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Theoretically, the argument against tariffs stems from the idea that a market increases the net surplus for everyone involved in the trade. This is because each
by dhruvp 8y ago
Theoretically, the argument against tariffs stems from the idea that a market increases the net surplus for everyone involved in the trade. This is because each individual in the economy would be able to focus on their 'comparative advantage' and trade to obtain a larger basket of goods than if they tried to create everything themselves.
The way the US is expected to enjoy this trade surplus (in a world where it is a net importer) is through lower prices for goods. The benefit the US gains from this reduction in prices etc. is meant to on the whole offset the loss in jobs, exports etc that might come from globalism. Whether this happens or not is clearly a moot point.
I believe the issue might be that while the US has enjoyed the surpluses of globalism, it has not redistributed that surplus well. In a tariff world, the need for redistribution is less - factory workers get the money directly in the form of a paycheck etc through their protected jobs. In a non-tariff world, these jobs no longer exist but the government would ideally now offset that loss through investments in education, infrastructure, new job opportunities etc.
Hope this answers why globalism is supposed to work and where it may not be working.
- DenisM 8y agoExcellent explanation. It also follows that tariffs are wealth-redistribution in disguise. Therefore Trump's actions benefit the working class, at the expense of the overall lesser economic efficiency, sort of the opposite of what you would expect from a republican president...
- hyperpape 8y agoA limited subset of the working class in the short-term, at that. There are plenty of working class people who are absolutely screwed by this. Anyone whose industry relies on steel or aluminum is likely losing out (https://www.npr.org/2018/03/24/596744980/trumps-tariffs-lead-to-layoffs-at-steel-beer-keg-company https://www.npr.org/2018/03/24/596744980/trumps-tariffs-lead...). If tariffs really were the best way to help the working class at some expense to the wealthy and upper middle-class like most of us on this board, they would be worth it. But they're not.
- DenisM 8y agoIt could be that more jobs are created than there are lost. Your link doesn't show the opposite (and I don't have a link at all).
- rohit2412 8y agoI feel this is true only at an individual level, but is not true for a collective level. Take two choices, you can either buy a 15$ tshirt in your local country, or a 10$ tshirt from another country. At an individual level it makes sense to buy the cheaper one. But from a country's perspective, those 15$ spent in the economy are earned by someone in the economy to be spent again. On the other hand, the 10$ sent overseas have no effect of money circulation. Saving those 5$ over a t-shirt might cost 20$ in GDP. The calculations need to be done regarding velocity of money, taxation rate, and savings. But I do think that not all money is equal. 10$ spent overseas and 5$ spent domestically is less favorable than 15$ spent domestically. I think protectionism and tariffs cannot be cast as inherently failures, and are necessary to build an economy.
- avar 8y agoOn a collective level it doesn't make sense for a developed 1st world country to spend a disproportional amount of money, public services etc. for its population, only to have some large portion of it sit behind a sewing machine all day making T-Shirts. > I think protectionism and tariffs cannot be cast as inherently failures, and are necessary to build an economy[...] I agree. There's a lot of cases to be made for bootstrapping an economy with central planning, protectionism and tariffs, e.g. post-WWII South Korea is a frequently cited example. But this isn't the form tariffs tend to take in 1st world economies. They tend to take the form of concentrated benefits and higher diffuse costs to protect already failing industries that we mostly wouldn't have anymore if it wasn't for the tariffs propping them up.
- hackeraccount 8y agoWhy is that? I mean you can tell a story where the local $15 shirt benefits the local country more but it's just as a easy to tell a story where the local country benefits more from buying the t-shirt abroad. If you buy the foreign t-shirt there's $5 more floating around in the economy for you to spend. Plus you have a t-shirt. Plus the local country is likely to stop making t-shirts (which it manifestly is not competitive at) and put that money into something that it is competitive at i.e. away from something that is not productive and into something that is productive which is to say efficient which is better for everyone - even better for the environment as resources are not wasted by inefficiently making goods.
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- qball 8y ago>I believe the issue might be that while the US has enjoyed the surpluses of globalism, it has not redistributed that surplus well. Note that with respect to globalism, it has also allowed a significant amount of companies to dodge both environmental and worker safety policies by moving to a country who considers the bulk of their population expendable. Tariffs against imports from countries like that make a lot of sense because we already take that into account for domestic production (which drives the costs of those goods up); having free trade with countries that do this severely undermines the environmental (and human rights) protection that Western countries have successfully implemented over the last 50 years. Couple that with the fact that when your country loses a critical mass of manufacturing capability the supply chain goes with it, and the fact that a government needs to provide the people who just plain aren't smart enough to benefit from higher education (which arguably comprises a significant fraction of people in Western universities today because they're stuck in jobs that don't make enough to pay down student loans, which means their degrees were worthless) with something to do or face significant instability later.