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189 sats \ 8 replies \ @Undisciplined 20 Jul \ on: Let's talk tariffs and (U.S.) domestic commodities econ
I’m entirely opposed to tariffs on both moral and humanitarian grounds. However, you’re right to wonder if economically there might be more here than meets the eye.
For a large country like the United States, the potential economic losses from tariffs are actually pretty small (at least in equilibrium).
Modern trade theory, which has decent empirical backing, even suggests that a large country might be able to gain from tariffs. I’m very skeptical of the practicality of that theoretical argument, but it does exist.
Within the pantheon of taxes, I believe that tariffs are less evil then income, wealth, or property taxes.
From a historical perspective, its clear the framers of the constitution considered excise taxes to be the main form of allowed taxation. Excise taxes, of course, are avoidable. If tea is taxed at 50%, you have the option of not buying tea....whereas if I tax your income at 50% (or your property) you have no practical way of avoiding that tax.
Moreover, I know its good to point out the concept of "free trade" and how tariffs undermine the efficiency of the markets. In theory that is a very good point and also philosophically (and morally) sound.
However, the world is more messy than just that simple analysis: What if your trading partner is using slave labor? Is that free trade?
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I have noticed that more people have embraced free trade since the rise and electoral success of Trump out of spite
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That's only rhetorical support. It's not worth the paper it's not printed on.
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You're right that this gets very messy when you take the actual conditions of our trade partners into account. That's why I'm not as animated about trade as many other libertarians, compared to how much I hate income or property taxes.
What might be worse than the generic inefficiencies of restricting trade, is the way trade policy is used to benefit certain industries and corporations. That is a major corrupting influence in our economy and government, so it would probably be better if they didn't have the option.
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Why does WTO exist?
USA should leave WTO and establish free trade/low tariff zones or agreements
EU was originally founded as Economic Union, a Common Market, zero or low tariffs between member nations post WW2
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USA was pretty much founded as an internal free trade zone, too.
I agree. America is a huge market that everyone wants access to. There's very little to gain from being in these organizations, other than special favors for politically connected groups.
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I agree and Bob has probably addressed why some of these theoretical results are implausible.
In brief, our fancy trade models indicate that a very large economy, trading with smaller ones, can more than offset the economic loss of higher prices with the additional economic activity from producing those goods domestically. The trade partners will all be worse off to the point where the world as a whole is less prosperous, though.
Tariffs don't always affect equilibrium prices very much, because domestic production is often nearly as efficient. Also, a large market like the US can usually pass most of the tax incidence onto it's trade partners.
Like I said, they're bad for humanity and it's immoral to prevent free association, but it's possible for certain countries to enrich themselves at their neighbors' expense via certain tariffs.
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