Biden and Trump Are Both Disastrously Wrong About Tariffs
Yes, cheap imports hurt some American companies. But protectionist trade policy harms many more Americans than it helps.
President Joe Biden and former President Donald Trump fight about everything.
But they agree about one thing: tariffs, the subject of my new video.
Trump imposed tariffs on steel, aluminum, washing machines, solar panels, and other products from China.
Then Biden took office and slapped a 100 percent tariff on Chinese electric vehicles.
Now Trump says, if elected, he'll impose the tariff on all Chinese cars.
This is a destructive competition.
The idea of a tariff sounds good. Protect American businesses from foreigners! Protect American workers from cheap foreign labor!
That's the seen benefit for Americans.
The unseen harm is worse.
First, tariffs are a hidden tax. They make everything cost more. Yet few consumers see that inflation is increased by tariffs.
American steelmakers love Trump's tax on Chinese steel, but every American who uses steel has to pay more.
The U.S. International Trade Commission says that Trump's tariffs helped increase domestic production of steel, but production in other, dependent industries dropped by a greater amount.
A second unseen harm: protected companies get lazy.
Instead of devoting their energy to customer satisfaction and innovation, it's easier and often more profitable to lobby politicians, pushing for more tariff protections.
When I was young, Ford and General Motors improved their cars because they found they had to compete with Toyota, BMW, Honda, etc.
We should all be glad that no 100 percent tariffs existed then.
Trump's big tariffs on steel didn't even help U.S. Steel. It's now trying to sell itself to a Japanese steel company.
By contrast, trade benefits most everyone.
Flying today is cheaper than ever.
Fifty years ago, a flight from Los Angeles to Boston cost about $1,000.
Today, you can book the same trip for just over $100.
Trade makes that possible. Manufacturers buy airplane parts from all over the world.
Boeing's newest plane depends on Italian manufacturers for its engine. Its wings come from Germany and France. Floor beams are sourced from the United Arab Emirates, and the plane's doors come from Vietnam.
A tariff on any of these parts would make flying more expensive for all of us.
(Boeing's recent safety problems weren't caused by trade. That was all American.)
Of course, not everyone flies. But everyone enjoys the fruits of trade.
Do you eat fresh produce in winter?
Our avocados come from Mexico. Grapes from Peru and Chile. Bananas from Guatemala and Ecuador.
Attempts to meddle in these voluntary exchanges disrupt our lives and lower our standard of living.
Biden and Trump don't get that.
Goldman Sachs' chief economist predicts that Trump's plan to "put a ring around the country" would raise our inflation rate another 1.1 percent.
Biden once pretended to understand trade.
"Trump doesn't get the basics," he said in 2019. "He thinks his tariffs are being paid by China. Any freshman econ student could tell you that the American people are paying his tariffs."
Biden promised to remove Trump's tariffs.
But once in office, he caved to special interests and increased them.
The Tax Foundation says tariffs imposed by the last two presidents equal a $625 tax on every U.S. household.
Of course, the justification for tariffs is protecting American industry and American jobs.
Trump said his tariffs were a part of his "duty to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself."
Biden now says his tariff proposals are "strategic and targeted actions that are going to protect American workers."
It's true that trade sometimes crushes American companies and takes jobs from some Americans.
But that opens up new opportunities.
When the North American Free Trade Agreement (NAFTA) took effect, 100,000 automotive workers in Michigan lost jobs.
But soon, total sales of cars and car parts went up. Most former auto workers applied their skills in more productive ways elsewhere, mostly in specialties where Americans produce most efficiently: high-end machinery, energy, movies, music, medicine, internet startups.
Not only do Americans make more money producing those things, but the jobs are safer and less physically demanding.
Despite "America first" fearmongering about growing international trade, it hasn't reduced total wages or the total number of American jobs. Unemployment remains near an all-time low.
Yes, cheap imports hurt some American companies. Politically connected industries will always try to persuade ignorant politicians to "protect" them.
But tariffs hurt many more Americans than they help.
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