Why Trump’s Tariffs Will Fail

Not because they’re (all) dumb, but because he is.

Just the other day I wrote about how tariffs rightly protect our workers from competition from places that treat their workers poorly. A poor standard of living is not a resource in which our trading partners can have a comparative advantage. To protect our workers, we need tariffs.¹

But in our capitalist economy tariffs succeed only if they encourage investment. To that end, tariffs must be domestically non-controversial. No one builds a factory in reliance on a temporary tariff wall enacted using “emergency” powers. Unless a powerful political consensus exists in favor of tariffs, they raise prices without increasing domestic production, even as retaliatory tariffs hurt our exports. American tariffs worked very well in the nineteenth century to encourage immigration and investment. People took risks to come here to start businesses or just to work expecting that tariffs would protect them from foreign competition. That expectation was key to the tariff’s success.

In this regard, tariffs are like other economic phenomena such as inflation and the universal basic income. Unless these things are reliable and predictable, they do not change behavior for the better. Trump’s tariffs are like Lucy’s promise not to pull the football away from Charlie Brown. I’m not…