Ok was reading a post somewhere else and came across someone saying how trump likes tariffs too much, which is not the first time i have heard tariffs frowned upon. I have always been of the opposite opinion and I guess would also ‘like tariffs too much’ so please enlighten me as to why they are bad.
My view:
I like to visualize the flow of wealth and whether wealth is flowing in to or out of an area. When I researched Fredrick the Great, he had become ‘the great’ thru making Prussia wealthy, and he had done this by freeing up and empowering local producers while limiting… thru tariffs… goods externally produced. This makes total sense to me. Prussian producers then pull wealth in while foreign producers no longer pull wealth out.
Another parallel is when developing countries have farmers that cannot produce goods cheaply enough to compete with the oversubsidized foreign goods flooding their market and, because their government does not tariff up the prices of the foreign goods, the locals get thrown in to poverty. These two things have always, to me, implied the role of tariffs is to prevent wealth from being drained out of an area and, as a byproduct, divert business and thus success inward instead. Because this helps local prosperity, I, I guess similarly to Trump (?), have historically viewed tariffs as generally a ‘good’ tool.
So please, explain where I’m wrong, if I am, and why tariffs would be bad. thank you
You’re correct, tariffs can protect (as in protectionism) the local economy. The only downside is to consumers, as they no longer have the possibility to buy cheaper foreign goods.
But what if there is no local production for the goods being tariffed (not sure that’s a word)? The government collects a bit of money and the price rises for two reasons: to pass the tariff to the consumer and because of the increased rarity/scarcity, as foreign traders will tend to sell their goods elsewhere.
Now I’m no expert, but I’m pretty sure that a lot of stuff is no longer locally produced in the US. Tariffs could lead (in the long term) to a re-industrialisation of the country, creating jobs, reducing pollution (reduced cargo transport, better regulations if Trump doesn’t gut them), etc. But in the short term, it will be price rise galore.