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Its true that one purpose of a tariff is to protect domestic production. Another purpose is to hurt specific trading partners; when we impose an xx% tariff on C
by 827a 2y ago
Its true that one purpose of a tariff is to protect domestic production. Another purpose is to hurt specific trading partners; when we impose an xx% tariff on China, companies who were previously importing goods from China may domesticate some production, but they may also just turn to e.g. Vietnam or Japan. A further third reason for tariffs is simply as a bargaining tool, as we've seen with Canada recently.
Sometimes you can tell what the real purpose of the tariff is based on what is being tariffed, and from who. For example, putting a tariff on Canadian energy: Canada is an ally of the United States who we generally don't have geopolitical interest in fighting with, and the United States has very, very strong domestic energy production and domestic energy consumption; so, the purpose is less about harming Canada, and more-so about protecting the domestic industry from being undercut by international partners. However, when it comes to electronics and microchips, we don't have the domestic production capacity, so the purpose is more aligned with: Yeah, we'll try to build that up, but we're most concerned about simply weakening China. If that production were to instead get built up in Vietnam or Japan because labor is cheaper, we'd have to see how the administration would react, but I suspect: there's a reason why we haven't levied similar tariffs against them.