Ok was reading a post somewhere else and came across someone saying how trump likes tariffs too much, which is not the first time i have heard tariffs frowned upon. I have always been of the opposite opinion and I guess would also ‘like tariffs too much’ so please enlighten me as to why they are bad.
My view:
I like to visualize the flow of wealth and whether wealth is flowing in to or out of an area. When I researched Fredrick the Great, he had become ‘the great’ thru making Prussia wealthy, and he had done this by freeing up and empowering local producers while limiting… thru tariffs… goods externally produced. This makes total sense to me. Prussian producers then pull wealth in while foreign producers no longer pull wealth out.
Another parallel is when developing countries have farmers that cannot produce goods cheaply enough to compete with the oversubsidized foreign goods flooding their market and, because their government does not tariff up the prices of the foreign goods, the locals get thrown in to poverty. These two things have always, to me, implied the role of tariffs is to prevent wealth from being drained out of an area and, as a byproduct, divert business and thus success inward instead. Because this helps local prosperity, I, I guess similarly to Trump (?), have historically viewed tariffs as generally a ‘good’ tool.
So please, explain where I’m wrong, if I am, and why tariffs would be bad. thank you
Good answers here, but another issue with generalized tarrifs is that if the business already exists in America the increased price of the foreign good gives the American business the means to raise their price to be closer to the now more expensive foreign good.
If China sells a shirt for $10 and now it’s $20, but US company sold their shirt at $14 they can now safely raise the price of their shirts to $18 and still be the “cheaper” option.
Exactly. EV tariffs give US EV manufacturers more room to raise prices. The same is true for subsidies.
That sounds good for US companies, but then other countries raise their tariffs on US goods to compensate, so consumers both inside and outside the US end up paying more.
You are forgetting that other countries respond with tariffs of their own. Ultimately, the outcome balances out, just with higher prices for everyone. Local producers that rely on exports lose while those that sell locally win - as long as they don’t rely on imports for raw materials.
Consumers lose, especially on stuff that will never be produced locally, or rules on raw materials that can’t be sourced locally.
The US imports everything. Food, clothes, all kinds of basic goods. We shifted from a manufacturing economy a long time ago.
Tariffs come into play when goods enter the country. They don’t exist until then. So if you put a tariff in place, it’s the local consumers who pay them. This drives prices up.
Nobody wants tariffs imposed on them, because it means their exports won’t be bought as much. But what happens when there’s essentially no competition from the importing country? The people suffer. That’s it.
Tariffs are a brute force tool to attempt to bully another country into doing what you want, but they cut off your nose to spite your face.
In general, incentivizing local production is good for many reasons, like jobs and the environment. It’s also one of the (not the only!) reason Switzerland is so wealthy.
I think the problem is that you have to transition and not just impose it immediately. US produced goods often aren’t currently affordable to the average American. Make foreign goods unaffordable through tariffs too, and many people will be between a rock and a hard place.
It’s also terrible for international relationships to basically cut economic ties at such short notice.
An alternative would be subsidies for small businesses rather than huge global ones, and for sustainable local farming.
Just my two cents as a European who tried to keep up.
Instead, america gives multiple massive subsidies to industrial farmers growing corn for oil additives and cow feed and gives next to nothing to small famers growing food for human consumption.
And they give business relief and tax breaks to multi billion dollar mega corporations and proportionally much much less to small businesses.
many people will be between a rock and a hard place.
And incomes tend to lag price increases by quite a bit, so the average consumer gets screwed in the meantime. Assuming tariffs are offset by increased pay (due to increased revenue), it shouldn’t matter a ton longer term, but the initial price shock will have a ripple effect across the economy as people struggle to keep up.
You’re correct, tariffs can protect (as in protectionism) the local economy. The only downside is to consumers, as they no longer have the possibility to buy cheaper foreign goods.
But what if there is no local production for the goods being tariffed (not sure that’s a word)? The government collects a bit of money and the price rises for two reasons: to pass the tariff to the consumer and because of the increased rarity/scarcity, as foreign traders will tend to sell their goods elsewhere.
Now I’m no expert, but I’m pretty sure that a lot of stuff is no longer locally produced in the US. Tariffs could lead (in the long term) to a re-industrialisation of the country, creating jobs, reducing pollution (reduced cargo transport, better regulations if Trump doesn’t gut them), etc. But in the short term, it will be price rise galore.
