The Asymmetrical Argument Underpinning Tariffs
The most common defense of tariffs centers around the notion that the United States needs to re-industrialize. The logic seems to be that if we increase tariffs on foreign competition, this will protect and strengthen current American companies while incentivizing more entrepreneurs to start manufacturing goods within the U.S. This in turn will lead to plentiful jobs and a thriving economy.
However, if we examine this argument just a little more closely, we will see one very specific hole in this logic that has irked me for a while now. Let’s use the recent arms deal that the United States just made with Saudia Arabia as an example of how proponents of tariffs lack symmetry within their advocation for them. The deal is estimated to be around $142 billion and is touted to be the “biggest arms deal in history” (Biggest Arms Deal in History a Win for Trump - Newsweek).
President Trump will present this deal as a massive win for the United States because our defense companies sold various aircrafts, missiles, and radars to Saudi Arabia for a large chunk of cash. Tariff crusaders will point to this deal as a reason why it’s vital to keep the industrial base strong within the United States since if it weren’t, no deal like this would have been made. But, how did Saudi Arabia get enough funding to buy all of this military equipment? In order for the U.S to have profitable and sizable exports, other countries like Saudi Arabia must have funding to pay for them as imports. And in order for Saudi Arabia to have financial capital to buy our exports, they must have a growing economy. And in order for Saudi Arabia to have a growing economy, they must be able to sell goods and services to as wide an audience as possible.
This is where I think the pro-tariff position lacks symmetry. They only focus on one side of the equation when it comes to trade. If the United States brought home manufacturing from China, Vietnam, Canada, Mexico, etc., what do we think these other countries would do in response? They most certainly would lose a lot of economic output, thus reducing their buying power. Do champions of tariffs think the end-state should be the United States becoming some self-sustaining powerhouse where everything you can think of will be manufactured here at a reasonable price with adequate output? If so, then this is quite the fantasy scenario.
Proponents of free trade like myself believe trade benefits both parties involved and that it leads to specialization and a more efficient allocation of resources. There is symmetry here because we understand the gains from trade are felt by both sides of the equation. I do have some sympathy for the argument that we need to keep defense manufacturing strong within the United States, but why would we want to produce clothing or dig up lithium mines?
I truly want to know what the full purpose of tariffs is supposed to accomplish. What does the ideal U.S economy look like to those who espouse the benefits of tariffs? As far as I can tell their rationale is lacking, but I will keep an open mind.
