If you find a stranger in your house, there are two questions you might ask. One is “How did you get here?” And the other is “What are you doing here?” However the intruder answers the first question – suppose he says the front door was unlocked – aren’t you still going to ask the second one? And isn’t that what you really want to know?
Likewise, then, the answer to “What are these pieces of coloured paper in my wallet?” is not – at least not typically – how came they to be there, but rather what you can do with them? And the answer to that, unless you really have to go but you have no toilet paper, is whatever else you can do with money. And so likewise the answer to the ontological question, i.e. “What is money?”, is not how money came about – does anyone not an historian really care? – but rather what role money plays in our lives.
Likewise again, then, when one asks, “What are tariffs?”, she’s not asking an historical question. She’s asking an ontological one. She wants to know what tariffs are. But in this case she’s not asking what she can do with them, though she might want to know what governments can do with them. But to that end she needs to know what they are. So let’s tell her.
Tariffs are taxes.
Why do governments collect taxes? For two reasons. First, because they need the wherewithal to provide the services they’re ‘contracted’ for. And second – and to this end they need to be able to tax differentially – governments are charged with encouraging some activities and discouraging others. Now back-burner all this.
By free trade I shall hereafter mean freedom to trade. We each have some good or service the other wants. Government ensures that we don’t just take what we want. Beyond that it has no role to play. But suppose Tom is able and willing to provide the good or service for less than you can or will. So I trade with Tom, leaving you with the stuff you don’t want and without the stuff you do. Or, in the case of labour, leaving you idle and without the means to sustain yourself.
So what do you do? You ask the government to intervene. There are a number of ways it can do this. It could, for example, pass a minimum wage law. This might discourage me hiring anyone, in which case all three of us take a loss. But if I can afford to hire, then whoever I hire makes more than he would have had we stuck to our Lockean guns.
Is this a good thing or a bad thing? Good or bad for whom? Certainly not for me. But the consumer aside, good if there’s plenty of work for everyone. Bad if there’s not. So governments have an interest in seeing that there is.
Of course by “plenty of work for everyone” we don’t mean everyone. We mean everyone who’s a citizen of the jurisdiction in question. You and Tom are, but Jose isn’t. So to ‘protect’ you and Tom from Jose undercutting the both of you, the government imposes an up-to-prohibitive tax, a.k.a. a tariff, on goods and services being offered by Jose.
I say up-to-prohibitive because if the demand is strong enough, Jose might still be able to remain in the market, albeit less lucratively. But the plight of Jose aside, the stakeholder who cannot escape the wages of tariffing is the consumer. Whether it’s the cost of the tariff which has to be passed on to the consumer, or it’s the higher price you and Tom can now charge because of it, she’s the one who has to pay.
In the short run, certainly. But in the long run just as surely. Why? Because the reasons America couldn’t compete in the first place won’t change. It’s not just that Americans refuse to make widgets for a living. It’s that, being unable to use their fingers for anything but texting, they can’t. Soon enough neither will the Chinese, and for the same reason. But at no point will there be no takers. Because if there were none, we’d have to do something about that. The Uigurs perhaps? Or maybe the Rohingya?
Why isn’t the American consumer crying bloody murder about this? Because somebody convinced her the rest of the world was exploiting her, rather than the other way around. This makes her the victim rather than the perp. And between moral impoverishment and material impoverishment she’ll still well-off enough to afford the latter.

Categories: Everything You Wanted to Know About What's Going On in the World But Were Afraid to Ask

Tags: America, China, economy, politics, tariffs, Trump