Commentary |

Tariffs are a problem, not a solution | Opinion

Tariffs may seem like an esoteric subject, understood by and of interest only to economists — practitioners of the reputedly abstruse “dismal science.” But in U.S. history, tariffs have been a strongly felt issue and are an important though often overshadowed topic in 2024’s presidential campaign.

Tragically, tariff battles sometimes have contributed to real battles. Trade and tariff wars have been destructive and, according to some analyses, have stimulated actual wars.

Before the Civil War — including the 1824, 1828 and 1844 presidential elections — tariffs bitterly divided the North and South. South Carolina tried to nullify a national tariff in 1832 and even then considered secession.

The South opposed tariffs because they increased the prices of items that its agricultural states imported, while the North favored tariffs to protect its manufacturing businesses. Although slavery was the main issue between the regions, tariff disputes exacerbated the split.

Seventy years later, responding to the onset of the Great Depression, Congress passed the Smoot-Hawley tariff, which in 1930 raised duties on more than 20,000 imported goods and made many products unaffordable. That prompted retaliatory tariffs by 25 other countries in the next two years — which reduced U.S. foreign trade, stressed the global economy and worsened the depression.

Claude Barfield, a resident scholar at the American Enterprise Institute, says the Smoot-Hawley tariff “prolonged (the depression) and possibly deepened it around the world, not just in the United States.”

Charles Kupchan, an international affairs professor, has written that “the Smoot-Hawley Tariff Act … triggered the fragmentation of the global economy and the collapse of international trade.”

The tariff eventually was reduced in 1934, during the Franklin Roosevelt administration.

In 1947, responding to tariff-caused problems that damaged the international scene before World War II, 23 countries initiated the General Agreement on Tariffs and Trade, which aimed to reduce or end trade barriers, including tariffs. That was succeeded in 1995 by the World Trade Organization, which included 125 countries. The WTO continued GATT’s anti-tariff orientation and fostered expansion of world trade.

In this year’s presidential election, the issue again has surfaced. Donald Trump, who raised tariffs as president, favors a 60% tariff on goods from China and 10% on imports from other countries. Kamala Harris calls that a “sales tax” on purchases and says she would take a more cautious approach for “targeted and strategic tariffs to support American workers, strengthen our economy and hold our adversaries accountable.”

By raising the prices of imports, tariffs ostensibly are intended to help domestic producers and induce consumers to buy domestically created goods. But in today’s highly, ever more interconnected global economy, many desired products — including popular electronics — are produced only or principally in other countries, so tariffs hurt those consumers, as well as foreign supply chains for U.S.-made merchandise.

Despite what some politicians say or voters believe, tariffs aren’t paid by the exporting country they’re aimed at. They’re paid first by the domestic businesses that import the goods, and that additional cost is passed on to individual consumers. So tariffs are a sure driver of inflation. President Biden made that point as a candidate in 2019, saying that “any beginning econ student … could tell you the American people are paying for [Trump’s] tariff” (although he kept many of them).

Other prominent voices also sound warnings. A Federal Reserve paper said any boosts from tariffs “are more than offset by larger drags from the effects of rising costs and retaliation tariffs.” Alan Greenspan, a former chair of the Federal Reserve System board, agrees that tariffs slow economic growth.

Four experts on economics and international matters wrote in “Foreign Affairs” magazine that “tariffs have not resurrected American manufacturing. But they could suppress it … In fact, sweeping tariffs could make the United States less secure.”

Oxford University economist Linda Yueh called tariffs “inefficient and also distortionary (on prices).” Erica York, a professor and senior economist at the Tax Foundation, says “tariffs … result in higher prices, lower employment and slower economic growth in the long run.”

And the World Economic Forum, which includes approximately 1,000 companies, wants tariffs eliminated.

Initially, high tariffs may be emotionally and politically satisfying. But ultimately, they’re detrimental. What’s touted as a simple and forceful solution for economic concerns is, in reality, a mirage fraught with problems.

That’s good to remember in our election. This consequential issue extends well beyond the “dismal” reach of economic theory and into the life of every consumer — which means every person.

Roger Buckwalter is a retired editorial page editor of The Jupiter [Fla.] Courier.