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Charles Ryder's avatar

I completely understand the case Matt is making here. Trump is corruption made flesh. But I want to provide a good, honest, neoliberal shrill reminder that even *honest* trade tariffs are quite bad. When Americans buy stuff from foreigners, they typically do so because it's cheaper. Thus tariffs require Americans to pay more. This mechanically reduces incomes, and makes us poorer. It also reduces the productivity of the economy, by forcing us to shift more capital into obtaining inputs than would be the case without the tariffs (which leaves less capital for everything else). So it's a double whammy: poorer immediately, and poorer and economically weaker over the longer term, because of the hit to productivity and efficiency.

We no doubt do need a measure of industrial policy to ensure we can produce things like artillery shells, warships, attack drones and the like. And given the hostility of China, that list probably has to include things like microprocessors and pharmaceutical precursors.

But, really, we ought to be doing the minimum amount of trade restricting consistent with our national security needs. I remember thinking, shortly after the 2020 election: "Democrats in Congress ought to take advantage of this window to narrow the scope of the executive branch's power to restrict foreign trade." Pity they didn't. And too late now.

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theeleaticstranger's avatar

Great issue to highlight. Since the free-trade consensus is dead, and a tarrif heavy system is also bad as you point out here, I wonder what a better system look like? It would be great if we could achieve a bipartisan consensus that friend-shoring is a good idea, then the limited tarriff regime could be focused on China and paired with subsidizing domestic production and/or production in friendly countries.

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