To the surprise of no one*, three recent studies found that the tariffs lain on goods imported from China are being paid by Americans. The damage to consumers and businesses includes a monthly deadweight loss of $1.4 billion, $12.3 billion extracted from the private sector in the form of tariff revenues, and, in 2018, $68.8 billion in lost economic activity.
One of the studies estimated that if the tariffs were to create 34,500 jobs manufacturing steel, the loss per job would amount to $195,000, or nearly quadruple the median steel worker’s annual income. In other words, to keep a steel worker employed at $52,500 per year, American consumers and businesses would, in effect, have to shell out nearly $200,000.
Does that sound like a good exchange to you?
In a recent post on recycling at the American Institute for Economic Research, Duke economist Mike Munger suggested an easy way to differentiate between valuable goods, and garbage:
Hold [a thing] in your hand, or hold a cup of it, or tank, or however you can handle it. Consider: Will someone pay me for this? If the answer is yes, it’s a commodity, a valuable resource. If the answer is no, meaning you have to pay them to take it, then it’s garbage.
We can apply this same test, at the macro level, to jobs: does the performance of a certain job (say, manufacturing steel) create net value for consumers and businesses? If so, it’s a job worth performing in the United States. If not–if it represents a net loss to consumers and businesses, as in the case of jobs “saved” by tariffs–then it’s not just unproductive, but counterproductive, and we shouldn’t hesitate to let it be outsourced.
Interestingly, Trump’s recent decision to forestall further tariffs previously threatened on Chinese goods (lest they “[disrupt] the Christmas season”) seems to undermine his loud, proud claim that Americans bear no excess burden in his protectionist regime. It would appear that the president either believes that tax incidence, like hay fever, is seasonal, or he knows his bloviating amounts to nothing but hot air. Over at the American Enterprise Institute, economist Mark Perry sums up this contradiction nicely with a Venn diagram:
It’s bizarre to me–as it should be to anyone who has taken an introductory economics class–that President Trump would favor cutting off Americans from economic resources in the interest of American prosperity while simultaneously doing the same thing to Iran as a sort of economic punishment for “hostile conduct.” Nineteenth century economist Henry George decried this cross-eyed nonsense, writing, “What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.”
Americans don’t represent an enemy regime–the president needs to stop treating us as if we were.
*The swarm of Trumpian partisans on the populist Right would no doubt be surprised to hear this news, if they removed their blinders.