What Tariffs Would Really Mean

Every day, you plunk out cash to support your neighbors. And they support you. That’s how economies work.

I buy from my local store, which employs people, and I use local services. Even when I buy from Amazon, the stuff has to get here somehow.

We also pay taxes, much of which goes to services that employ and support people in the community. In this instance, you can think of the entire nation as your community.

So, how much of your cash are you willing to give to your neighbors?

Would you part with an extra $50 per month so that others could have a bit higher standard of living?

How about $100 per month?

What if the money went not only to workers, but also to business owners? Would you give them extra cash?

Welcome to the world of trade tariffs.

I’m not saying that tariffs are inherently bad or wrong. When Adam Smith wrote The Wealth of Nations in 1776 and described how free trade made everyone better off, he lived in a world of scarcity.

I can’t imagine that he envisioned a time when nations (cough, China, cough), would use the public coffers to build more steel mills, when they already had a glut of steel, simply to boost employment.

But we have to remain clear on what tariffs accomplish.

If a country is “dumping” a good like steel on the world market, they are selling it much cheaper than it can reasonably be produced.

This is bad for other producers, but good for buyers. Those buyers can earn higher profits, pay higher wages, cut prices, or some combination.

The local steel industry suffers, but steel buyers are pretty happy… and so are their customers and workers.

Putting an extra financial burden on steel means that a steel purchaser, like John Deere or GM, will have to pay more, presumably raising the price of imported steel to the reasonable production cost of domestic steel. This benefits domestic steel companies, but obviously raises the price to buyers like GM and John Deere, who must earn less, pay lower wages, raise prices, or some combination.