Tag Archives: trade

In praise of tariffs

7 Replies

In a previous post I noted that we could reduce global air pollution if we used import taxes (tariffs) to move manufacture to the US from China and other highly polluting countries. It strikes me that import tariffs can have other benefits too, they can keep US jobs in the US, provide needed taxes, and they’re a tool of foreign policy. We buy far more from China and Russia than they buy from us, and we get a fair amount of grief — especially from Russia. An appropriate-sized tariff should reduce US unemployment, help balance the US, and help clean the air while pushing Russia in an alternative to war-talk.

There is certainly such a thing as too high a tariff, but it seems to me we’re nowhere near that. Too high a tariff is only when it severely limits the value of our purchasing dollar. We can’t eat dollars, and want to be able to buy foreign products with them. Currently foreign stuff is so cheap thought, that what we import is most stuff we used to make at home — often stuff we still make to a small extent, like shoes, ties, and steel. An import tax can be bad when it causes other countries to stop buying from us, but that’s already happened. Except for a very few industries, Americans buy far more abroad than we sell. As a result, we have roughly 50% of Americans out of well-paying work, and on some form government assistance. Our government spends far more to care for us, and to police and feed the world than it could possibly take in, in taxes. It’s a financial imbalance that could be largely corrected if we bought more from US manufacturers who employ US workers who’d pay taxes and not draw unemployment. Work also benefits folks by developing, in them, skills and self-confidence.

Cartoon by Daryl Cagle. Now why is Russia a most favorable trade partner?

Cartoon by Daryl Cagle. Trade as foreign policy. Why is Russia a most favorable trade partner?

In a world without taxes or unemployment, and free of self-confidence issues, free trade might be ideal, but taxes and unemployment are a big part of US life. US taxes pay for US roads and provide for education and police. Taxes pay for the US army, and for the (free?) US healthcare. With all these tax burdens, it seems reasonable to me that foreign companies should pay at least 5-10% — the amount an American company would if the products were made here. Tariff rates could be adjusted for political reasons (cartoon), or environmental — to reduce air pollution. Regarding Russia, I find it bizarre that our president just repealed the Jackson Vanik tariff, thus giving Russia most favored trade status. We should (I’d think) reinstate the tax and ramp it up or down if Russia invades again or if they help us with Syria or Iran.

A history of US tariff rates. There is room to put higher tariffs on some products or some countries.

A history of US tariff rates. Higher rates on some products and some countries did not harm the US for most of our history.

For most of US history, the US had much higher tariffs than now, see chart. In 1900 it averaged 27.4% and rose to 50% on dutiable items. Our economy did OK in 1900. By 1960, tariffs had decreased to 7.3% on average (12% on duty-able) and the economy was still doing well. Now our average tariff is 1.3%, and essentially zero for most-favored nations, like Russia. Compare this to the 10% that New York applies to in-state sales, or the 6% Michigan applies, or the 5.5% that Russia applies to goods imported from the US. Why shouldn’t we collect at least as high a tax on products bought from the non-free, polluting world as we collect from US manufacturers.

Some say tariffs caused the Great Depression. Countries with lower tariffs saw the same depression. Besides the Smoot-Hawley was 60%, and I’s suggesting 5-10% like in 1960. Many countries today do fine today with higher tariffs than that.

Robert E. Buxbaum, March 25, 2014. Previous historical posts discussed the poor reviews of Lincoln’s Gettysburg address, and analyzed world war two in terms of mustaches. I’ve also compared military intervention to intervening in a divorce dispute. My previous economic post suggested that Detroit’s very high, living wage hurt the city by fostering unemployment.

Where does industrial CO2 come from? China mostly.

The US is in the process of imposing strict regulations on carbon dioxide as a way to stop global warming and climate change. We have also closed nearly new power plants, replacing them with cleaner options like a 2.2 billion dollar solar-electric generator in lake Ivanpah, and this January our president imposed a ban on lightbulbs of 60 W and higher. But it might help to know that China produced twice as much of the main climate change gas, carbon dioxide (CO2) as the US in 2012, and the ratio seems to be growing. One reason China produces so much CO2 is that China generates electricity from dirty coal using inefficient turbines.

Where the CO2 is coming from: a fair amount from the US and Europe, but mostly from China and India too.

From EDGAR 4.2; As of 2012 twice as much carbon dioxide, CO2 is coming from China as from the US and Europe.

It strikes me that a good approach to reducing the world’s carbon-dioxide emissions is to stop manufacturing so much in China. Our US electric plants use more efficient generating technology and burn lower carbon fuels than China does. We then add scrubbers and pollution reduction equipment that are hardly used in China. US manufacture thus produces not only less carbon dioxide than China, it also avoids other forms of air pollution, like NOx and SOx. Add to this the advantage of having fewer ships carrying products to and from China, and it’s clear that we could significantly reduce the world’s air problems by moving manufacture back to the USA.

I should also note that manufacture in the US helps the economy by keeping jobs and taxes here. A simple way to reduce purchases from China and collect some tax revenue would be to impose an import tariff on Chinese goods based, perhaps on the difference in carbon emissions or other pollution involved in Chinese manufacture and transport. While I have noted a lack of global warming, sixteen years now, that doesn’t mean I like pollution. It’s worthwhile to clean the air, and if we collect tariffs from the Chinese and help the US economy too, all the better.

Robert E. Buxbaum, February 24, 2014. Nuclear power produces no air pollution and uses a lot less land area compared to solar and wind projects.