An Example of Government Harm (Part 1)
The Wall Street Journal has a sobering story from May 25th about how Trump’s tariffs have sent negative shocks throughout the Los Angeles economy (How Trump’s Trade War Is Battering the Los Angeles Port Economy - WSJ). This is a textbook example of when public policy causes direct harm to people. As I laid out in my previous post, when governments allow markets to function properly, there is rarely, if ever, actual harm being done. This is because transactions are made voluntarily with minimal hinderance. Some businesses may not do as well as others, but the government isn’t directly responsible for their downfall.
However, in the case of tariffs, the increase in taxes being levied on foreign goods is causing a damaging ripple effect within the Southern California economy. Because of the tariffs, the flow of goods has dropped significantly into the ports of Los Angeles and Long Beach. The WSJ highlighted some direct effects from those decreases in shipments: “A reduction in containers flowing into the ports means fewer hours for dockworkers and warehouse employees and fewer loads for truckers such as Diaz. It also means less business for local restaurants, truck dealerships and repair shops, whose owners and managers say they are cutting hours and staff. “
By interfering directly in the trade process, the U.S government has caused detrimental effects on a flourishing sector of the Los Angeles economy. The WSJ notes that “Trade and logistics are among the biggest economic drivers in Southern California, directly employing about 900,000 people and generating almost $500 billion in economic output across the region, according to the Los Angeles County Economic Development Corp.” Why would the government want to tear this down?
Two different business owners in the story both said their sales/revenue were down around 15% as a result of the tariffs. Consumers did not impose tariffs. Businesses did not impose tariffs. The market overall did not impose tariffs. It was the government that did so, and because it did there are now reductions in jobs, revenue and just overall economic activity. There are tradeoffs to everything in life, and we must weigh those tradeoffs when we make decisions. I’m not sure what the benefits are of these tariffs, but I know the costs and the harm they have done and will continue to do if they aren’t repealed.
