Tariffs: Tax Hikes Wrapped in the Flag

Posted on: August 4, 2018 at 20:07:38 CT

By Doug French:

Trump’s tariffs are simply, in the words of economist Murray Rothbard, “not only nonsense, but dangerous nonsense, destructive of all economic prosperity.” Business owners who are suffering from this ham-handed government intervention should be the first to complain, whether having voted for Trump or not.

I asked a friend of a business owner (a fan of the president), what the owner thought of the tariffs. “He’s for them,” came the answer.

“But his profits have to be impacted,” I countered, “since he uses steel in his manufacturing.”

“Yes, but he thinks it will all work out in the long run,” was the reply.

“But, his profits are being diverted to the government. Wouldn’t he rather have the profits than the government?”

“Yes, but there are not any American cars being sold in China,” my friend countered, using one of the president’s bromides.

Dangerous nonsense indeed.

The New York Times’ Nelson Schwartz reports a similar feeling from Banner Metals in Columbus, Ohio. “I’m not looking at what’s best for Banner right now,” Bronson Jones, a part-owner of the company and its chief executive told Schwartz. “I’m looking at what’s best for the national economy. The U.S. has been taken advantage of for too long.”

What? The Fed and Treasury conspire to conjure dollars from the ether, and these amounts on a ledger or pieces of paper are tradable for actual goods, but the US has somehow been done wrong? How could anyone, the owner of a business no less, believe such a thing?

“We are not, if we were ever, a world of self-sufficient farmers,” Rothbard wrote. “The market economy is one vast latticework throughout the world, in which each individual, each region, each country, produces what he or it is best at, most relatively efficient in, and exchanges that product for the goods and services of others.”

“If it comes out of my paycheck, so be it,” Banner maintenance technician Casey Jackson told the Times. “You got to look at the big picture. That tiny bit of sacrifice we make will create jobs.”

No, that sacrifice destroys jobs. What’s taken from Jackson is given to inefficient producers who will waste capital and ultimately extinguish jobs. “Protectionism is simply a plea that consumers, as well as general prosperity, be hurt so as to confer permanent special privilege upon groups of inefficient producers, at the expense of competent firms and of consumers,” wrote Rothbard.

However, tariff victims are standing by their man. “He’s going for the jugular, which is typical Trump style,” Mr. Jones said. “I’m not used to it, and it’s not a presidential style we are accustomed to. But he’s the only president who’s taken a significant stance on trade, and we need a brash approach.”

Actual free trade would be a brash approach, not going full blown Smoot-Hawley. But don’t try to convince the guys on the Banner shop floor of any economics 101 mumbo-jumbo. “It’s aggressive, it’s tough, and he [Trump] won’t back down,” Mr. Jackson said. “Using trade as a bargaining chip will help someone else put food on the table.”

Todd Grizzle, a 25-year-old maintenance technician, put in his two cents worth and hit the nail on the head. “I like the idea of the U.S. having allies,” he said. “But if this can bring more jobs back to America, that’s a good thing.”

Consumers will pay more for goods, some people will lose their jobs or receive pay cuts but it’s all worth it for the red, white, and blue. Rothbard explained the danger decades ago. Tariffs and protectionism “is a peculiarly destructive kind of bailout, because it permanently shackles trade under the cloak of patriotism.”

https://mises.org/power-market/tariffs-tax-hikes-wrapped-flag