The Ignorance of Protectionism


It never ceases to amaze me how some issues can be dominated by positions that have been repeatedly proven to be flawed. Recently, it’s been the issue of trade. President-elect Donald Trump rose to win the Presidency in large part due to his anti-trade positions and promises to save American jobs. His repeated proclamations that American workers are being “screwed” and having their jobs “stolen” by China and other nations has resonated with the general public and resulted in an historic sea change in American politics.

The problem is that almost everything Mr. Trump says about trade is demonstrably wrong. Despite his self-proclaimed expertise in business and economics, he still doesn’t seem to grasp the concept that protectionist policies have failed repeatedly throughout world history and in a number of instances, have been the key drivers of serious economic downturns. I’ve said it before and I’ll say it again, tariffs and protectionist policies make everyone worse off. Any claim to the contrary is based on some combination of emotion, ignorance or just plain unwillingness to accept indisputable evidence.

Below is a short summary from the American Enterprise Institute in which both the benefits and costs of protectionism are weighed.

An economic analysis of protectionism tells us that the deadweight losses that result from tariffs are guaranteed to make the economy worse off on net and guaranteed to reduce our economic welfare, which would be reflected in a loss of U.S. jobs, and a reduction of wealth, prosperity, and national income. You could argue about the size of the deadweight losses moving from free trade to protectionism, but you can’t argue that they don’t exist.

Therefore, despite the naive proclamations from Trump about “making America great again” with protectionism and tariffs, the economic analysis above demonstrates that protective tariffs make the country imposing them worse off, on net, and that proposition is supported by 200 years of economic theory and hundreds of empirical studies. That is why economists almost universally support free trade and oppose tariffs and trade protection – because economic analysis and empirical evidence clearly show that there are always net economic losses from protectionism.

If Trump is successful with his mercantilist and protectionist trade policies, it will be average Americans who will be punished by punitive tariffs, not the Mexicans or Chinese. And while Trump’s protectionism might save some U.S. jobs in the short run, his tariffs and other protectionist measures will unavoidably lead to even greater job losses in the long run, and less prosperity and a lower standard of living for the average American. That’s not a formula for greatness, it’s a guaranteed formula for economic impoverishment.

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One thought on “The Ignorance of Protectionism

  1. From Fee.org:

    “…when consumers buy imports, they are simply choosing to make things for themselves and their families using the lowest-cost methods of production available to them: they ‘make’ their consumer goods using the roundabout method of working at their specialties and then transforming through trade some of their incomes into these goods. Sometimes consumers trade with fellow citizens; other times they trade with foreigners. But in all cases the trades are the lowest-cost methods of production available to consumers for provisioning themselves and their families with the goods and services that they desire. Why should the making of such choices ever be blocked?”

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