[E]ven when a $1 reduction in imports doesn’t lead to a $1 reduction in exports, as is often the case when there are no or few restrictions on international capital flows, the basic symmetry nevertheless holds: Artificial barriers to imports inevitably create artificial barriers to exports and to inflows of foreign capital. Concretely, this means that if the United States raises tariffs, some US firms and their workers will pay a price as the demand for their outputs will fall. Capital and labor in the United States will shift from industries in which Americans have a comparative advantage to less productive ones in which Americans have a comparative disadvantage. And this reallocation of US resources will occur regardless of whether foreign countries respond to US tariffs by retaliating against US exports.
DBx: Yes.
NatCons and other protectionists will respond with sneering assertions that ‘elite’ intellectuals don’t know what they’re talking about and are out of touch with reality. These protectionists mistake their uninformed, unreflective, and superficial impressions of trade – impressions mixed with fantasies – for knowledge of how trade works. Some of these protectionists will even quote Adam Smith, David Ricardo, or Alfred Marshall (selectively, of course) to create the false impression that these protectionists are informed – indeed, more informed (in their telling) than are the “neoliberal” or “market fundamentalist” economists who (again in the protectionists’ telling) are driven by their study of economic theory and history to have “blind faith” in free trade.
This accusation by protectionists is akin to a witch doctor contemptuously dismissing the counsel of an experienced physician – a physician with an MD from the Johns Hopkins University School of Medicine – by calling this physician a faith healer. “Ignore the MD,” the witch doctor advises the patient, “he’s blinded by dogma. Pay attention instead to me for I’m the one with true and deep knowledge of how to improve your health.”
