Bret Stephens: “It used to be common knowledge — not just among policymakers and economists but also high school students with a grasp of history — that tariffs are a terrible idea. The phrase ‘beggar thy neighbor’ meant something to regular people, as did the names of Senator Reed Smoot and Representative Willis Hawley. Americans broadly understood how much their 1930 tariff, along with other protectionist and isolationist measures, did to turn a global economic crisis into another world war. Thirteen successive presidents all but vowed never to repeat those mistakes.”
“Until Donald Trump. Until him, no U.S. president has been so ignorant of the lessons of history. Until him, no U.S. president has been so incompetent in putting his own ideas into practice.”
The Facts
- Tariffs lead to higher prices for consumers as businesses often pass on the increased costs of imported goods. This can strain household budgets, particularly for lower-income families who spend a larger portion of their income on essential goods.
- Tariffs can slow economic growth by raising the cost of intermediate goods, which reduces private sector output and employment. This can lead to a decrease in GDP and capital stock.
- The increased costs and reduced competitiveness can result in job losses, especially in industries that rely heavily on imports or exports..
- Tariffs often provoke retaliatory measures from affected countries, which can further disrupt global trade flows and exacerbate economic downturns.
- The imposition of broad tariffs can destabilize international markets and ignite broader trade conflicts, affecting global economic stability..
- Some countries might respond with protectionist policies, which can have long-term negative consequences for their economies.
Most economists agree that tariffs are generally detrimental to economic health, leading to inflation and reduced economic growth. They argue that free trade is more beneficial for economic output and income.
The imposition of tariffs can lead to a cascade of negative economic and geopolitical consequences, supporting the notion that “none of this will end well.”