Hooray for tariffs! They are the natural, logical defense for that form of economic warfare that is subsidy. Chinese steel is notably subsidized. US corn is another egregious example. And the list goes on...
Great article. Tariffs will raise a lot of revenue if, for example, more steel is made in the USA instead of being imported. There will be higher income taxes and higher corporate profits. Many U.S. exports are also high-tech items such as jets and software that can't be substituted, though Boeing is working hard to erode its edge, while other goods such as wheat are totally fungible worldwide. Most countries can't retaliate as hard as they'd like. The best AI chips will be in demand even at high tariffs, and Russian oil keeps finding its way overseas despite sanctions.
On Ricardo, he wasn't correct about comparative advantage. See: 1,000,000 economists can be wrong: the free trade fallacies
I did a post last week looking at various ways tariffs might impact markets, including a stronger dollar, higher gold prices and financial market turmoil.
Almost two decades ago I came across the paper on free trade by Ha-Joon Chang. It seemed radical and controversial, and being attracted to all things radical and controversial, I read it carefully. It caused me to change my mind on free trade, as it was supported by all the empirical evidence that you listed in the article. "Free trade" is another misnomer foisted on us by the wealthy elite, just as "free markets", "free society", and "democracy" have been. BTW, the tariffs of 1861 are considered by a growing number of historians to be the primary cause of the Civil War. The North wanted the tariffs to protect their growing industry against British dumping, and the South wanted to continue selling cotton, rice, and tobacco to the British in exchange for manufactured goods, which could be sold within the rest of the US at a profit. The British knew that these underpriced goods would crush the small American manufacturers, and was trying to split the rising United States. They succeeded in the short run, but ultimately failed. Britain was following the same strategy that the Neocons use today - prevent the rise of any global power that might have the capacity challenge them.
Exactly. For me, changing my mind on free trade was a painful but necessary step in my (for lack of a better word) "enlightenment." I was so convinced of its importance that at one time my online username was FreeTrader...
And here in the real world of non-ideal government, a shift of the tax burden to tariffs would get the government out of taxing itself so badly. Government at all levels buys a lot of domestic labor and production -- and it taxes domestic labor and production bigly. This is part of why the government appears to keep getting bigger while getting less done.
Fantastic article. It has always bothered me that neoliberal economist will point out that tariffs are a type of tax and then list all the potential problems with them. These problematic effects are real, but I have never seen one of these economists compare the downsides of tariffs vs the downsides of other forms of taxes. I don't think it has ever occurred to them that tariffs might be preferable to the other taxes we levy.
To be clear, my suggestion is to replace ALL existing taxes with the four taxes I am proposing -- a poll tax, a land-value tax, a tariff, and a transaction tax. The total tax on individuals will end up being much less than our current system.
But you are 100% correct that in our current circumstances the most likely outcome is tariffs PLUS income tax. That is not at all what I would like to see happen; I consider the income tax to be both absurd and immoral. However, I don't know of any way to propose a coherent reform that isn't susceptible to just being cherrypicked by bad legislators. From what I understand, the same thing has happened in dozens of tax jurisdictions worldwide when professional economists have proposed reforms. If Nobel Prize winning economists with friends in the Treasury department or Ministry of Trade can't get their way, I probably won't either. :(
It should be noted that the McKinley Tariff of 1890 was extremely unpopular and lead to McKinley's Republicans losing the 1890 congressional elections in a landslide and then losing the 1892 presidential election whereupon it was repealed.
Hooray for tariffs! They are the natural, logical defense for that form of economic warfare that is subsidy. Chinese steel is notably subsidized. US corn is another egregious example. And the list goes on...
Great article. Tariffs will raise a lot of revenue if, for example, more steel is made in the USA instead of being imported. There will be higher income taxes and higher corporate profits. Many U.S. exports are also high-tech items such as jets and software that can't be substituted, though Boeing is working hard to erode its edge, while other goods such as wheat are totally fungible worldwide. Most countries can't retaliate as hard as they'd like. The best AI chips will be in demand even at high tariffs, and Russian oil keeps finding its way overseas despite sanctions.
On Ricardo, he wasn't correct about comparative advantage. See: 1,000,000 economists can be wrong: the free trade fallacies
https://www.debtdeflation.com/blogs/2011/09/30/1000000-economists-can-be-wrong-the-free-trade-fallacies/
I did a post last week looking at various ways tariffs might impact markets, including a stronger dollar, higher gold prices and financial market turmoil.
Gold Thinks Trump Gets Tariffs
https://basedmoney.substack.com/p/gold-thinks-trump-gets-tariffs
Great links, thank you. I always love Keen and I'll have to start reading your substack regularly for the economic analysis.
Almost two decades ago I came across the paper on free trade by Ha-Joon Chang. It seemed radical and controversial, and being attracted to all things radical and controversial, I read it carefully. It caused me to change my mind on free trade, as it was supported by all the empirical evidence that you listed in the article. "Free trade" is another misnomer foisted on us by the wealthy elite, just as "free markets", "free society", and "democracy" have been. BTW, the tariffs of 1861 are considered by a growing number of historians to be the primary cause of the Civil War. The North wanted the tariffs to protect their growing industry against British dumping, and the South wanted to continue selling cotton, rice, and tobacco to the British in exchange for manufactured goods, which could be sold within the rest of the US at a profit. The British knew that these underpriced goods would crush the small American manufacturers, and was trying to split the rising United States. They succeeded in the short run, but ultimately failed. Britain was following the same strategy that the Neocons use today - prevent the rise of any global power that might have the capacity challenge them.
Exactly. For me, changing my mind on free trade was a painful but necessary step in my (for lack of a better word) "enlightenment." I was so convinced of its importance that at one time my online username was FreeTrader...
Thank you for your rigorous analysis and for making your assumptions transparent… This is what journalism should be like.
Thank you for the kind words!
And here in the real world of non-ideal government, a shift of the tax burden to tariffs would get the government out of taxing itself so badly. Government at all levels buys a lot of domestic labor and production -- and it taxes domestic labor and production bigly. This is part of why the government appears to keep getting bigger while getting less done.
Fantastic article. It has always bothered me that neoliberal economist will point out that tariffs are a type of tax and then list all the potential problems with them. These problematic effects are real, but I have never seen one of these economists compare the downsides of tariffs vs the downsides of other forms of taxes. I don't think it has ever occurred to them that tariffs might be preferable to the other taxes we levy.
I too am a tariffs appreciator
Feeling so validated right now!
Excellent article, thank you.
There are two different policy proposals here that are being conflated.
One is to replace the current income tax with a high tariff.
The other is to implement a high tariff in addition to our current income tax.
While much of your analysis is based on the former it is the latter that's likely to actually happen if this proposal is pushed.
To be clear, my suggestion is to replace ALL existing taxes with the four taxes I am proposing -- a poll tax, a land-value tax, a tariff, and a transaction tax. The total tax on individuals will end up being much less than our current system.
But you are 100% correct that in our current circumstances the most likely outcome is tariffs PLUS income tax. That is not at all what I would like to see happen; I consider the income tax to be both absurd and immoral. However, I don't know of any way to propose a coherent reform that isn't susceptible to just being cherrypicked by bad legislators. From what I understand, the same thing has happened in dozens of tax jurisdictions worldwide when professional economists have proposed reforms. If Nobel Prize winning economists with friends in the Treasury department or Ministry of Trade can't get their way, I probably won't either. :(
And that is way I'm extremely skeptical of pushes for new taxes of any kind.
Read my lips... No new...nevermind
It should be noted that the McKinley Tariff of 1890 was extremely unpopular and lead to McKinley's Republicans losing the 1890 congressional elections in a landslide and then losing the 1892 presidential election whereupon it was repealed.
Wtf, tree, you advocate for local businesses but buy Bri'ish plastic soldiers? Buy local, lmao
That's it, I'm selling my collection. I am shamed.