My previous post explained why the popular view of trade and the effects of tariffs is wrong. It did not explain why and in what sense tariffs make the country that imposes them poorer or what, if any, arguments for tariffs might survive the realization that a tariff reduces exports as well as imports and that the trade deficit is equal to the net inflow of capital, survive, more generally, a correct understanding of the relevant economics.1 The easiest way of seeing why our tariffs make us poorer is to think of trade as a technology for producing things. One way of producing cars is by building them in Detroit, another is by growing corn in Iowa, putting it on a ship, sending the ship into the Pacific to come back with cars on it. Doing that is profitable only if it costs less, in US resources, to produce cars by trade than by building them. An auto tariff taxes the lower cost technology for building cars in order to make us use the higher cost technology instead. We are getting...
learn more
