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I. DON’T. KNOW.
Normally, when I don’t know about something, I try not to start a post about the subject. None of us knows everything about everything, and there is a reason why God invented the division of labor. Let people who know about how to do things do them.
But in this case, the REASONS why I don’t know whether Trump’s tariffs will help or hurt America are important, and I hope I can help clarify at least some of the reasons why people are lining up on different sides of the issue.
ARE TARIFFS GENERALLY GOOD ECONOMIC POLICY?
All other things being equal—not that they ever are—tariffs are terrible economic policy. In principle, putting tariffs on foreign goods throws sand into the gears of any economy because more trade is better than less, and all tariffs do ECONOMICALLY is add to the price of goods. Either consumers wind up buying less of what they want—a loss for them—or pay more for the same goods—a loss for them.
In an interview recorded yesterday, Hoover Senior Fellow Thomas Sowell criticizes the tariffs President Trump instituted earlier today. Watch the complete interview with Dr. Sowell on @UncKnowledge with Peter Robinson (@P_M_Robinson) on April 15th, 2025. pic.twitter.com/i0Ver1QIp4— Hoover Institution (@HooverInst) April 3, 2025
Imposing tariffs can make others retaliate—in fact, Trump says that he is retaliating for tariffs imposed on the US in many cases—which creates a «beggar thy neighbor» tit-for-tat that hurts everybody. More and more friction is introduced into the economy of the world, trade slows, and everybody gets poorer.
In principle, everybody plays by the same rules, imposing the lowest tax and trade barriers possible and maximizing trade (which, after all, is people exchanging goods that each other value more than the money they have in their pockets) makes everybody richer. You have wheat that I want; I have money you want. We exchange and are both better off.
Senator Rand Paul: «On many fronts, I’m a supporter of the president. On tariffs, I think it’s economically a fallacy to think it will help the country. Tariffs are a tax. This tariff will originate with the signature of one person. That’s not what our founding fathers wanted.» pic.twitter.com/HYOuORnL1G— Simon Ateba (@simonateba) April 3, 2025
So, no, tariffs in purely economic terms are a bad idea. It amounts to everybody increasing prices on everybody else. Investment goes down and costs for everybody go up.
ARE TARIFFS EVER A GOOD IDEA?
Absolutely. There may be some reasons why you may want less trade in some set of goods, or to subsidize domestic industry despite the economic costs of doing so. While industrial policies are generally a terrible idea for many reasons—government picking winners and losers is a recipe for corruption and self-dealing, harming consumers to favor friends or contributors, or channeling investments or research into suboptimal channels, there are times when the cost is worth it.
Maintaining a defense industrial base, for instance, is important. Ensuring that you don’t become reliant on adversaries, such as our reliance on China for some defense products, pharmaceuticals, or other vital goods.
