Let us take up the limited government point of view according to which some small amount of taxation is justified and economically important. At present, relative to tariffs, income taxes reach into the stratosphere. The former is estimated as bringing about 2.5% of all government revenues. There is the eminently reasonable point to be made that our country’s GDP would be higher if the former were lowered and the latter raised. This has to do with the diminishing returns of pretty much everything in economics, at least eventually.
But this is not at all Mr. Trump’s tariff plan. Yes, he has been in effect balancing tax by lowering those in income, on corporations, etc. However, in his view, tariffs are per se a good thing. Indeed, that word is the most beautiful in the entire English language according to him. No economist worthy of his salt would go along with any such claim, to say the least. However, to defend out president, “actions speak louder than words.” Given that we must have taxation at all (some extremists argue against this), it is not at all clear that The Donald’s actions, as opposed to his mere rhetoric, are at all ineffective. Yes, he would be well advised to have a love affair with some other word than “tariffs.”
Then, too, many objections to Trump’s tariffs are far too general. They apply to all taxes. Therefore, the denigration of these levies completely miss the mark, given our assumption that at least some taxation is justified. However, it does not logically follow that many of the critics of Trump’s tariffs are misbegotten that his plan is valid.
Some of the criticisms of the flat earth hypothesis may well be wrong, but that hardly supports this viewpoint. Showing the errors of flat earth criticism does indeed, somewhat, vaguely, indirectly, buttress flat-earthism. Anyone contenting himself with this sort of argument shows how weak is his support for Trump’s policy.
Is there any sort of economic case for some type sort of tariff? According to some economists, there is. It would depend upon the existence of monopoly power on the part of the home country, and then being able to extract monopoly profits on the basis of it from other countries; through tariffs. In my view this is wrong per se, since in the first place the monopoly theory at the basis of this initiative is itself faulty. As I see matters, there is not, there cannot be, any such thing as monopoly under full free enterprise. These theoreticians rely upon concentration ratios to establish monopoly, and the two are very different incompatible phenomenon. Real monopoly depends solely upon special privileges which can only emanate from government (the Post Office, taxi cab medallions, some licensing arrangements), and has nothing at all to do with business concentration.
This is a “beggar my neighbor” policy. This erroneous theory at best implies that under very limited circumstances the domestic country can have its economic welfare improved, but only at the cost of impoverishing the rest of the world.
However, even this monopolistic justification for tariffs only claims benefits on the part of the home country given the unlikely case that they do not bring in their wake retaliatory tariffs from other nations.
Is there an argument for tariffs on a non-economic basis? Yes, from the perspective of politics, but not economics. Stipulate, arguendo, that some country engages in slave labor against a minority of its population. We do not have to go too far out on the proverbial limb to posit, also, that this is a bad thing. We have to reach further to assume it is any business of the US government to stop this moral outrage, but we go there too. Then, there are two types of activities our country could take. One, bomb them back into the stone age. Two, engage in very punitive tariffs against them. Surely, the latter has great advantages over the former. At the very least, we should try trade restrictions which will hurt the both of us, first, before getting into the deep water of a military battle.
By the way, did Bernie Sanders ever support tariffs? He most certainly did; he is on record for so doing. He insisted though that while his own type of tariffs would be justified, none of the present ones pass this test. However, he fails, utterly, to offer any criterion on the basis of which disinterested parties can discern the difference. Therefore, it comes from him with little grace to inveigh against Trumpian tariffs.
