Generally the benefit caused by the increased domestic production in the tariff protected industry plus the increased government revenues does not offset the losses the increased prices cause consumers and the costs of imposing and collecting the tariff. We haven't even considered the possibility that other countries might put tariffs on our goods in retaliation, which we know would be costly to us. Even if they do not, the tariff is still costly to the economy. In my article The Effect of Taxes on Economic Growth we saw that increased taxes cause consumers to alter their behavior which in turn causes the economy to be less efficient.

Adam Smith's The Wealth of Nations showed how international trade increases the wealth of an economy. Any mechanism designed to slow international trade will have the effect of reducing economic growth. For these reasons economic theory teaches us that tariffs will be harmful to the country imposing them.

That's how it should work in theory. How does it work in practice?

Empirical Evidence on the Effect of Tariffs on the Country Imposing Them

Study after study has shown that tariffs cause reduced economic growth to the country imposing them. A few of examples:

The essay on Free Trade at The Concise Encyclopedia of Economics looks at the issue of international trade policy. In the essay, Alan Blinder states that "one study estimated that in 1984 U.S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker. That same study estimated that restricting foreign imports cost $105,000 annually for each automobile worker's job that was saved, $420,000 for each job in TV manufacturing, and $750,000 for every job saved in the steel industry."

In the year 2000 President Bush raised tariffs on imported steel goods between 8 and 30 percent. The Mackinac Center for Public Policy cites a study which indicates that the tariff will reduce U.S. national income by between 0.5 to 1.4 billion dollars. The study estimates that less than 10,000 jobs in the steel industry will be saved by the measure at a cost of over $400,000 per job saved. For every job saved by this measure, 8 will be lost.

The cost of protecting these jobs is not unique to the steel industry or to the United States. The National Center For Policy Analysis estimates that in 1994 tariffs cost the U.S. economy 32.3 billion dollars or $170,000 for every job saved. Tariffs in Europe cost European consumers $70,000 per job saved while Japanese consumers lost $600,000 per job saved through Japanese tariffs.

These studies, like many others, indicate that tariffs do more harm than good.

I agree. Free trade is good.

Ajax wrote on May 15^th, 2016 at 10:02pm:


Tariffs are a form of tax which robs the consumer of its purchasing power. All they do is raise prices for all goods, not just imported goods.

Ajax wrote on May 15^th, 2016 at 10:02pm:


Tariffs are a form of tax which robs the consumer of its purchasing power. All they do is raise prices for all goods, not just imported goods.

The wealthy will do well under tariffs because they spend so little of their earnings on consumption. The poor will pay because they cannot protect themselves from price rises.

All forms of tax on consumption are regressive.

Tariffs such as this are often overturned by the WTO and sometimes by protests from companies that use steel as an input in manufacturing.

China is filing a complaint with the WTO.

The Australian government has proclaimed that Australians have a job servicing each other and magically producing economic growth from thin air.

1. Now tell me again why tariffs are bad and what benefit we have seen from their dismantlement thus far?

2. BTW If taxes are regressive why do you support a tax on energy which affects everyone and every industry..????