A Word On Tariffs

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This past week hasn’t ranked among President Trump’s best, as he talked about suspending due process for gun owners in order for confiscation to take place, praised China for granting their president Xi Jinping a lifelong term, and talked up his new “trade war” policy. The President wants to place a 10% tariff on aluminum imports, and a 25% tariff on steel imports. It’s the tariffs that actually need to be addressed, because they might actually happen. While this talk may resonate with some of Trump’s base, it’s important to understand what actually is going on, and why one of the President’s economic advisors recently quit over this policy.

A tariff is just a tax on imports. If the only impact of 200 years of economic theory has taught America anything, let it be that tariffs are a horrible idea. Tariffs end up having an overall negative impact on economies, especially in the hyper-connected world we live in today.

The issue with tariffs is that when you tax something, you get less of that thing. For instance, a tax on the sale of bread would increase the price of bread, thus decreasing sales. The same theory applies to tariffs. Taxing steel and aluminum means that on net, the market sees less steel and aluminum. This is really harmful for companies that buy these metals in order to make a profit. Either companies can buy less steel to make less product, or they can see their profitability decrease. Now, the President is correct when he says that American steel and aluminum will benefit from a tariff, but he ignores the bigger picture, the bigger market.

On the whole, consumers bear the brunt of tariff policy, as the price of anything that needs steel or aluminum increases, from cars to aluminum foil. Conservatives need to stand firm against protectionism and trade wars and promote truly free markets in order to ensure economic prosperity

Ethan Buehrer, writer at The Daily Lev.