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Can anyone point to an historical case study where protective tariffs resulted in a better economic or social outcome? I can’t help but recall the saying: “Whe

Can anyone point to an historical case study where protective tariffs resulted in a better economic or social outcome? I can’t help but recall the saying: “When goods don’t cross borders, soldiers soon will.” Not that I think the United States is going to war with Canada, but the (German-dominated) EU and China are less certain.

hugh4life 8y ago
The US when it was industrializing? China now? Protectionism can be good for large nations/markets catching up to other nations/markets.
- WhompingWindows 8y ago
  US was industrializing throughout the 1800's, there are empty/converted factories all up and down the East Coast from these. In New England, it was a lot of textiles, metalworking, shoes, parts, etc. What tariffs protected that growth? To me it seems to be a rising production due to rising demand for those products, as factories/mass production wasn't common prior to 1800.
  - hunter23 8y ago
    The US had protective tariffs and regulations (along with a lack of free trade agreements) which definitely protected foreign goods and companies from entering the country. Protective tariffs literally started with George Washington with the goal of "the encouragement and protection of manufactures".
maxerickson 8y ago
Why would Germany invade Canada? More seriously, I will be pretty surprised if this particular stupidity escalates to any kind of military action.
- AlexCoventry 8y ago
  It probably won't directly escalate to military action, but the Smoot-Hawley Tariff Act of 1930 did make it a lot easier for the Nazis to take power in 1932. Edit: I'd be grateful for an explanation for why this might be getting downvoted.
dominotw 8y ago
Seems to be working for china.
s2g 8y ago
Canada has been arguing with the US about dairy for a while. Protecting that industry, you could argue, actually is a national security issue and tariffs are needed because of the massive production of the US. IIRC haiti allowed tariff free dairy and now pretty much don't have that industry anymore.
mastazi 8y ago
Tariffs on corn prompted a guy called James Wilson to create The Economist, of course you may or may not regard that as a positive outcome: https://en.wikipedia.org/wiki/The_Economist#History https://en.wikipedia.org/wiki/The_Economist#History
- jcranmer 8y ago
  Tariffs on wheat and rye, mostly. Note that, in British English, "corn" generically refers to grain, while in American English, "corn" is synonymous with "maize."
  - mastazi 8y ago
    Yes, a bit like the German equivalent körner
duxup 8y ago
I believe Ecuador had a short run where they closed up some of their economy and it paid off for a bit, but they were hardly operating like a large global trading nation before that...
BurningFrog 8y ago
Tariffs can be good for big companies and other special interests in a country, but never for the country as a whole. So when you ask if they result in "better economic or social outcome", you have to be careful to think about "for who?".
- darawk 8y ago
  That's definitely not true. Tariffs have allowed China to bootstrap a local tech industry. It's been extremely beneficial for them.
- kakwa_ 8y ago
  Not necessarily. Let say you are a large developing country and you want to bootstrap a domestic car industry. The first cars coming out will probably not be that great as you don't have the engineering knowledge or the experience building cars yet. Cars built by foreign companies are definitively better, and maybe cheaper to buy and/or to operate. If you do nothing, this new car industry would die quite soon. So you impose tariffs on foreign cars, that way your domestic production is protected, and you are able to make it grow and make it better. However be careful to not protect it too much, otherwise it will keep producing crappy cars looking like Trabant. With time you decrease the protection progressively. Another less abstract example is food, for instance, rice production and tariffs in Haiti: https://en.wikipedia.org/wiki/Rice_production_in_Haiti https://en.wikipedia.org/wiki/Rice_production_in_Haiti
  - BurningFrog 8y ago
    So while you protect the local industry, your population is forced to overpay for inferior cars. I think we agree on that fact. You're saying that that is more than compensated for by the later emergence of a competitive car industry, and the various wealth effects it spreads across the nation over many following decades. I just don't think there is empirical support for that. I'm sure you can cherry pick examples in hindsight, but if you do an honest accounting of these attempts, including those that failed I don't think it looks good. Except for the favored industry of course, who makes a nice living during the protected era.
hunter23 8y ago
Protective tariffs are a good idea for protecting nascent industries from essentially foreign competition. Many countries in Asia essentially locked foreign goods from certain industries during the later half of the 20th century to help build their own industries post WW 2. They ended up opening their economy once their domestic players hit a critical stage where they could compete with international players. For example, India closed off their soda, car, and other markets to spark a homegrown industry. In the 1990s they liberalized the economy and opened it to the international megacorps, but many of the domestic companies still remain in some form and there are large manufacturing plants still from that era. So it is entirely possible that protective tariffs can help for long term growth when done strategically. However, I highly doubt any of Trump's tariff's are strategically smart.
toomanybeersies 8y ago
I can't point to any specific examples, but tariffs are generally more effective, or at least less harmful when targeted on luxury goods. Tariffs on general goods like steel, food, or oil just increase costs for the whole population.

hugh4life 8y ago

The US when it was industrializing? China now? Protectionism can be good for large nations/markets catching up to other nations/markets.

WhompingWindows 8y ago
US was industrializing throughout the 1800's, there are empty/converted factories all up and down the East Coast from these. In New England, it was a lot of textiles, metalworking, shoes, parts, etc. What tariffs protected that growth? To me it seems to be a rising production due to rising demand for those products, as factories/mass production wasn't common prior to 1800.
- hunter23 8y ago
  The US had protective tariffs and regulations (along with a lack of free trade agreements) which definitely protected foreign goods and companies from entering the country. Protective tariffs literally started with George Washington with the goal of "the encouragement and protection of manufactures".

maxerickson 8y ago

Why would Germany invade Canada? More seriously, I will be pretty surprised if this particular stupidity escalates to any kind of military action.

AlexCoventry 8y ago
It probably won't directly escalate to military action, but the Smoot-Hawley Tariff Act of 1930 did make it a lot easier for the Nazis to take power in 1932. Edit: I'd be grateful for an explanation for why this might be getting downvoted.

dominotw 8y ago

Seems to be working for china.

s2g 8y ago

Canada has been arguing with the US about dairy for a while. Protecting that industry, you could argue, actually is a national security issue and tariffs are needed because of the massive production of the US. IIRC haiti allowed tariff free dairy and now pretty much don't have that industry anymore.

mastazi 8y ago

Tariffs on corn prompted a guy called James Wilson to create The Economist, of course you may or may not regard that as a positive outcome: https://en.wikipedia.org/wiki/The_Economist#History https://en.wikipedia.org/wiki/The_Economist#History

jcranmer 8y ago
Tariffs on wheat and rye, mostly. Note that, in British English, "corn" generically refers to grain, while in American English, "corn" is synonymous with "maize."
- mastazi 8y ago
  Yes, a bit like the German equivalent körner

duxup 8y ago

I believe Ecuador had a short run where they closed up some of their economy and it paid off for a bit, but they were hardly operating like a large global trading nation before that...

BurningFrog 8y ago

Tariffs can be good for big companies and other special interests in a country, but never for the country as a whole. So when you ask if they result in "better economic or social outcome", you have to be careful to think about "for who?".

darawk 8y ago
That's definitely not true. Tariffs have allowed China to bootstrap a local tech industry. It's been extremely beneficial for them.
kakwa_ 8y ago
Not necessarily. Let say you are a large developing country and you want to bootstrap a domestic car industry. The first cars coming out will probably not be that great as you don't have the engineering knowledge or the experience building cars yet. Cars built by foreign companies are definitively better, and maybe cheaper to buy and/or to operate. If you do nothing, this new car industry would die quite soon. So you impose tariffs on foreign cars, that way your domestic production is protected, and you are able to make it grow and make it better. However be careful to not protect it too much, otherwise it will keep producing crappy cars looking like Trabant. With time you decrease the protection progressively. Another less abstract example is food, for instance, rice production and tariffs in Haiti: https://en.wikipedia.org/wiki/Rice_production_in_Haiti https://en.wikipedia.org/wiki/Rice_production_in_Haiti
- BurningFrog 8y ago
  So while you protect the local industry, your population is forced to overpay for inferior cars. I think we agree on that fact. You're saying that that is more than compensated for by the later emergence of a competitive car industry, and the various wealth effects it spreads across the nation over many following decades. I just don't think there is empirical support for that. I'm sure you can cherry pick examples in hindsight, but if you do an honest accounting of these attempts, including those that failed I don't think it looks good. Except for the favored industry of course, who makes a nice living during the protected era.

hunter23 8y ago

Protective tariffs are a good idea for protecting nascent industries from essentially foreign competition. Many countries in Asia essentially locked foreign goods from certain industries during the later half of the 20th century to help build their own industries post WW 2. They ended up opening their economy once their domestic players hit a critical stage where they could compete with international players. For example, India closed off their soda, car, and other markets to spark a homegrown industry. In the 1990s they liberalized the economy and opened it to the international megacorps, but many of the domestic companies still remain in some form and there are large manufacturing plants still from that era. So it is entirely possible that protective tariffs can help for long term growth when done strategically. However, I highly doubt any of Trump's tariff's are strategically smart.

toomanybeersies 8y ago

I can't point to any specific examples, but tariffs are generally more effective, or at least less harmful when targeted on luxury goods. Tariffs on general goods like steel, food, or oil just increase costs for the whole population.