Tariffs are not a topic we discuss often in the modern era. The United States has generally followed a policy of free trade, at least since WWII. We participate in multiple international organizations, like the World Trade Organization (WTO), designed to promote free trade among their members. The United States has pursued this policy based on years of economic research that tells us that free trade benefits the economies of all the countries involved.
For those of us who aren’t economists: a tariff is a tax on imported goods. They are meant to protect industry in the country that levies them, by making goods from overseas more expensive or keeping those goods out of the market altogether.
For example, in order to help American steel and aluminum manufacturers, President Donald Trump said he wants to place an import tariff on steel and aluminum. Foreign steel manufacturers would have to charge more to cover the cost of this tax, meaning that American companies would use less foreign steel to build their products.
It sounds great, especially to a president like Trump, who gained thousands of voters from organized labor by promising to revitalize American manufacturing. However, there are a few problems with this theory that should lead most Americans to the conclusion that tariffs are a bad idea. In the Trump era, many of us have a tendency to support or oppose a policy based on whether Trump supports it or not. Democrats and Republicans alike need to understand why they should stand firm and oppose the president on this issue.
First, the price of many goods will go up for American consumers. The whole reason to place a tariff on a foreign good is that the foreign good can be produced and sold cheaper than its American equivalent. So, when you place tariffs on steel and aluminum, the price of anything made of steel or aluminum will go up.
Think of everything you can that is made of either steel or aluminum. The prices of thousands of products that millions of Americans use every day would rise– meaning fewer Americans would be able to afford some of these products.
For instance, think about all the steel and aluminum TCU uses in its endless construction projects. If those projects become more expensive to complete, that higher cost could be passed on to you in the form of tuition increases. Yes, steel and aluminum tariffs could even affect your college tuition.
Next, tariffs usually invite tariffs in return. If the United States places a tariff on Chinese goods, it is almost certain that China will place a tariff on American goods– which is exactly what they did last week. This actually harms U.S. industries because it can shrink or even completely close off a huge market for them to sell their goods. Americans with good jobs working in export industries could lose their jobs or take a cut to their pay or hours.
We have already seen this with the recent talk about steel and aluminum tariffs. When Trump announced his intention to pursue tariffs on steel, many European leaders threatened tariffs on U.S. goods in return. This vicious cycle of meeting tariffs with tariffs, otherwise known as a trade war, harms the economies of all involved. The prices of many goods go up, meaning fewer Americans can afford those goods, industries affected by the return tariffs might have to lay off workers, and overall cooperation between the United States and important ally nations would suffer.
Finally, since the U.S. is a member of the WTO, any other WTO member could challenge the tariffs. If the WTO rules the tariffs to be unjust and Trump chooses to ignore that ruling, it could undermine the WTO as an international institution and hurt our relations with the 163 other member states.
Many Americans, however, don’t think the U.S. needs the WTO. I would argue that Trump doesn’t think we need any international organization, including this one. It is important to remember that the U.S. has brought disputes before the WTO 115 times and most of the time we get what we want. Trump’s claim that, “The WTO was set up for the benefit of everybody but us,” is completely untrue. The U.S. has used the WTO many times throughout its history to fight against trade policies in other countries that harm U.S. businesses and workers. In fact, for many years countries like China have accused the WTO of being an organization biased in favor of the U.S.
It must be noted that these tariffs could benefit some Americans. Members of the steelworkers union love these tariffs because they increase the demand for U.S. steel since there is no alternative– but most of us are not steelworkers and there will never be enough steel jobs to benefit the majority of Americans. We can’t prioritize this one industry over the others.
The bottom line is that tariffs are a bad idea. They harm American industry more than they help it. Even if the most promising estimates are true, the number of jobs produced in the steel industry will not come close to covering the jobs lost as a result of Trump’s tariffs.
This talk of tariffs, trade balances and trade wars is misguided and dangerous. Someone has to stand up to the President on this disastrous policy before it’s too late.