Here’s a follow-up note to a new correspondent.
Mr. L__:
Thanks for your follow-up email in response to this note.
You write that my “comparing tariffs to the destruction of household goods and business capital” is “laughable.” But you dismiss my comparison only with giggles and guffaws, never bothering to explain just why you find this comparison to be comically inept.
Suppose you plan to spend $200 on a case of wine imported from France. When you arrive at the wharf, you learn that a 33% tariff has just been imposed. With your $200 you will now get, not the 12 bottles of French wine that you expected, but only nine bottles. You are three bottles of wine poorer.
Now change the example slightly so that there’s no tariff on imported wine. In exchange for your $200 you get 12 bottles of French wine. But upon unloading your case of wine at home, uniformed government agents seize three of your bottles and fling them to the ground to shatter them. You are three bottles of wine poorer.
In what substantive way does this second example differ economically from the first? I see no economic difference.
In the second example, the government will inform you that if you instead buy American wine, none of it will be seized and shattered. Because you and other American wine drinkers obviously prefer not to have part of your wine collection seized and shattered, you’ll buy less non-American wine and more American wine. American vintners, seeing the demand for their product rise, will raise their prices. With your $200, even when buying American wine of similar quality as the French, you’ll get fewer than 12 bottles – maybe 11, maybe 10, maybe 9. Fewer. Your government has conscripted part of your income to enrich American wine growers – growers who, far from earning your patronage honestly, had that patronage stolen from you dishonestly through government action.
The same thing happens with tariffs. The 33% tariff destroys a quarter of the purchasing power of the $200 you intended to spend on French wine. When you and other wine drinkers adjust to minimize the destruction of your dollars’ purchasing power by shifting your demands to American wines, the prices of these wines will rise. With your $200 you’ll get less wine than you would get without the tariffs.
Tariffs effectively destroy economic goods no less surely than does physical destruction of those goods – a reality that explains why economists and other reasonable people find the economic case for protectionism to be laughable.
Wishing you and yours a Happy – and protectionism-free – 2026.
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
UPDATE: I changed the titled of this post. The phrase ‘protectionism is destructionism’ is the brainchild of Jon Murphy.
