Trade Restrictions Imperil Our Standard of Living

Yet another article that illustrates the negative effects of tariffs. Protectionism has become strangely popular despite empirical evidence showing that restricting trade always ends the same; with reduced economic activity and lower standards of living.


Too often, we talk about international trade as being about the direct benefits to consumers. Those benefits are real. It’s true and important that Walmart can import goods from China and sell them to US consumers at low prices. It makes us, especially the least well-off among us, better off than we would be otherwise.

But what that conversation forgets is that over half of US imports are actually inputs into the production of US-based firms. That’s about 8 percent of US Gross Domestic Product. Plus, many of those importers are also exporters. The firms who buy imported inputs use them to produce final goods here in the US then export some of them to the rest of the world.

When we start to place limits on global trade through tariffs on imports, we are not just harming the producers of those goods in other countries. We are harming US manufacturers who rely on those imports for their production here (and the jobs that go with it). Raising tariffs on imported dry goods or produce makes food produced by American chefs at restaurants that employ Americans more expensive, thereby threatening the viability of those businesses and those jobs.

If we raise the price of imported steel, we don’t just hurt foreign manufacturers, we hurt American firms who rely on that input for their production, including their exports.


Image credit: Tama66

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