug shortages, elevate costs for US producers using imported APIs, and reduce the competitiveness of US exports of finished drugs.
Phil Magness and Marc Wheat make a strong case that “the Trump administration’s tariff ‘Plan B’ has an ominous history.” Here’s their conclusion:
President Trump likes tariffs and has for a long time, advocating them as early as the 1980s. To him and his advisers, IEEPA is a tool for implementing his preferred policy. If that tool breaks, he’ll look for another. One might have hoped that Smoot–Hawley’s inauspicious history would preclude the White House from turning to it, but apparently that’s not the case.
The president’s desire to implement tariffs is detached from his legal authority to do so, as well as from the harm they are causing. The American economy is already slowing, and our allies are deepening their commercial relationships with our enemies. Whether imposed under IEEPA, Smoot–Hawley, or some other statute, tariffs will continue to hurt Americans until Congress or the courts intervene and enforce constitutional limitations on presidential power.
Even a small rate change on chip tariffs could have huge consequences for domestic producers. The Chamber of Commerce warns that a 1 percent increase in tariffs on chips and semiconductor manufacturing equipment will increase the construction costs of all announced domestic semiconductor fabrication plants (valued at $540 billion) by as much as $3.5 billion. A 100 percent rate increase, then, could increase construction costs for these projects by $350 billion. Moreover, “additional costs will reduce demand for end market products [and] reduce investments in semiconductor R&D,” diminishing American semiconductor dominance instead of enhancing it. These estimates are found in the Chamber’s public comment to the Commerce Department, in response to the agency’s Section 232 investigation into the national security effects of imported semiconductors, manufacturing equipment, and downstream products.
“Small Businesses Wither Under Trump’s Tariffs: ‘It’s Hard to Breathe’.” A slice:
President Trump’s tariffs are straining the backbone of the United States economy.
While many larger companies have integrated soaring levies that kicked in last month into their businesses without raising prices for customers, a growing number of smaller businesses are confronting a make-or-break moment. Many small businesses lacked the funds or storage capacity to stockpile goods before Mr. Trump’s tariffs kicked in. They have been reluctant to lift prices because they do not want to drive away customers.
That has made some particularly vulnerable to the recent price shocks, leaving them with deteriorating profit margins and no easy choices.
Ge Bai sets the record straight about Obamacare subsidies. A slice:
Letting the subsidies go away merely restores the original ObamaCare premium-support structure. That preserves access to subsidies for low-income populations, who already comprise 93% of the 24 million who get health insurance through the ObamaCare exchanges. The expiration will affect roughly 1.6 million current enrollees. These are the people with incomes above 400% of the federal poverty level who have been receiving subsidies that cap their premium contributions at 8.5% of income. A family of four in Arizona making $600,000, a married couple in West Virginia making $580,000, and a single individual in Vermont making $180,000 all qualify for subsidies.
Simply put, since 2021, Congress has been bribing higher-income Americans to purchase expensive ObamaCare plans by hiding the plans’ true price tags using taxpayer dollars. Premiums have increased by nearly 80% since 2014 and more than doubled since 2011. They are projected to rise another 15% to 20% next year. Despite record taxpayer spending on premium subsidies—exceeding $130 billion annually—enrollees still pay average deductibles of $5,000 and out-of-pocket maximums of $21,000 while 1 in 5 of their medical claims are denied. Without Covid-era premium subsidies, these plans would hold little appeal to consumers.
First, Miran treats protectionism and state-directed credit as if they were benign “savings” that somehow push r* lower. Calling tariffs a virtue because they raise federal revenue and might shrink the deficit is fiscal alchemy. Tariffs are distortionary taxes: they raise domestic prices, misallocate capital and labor, and invite retaliation. To present them as a clean increase in “national saving” is to ignore the growth and supply-chain damage they impose. Likewise, labeling $900 billion of government-negotiated foreign loan guarantees as an “exogenous increase in credit supply” is, at best, bizarre. More bizarre still is Miran’s comfort with government credit allocation. These are poor substitutes for market finance and price signals, not reasons to pull the Fed’s lever.
Jim Bovard is rightly critical of Henry David Thoreau’s ignorance-rooted contempt for commerce. A slice:
Thoreau’s Original Sin is his contempt for voluntary exchange among private citizens. Thoreau proclaimed that “trade curses everything it handles.” Thoreau talked as if there was a spiritual calculus that made society poorer every time that two parties made a mutually profitable agreement.
Except, of course, when Thoreau was the one profiting. Thoreau boasted that he grew seven miles of rows of beans at Walden. His memoir would have been more candid if he added a postscript to his jeremiad: “Trade is a great evil and… hey buddy, ya wanna buy some beans?” Thoreau sold his surplus beans and bought rice, pork, molasses, apples, and farming supplies. Do people lose part of their soul when they swap beans for bacon or what?
