by Lew Rockwell, Lew Rockwell:
Donald Trump is a strong believer in protective tariffs, and this is very bad news for those of us who support the free market. In Trump’s opinion, tariffs are a great idea. Here is what he said about them in an interview last month: “Trump has proposed a 10 percent across-the-board tariff on all imports and 60 percent on goods from China. During Tuesday’s remarks, he singled out imported cars for higher trade duties, saying he would slap a100, 200 or 300 percent tariff on cars made in Mexico. He also floated imposing 50 percent tariffs on goods to force companies to relocate operations to the U.S. to avoid the penalty.
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‘First of all, 10 percent when you collect it is hundreds of billions of dollars … all reducing our deficit,’ he said. ‘But really, so there’s two ways of looking at a tariff. You can do it as a money-making instrument, or you can do it as something to get the companies. Now, if you want the companies to come in, the tariff has to be a lot higher than 10 percent because 10 percent is not enough. Guys, they’re not going to do it for 10, but you make a 50 percent tariff, they’re going to come in.’”
Trump discusses tariffs as if they were a way of improving the free market. In fact, though, as the great economist Murray Rothbard points out in Power and Market, tariffs directly attack the essence of the free market, namely that people gain through mutually advantageous trade. Rothbard proves this by a brilliant reductio ad absurdum argument: “The absurdity of the pro-tariff arguments can be seen when we carry the idea of a tariff to its logical conclusion—let us say, the case of two individuals, Jones and Smith.”
You might think that Rothbard has gone too far— aren’t individuals very different from nations? Isn’t a discussion of two-person trade irrelevant? But Rothbard has a convincing response. Often a very simple example. reveals the principle that underlies a much more complicated case. As he explains:
“This is a valid use of the reductio ad absurdum because the same qualitative effects take place when a tariff is levied on a whole nation as when it is levied on one or two people; the difference is merely one of degree. Suppose that Jones has a farm, ‘Jones’ Acres,’ and Smith works for him. Having become steeped in pro-tariff ideas, Jones exhorts Smith to ‘buy Jones’ Acres.’ ‘Keep the money in Jones’ Acres,’ ‘don’t be exploited by the flood of products from the cheap labor of foreigners outside Jones’ Acres,’ and similar maxims become the watchword of the two men. To make sure that their aim is accomplished, Jones levies a 1,000-percent tariff on the imports of all goods and services from ‘abroad,’ i.e., from outside the farm. As a result, Jones and Smith see their leisure, or ‘problems of unemployment,’ disappear as they work from dawn to dusk trying to eke out the production of all the goods they desire. Many they cannot raise at all; others they can, given centuries of effort. It is true that they reap the promise of the protectionists: ‘self-sufficiency,’ although the ‘sufficiency’ is bare subsistence instead of a comfortable standard of living.”
Rothbard next addresses a central point of pro-tariffs defenders like Trump, the alleged need to keep money at home.
