TARIFFS ARE SELF-IMPOSED SANCTIONS: We restrict trade to punish our enemies. Why would we do the same to ourselves?

Author:Mangu-Ward, Katherine
Position::FUTURE
 
FREE EXCERPT

SOMETIMES, WHEN THE leaders of a foreign country do something very naughty, the other nations of the world get together and punish them. Assuming bombing isn't on the menu, a popular way to administer a political spanking is to dramatically curtail the export of certain goods to the troublemakers. The thinking is that if you want your enemies to suffer, you should deny them the incredible gains in productivity and prosperity made possible by comparative advantage and division of labor operating on the global scale.

In other words, the penalty for behavior beyond the political pale--such as the development of a new nuclear arsenal, the use of chemical weapons, genocide, or widespread nationalization of industry--is to be cut off from trade. Slowing or eliminating the flow of cheap foreign raw materials, manufacturing equipment, and finished goods makes it harder and more expensive for a country's domestic industries to function.

In Cuba, for example, the U.S. sought for decades to inspire homegrown rebellion against pro-Soviet Communism by artificially imposing a shortage of basic supplies and creature comforts. The same is true in Iran, where the U.S., along with other nations, has imposed various sanctions since the revolution in 1979--alternately holding out the possible future lifting of those restrictions as a carrot in negotiations over the country's nuclear program, and wielding tougher injunctions as a stick. In Venezuela, when a belligerent authoritarian socialist took power, the world moved swiftly to limit commercial intercourse with that nation.

This strategy goes all the way back to Thomas Jefferson, who presided over the Embargo of 1807, which prohibited U.S. ships from trading in foreign ports in an effort to punish the British and French for their bad habit of grabbing Americans off civilian vessels and impressing them into Europe's understaffed wartime navies.

HOW ODD, THEN, that protectionists seek to create the same conditions at home--artificial scarcity or elevated prices for certain imported goods--as a way to stimulate the domestic economy and punish our economic enemies. President Donald Trump and his anti-trade allies in the administration and on Capitol Hill are using the very same weapon they have been brandishing at Iran and Cuba to shoot ourselves in the foot when it comes to China.

Trump kicked off our current trade war in early 2018 by imposing tariffs on washing machines and solar panels. While the sanctions...

To continue reading

FREE SIGN UP