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
Who is getting the wealth becomes the issue. The vague sense that “America” gets the wealth ignores what we’ve already seen companies do: instead of reinvesting in the company, instead of raising wages, the major corporations aim for things like stock buybacks that boost their share prices so the board of directors are happy, the CEO keeps their job, and the leaders of the company get greater compensation as their compensation is usually in the form of stocks.
Increasing salaries is an expenditure and is often seen as a last resort. You raise salaries when you need to in order to attract new talent, or in order to retain talent. In a lot of industry the workers are no more than “meat machines” and aren’t valued as a component that needs to be maintained, management would be just fine replacing them. It’s the same argument with productivity, more output because a machine outputs more does not equal a greater pay for the workers, “they didn’t do anything more to deserve it” so a tarrif that increases prices/profit doesn’t mean that wealth will reach the general population.
“America” as in the general population loses in this scenario. Things just become more expensive, that doesn’t mean that the money comes back to us. That’s “trickle down economics” and we have over 50 years of evidence showing that doesn’t work the way it was sold to us.