Milton Friedman and Thomas Sowell agree: Tariffs are a really bad idea
Why couldn’t Donald Trump ignore his campaign promises like a normal president?
A painful economy is growing only more painful because Trump has it in his head for years that tariffs are a good idea. They’re not.
Various tariffs have been proposed, paused, implemented and worsened, all seemingly on a whim. It’s impossible for businesses to prepare, and as a result major stock indexes tanked in recent weeks. The latest jobs numbers were slightly underwhelming, while unemployment is on the rise, sparking fears that the labor market is softening. The Federal Reserve Bank of Atlanta is expecting the economy to shrink.
The only economic bright spot is that inflation eased to 2.8%, but that might not last long as tariffs on foreign imports raise prices on American consumers.
Trump is convinced that gouging, or threatening to gouge, American consumers is going to stop fentanyl from coming into the country and transform the U.S. into a global leader in manufacturing – but the fact that America is already second on that list only points to how pointless this strategy is. Also, the president has broader authority to take action against drug trafficking than he does to renegotiate trade deals, which is one of the main reasons he’s made fentanyl such a priority.
It’s true that Mexico in particular could do more to stem the flow of drugs coming across our shared border, but tariffs still seem like a really strange and indirect attempt at border security. Of course Mexico acquiesced and offered to do more (but Trump left them hanging and everyone is confused), but other countries are instead fighting back with retaliatory tariffs.
Again, tariffs are taxes – though the White House doesn’t seem to get that.
“Tariffs are a tax hike on foreign countries that have been ripping us off,” White House spokesperson Karoline Leavitt said in response to a reporter’s question on Tuesday. “Tariffs are a tax cut for the American people.”
Leavitt added that “it’s insulting that you’re trying to test my knowledge of economics,” though she would be hard pressed to find a serious economist who agrees with her.
Here’s Milton Friedman, who won a Nobel prize and was the most important economist of the 20th century, on tariffs: “We call a tariff a protective measure. It does protect; it protects the consumer very well against one thing. It protects the consumer against low prices.”
And Thomas Sowell, who Trump just honored for Black History Month: “Tariffs are taxes on imports which serve to raise the prices of those imports,” adding that tariffs lead to higher prices from domestic producers as well.
And lest anyone accuse me of ideological bias, here’s former Treasury Secretary Larry Summers, who called Trump’s tariffs “inexplicable and dangerous.”
The United States turned away from widespread tariffs during the Great Depression because they triggered a trade war, like we have now, and significantly reduced trade with Europe. Instead, the U.S. turned towards free trade, which helped fuel a massive boost in American wealth.
One of the other trends during that rise to prosperity was that the American economy transformed from a manufacturing focus to providing services. This was overall a good thing, though certainly not for those dependent on many good, blue-collar jobs.
Free trade is blamed for shipping these jobs to other countries. And while that’s partially true, it does not tell the whole story. First, automation was as much of a culprit as free trade, and, second, certain jobs went overseas because they were cheaper and easier to perform in other countries. Tariffs address neither underlying issue.
Some of Trump’s tariffs are geared towards reviving the American automotive industry, but cost is not the only reason foreign manufacturers grew to dominate the market. American automobiles have long struggled with perceived quality issues compared to foreign competitors, as well as U.S. companies’ slowness to respond to market demands, like fuel efficiency.
Furthermore, as we learned from the COVID shutdowns, economies don’t just pivot on a dime. Sure, we were able to quickly find producers of masks with a global market, but that’s not likely to work across the board. If anything, COVID showed that disruptions to supply chains can be catastrophic, especially since we are still dealing with some of those disruptions.
There are potentially some very limited benefits to tariffs. For example, Trump’s tariffs on washing machines during his first administration are estimated to have helped create approximately 2,000 jobs. However, those jobs were said to have cost American consumers around $817,000 for each job created. I suppose it’s up to each individual to decide if that tradeoff is worth it (though it seems like a waste to me).
Tariffs in theory can bring trade partners to the negotiating table, as they did with Mexico. But Trump’s hardball tactics have mostly just triggered a trade war.
The truest measure of the effectiveness of a policy is whether or not its accomplishing its goals. Tariffs might be helping on the margins on fighting fentanyl and are potentially bringing a nominal number of jobs. But the cost on Americans is exorbitant and it seems better diplomacy would have been more effective.
Free trade is good. We need more of it, not less. In a dynamic, global economy, change is constant and we adapt (which is why we don’t mourn the loss of jobs centered on beepers or covered wagons).
But constant change means that there will be many winners and some who are left behind. A better use of our time is to figure out how to lift those who are negatively affected, instead of taxing ourselves, alienating our allies and fighting economic realities.
Matt Fleming is an opinion columnist for the Southern California News Group. You can find him on X, @FlemingWords