President Joe Biden and former President Donald Trump both portray tariffs as magic wands to create national prosperity. Trump is calling for a 10% across-the-board tariff on imports, while Biden is imposing selective tariffs that he portrays as miracle cures for any economic malaise. But tariffs have always been and always will be an enemy to prosperity and individual freedom.
The U.S. tariff code is the accumulated junk heap of centuries of political payoffs and kickbacks. In 1790, the Tariff Code consisted of a single sheet of rates posted at U.S. Custom Houses; now, our tariff code occupies two hefty volumes with more than 8,000 different rates, a blizzard of arbitrary discriminations against and among products.
Tariffs are not merely a slight nuisance imposed by government clerks at the national borders. Economist Henry George observed in 1886, “Protective tariffs are as much applications of force as are blockading squadrons…The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading.”
Tariffs are coercive in the same way that a sales tax is coercive. In 1956, the Joint Economic Committee of Congress declared, “For a government official to make a moral judgment on how we ought to spend our money is an invasion of liberty and privacy which is acceptable only where obvious public harm follows.” If one wishes to avoid being coerced by tariffs, one could simply abstain from buying orange juice, clothing, autos, machinery, medicine, shoes, etc. But, since few Americans can realistically choose to live in the mountains in a thatch hut on a diet of nuts and berries, people have no choice but to submit to the surcharges and dictates of American trade policymakers.
Every trade barrier undermines the productivity of capital and labor throughout the economy. A 1984 Federal Trade Commission study estimated that tariffs cost the American economy $8 for every $1 of adjustment costs saved. Restrictions on clothing and textile imports cost consumers $l.00 for each one cent of increased earnings of American textile and clothing workers, according to the London-based Trade Policy Research Centre. Tariffs are either a bailout to perpetuate uncompetitive American industries, or a license for efficient American industries to gouge their customers.
Trade is an issue not simply of exchanging widgets for gadgets—but of how people live their daily lives. Since practically no one can make all the things he wears, eats, and uses, a person’s living standard and opportunity in life depends largely on his opportunities for trading the product of his labor with others. Pervasive trade barriers effectively force people to use inferior building blocks for their life. Trade barriers are an attempt by politicians to control the market. And politicians cannot control the market without commanding everyone who must rely on that market.
If the government prohibited Americans from corresponding with citizens in the rest of the world, no one would deny that citizens’ liberties had been trampled. Totalitarian regimes do not directly intervene to prohibit each of their subjects from reading foreign books; instead, they simply seek to prohibit all unapproved foreign books from entering the nation. What is the difference in principle between prohibiting entry of almost all foreign books, and the U.S. import quotas that prohibited the entry of almost all foreign ice cream, peanuts, butter, and dry milk until recent decades? Freedom of choice is as important in how one lives as in what one reads.
Either the government has a valid moral reason for restricting one citizen’s freedom in order to boost another citizen’s profits, or a trade barrier is unjust. Protectionism means robbing Peter to pay Paul—or, more accurately, robbing a thousand Peters to pay one Paul. Oswald Garrison Villard, the editor of The Nation, observed in 1947, “Every citizen who has sufficient influence to get Congress to interfere with natural trade laws by creating a tariff dam across the currents of international trade, becomes a price dictator to all his fellow citizens.”
In trade policy, government cannot pick winners without turning everyone else into losers. Every trade barrier constitutes a moral judgment that certain groups of producers, workers, and shareholders will be treated as superior to the rest of society. William Graham Sumner observed in 1888, “The protectionist, instead of ‘creating a new industry,’ has simply taken one industry and set it as a parasite to live upon another.” The government protects the steel industry by sacrificing precision metal makers and agricultural equipment exporters. The government protects 11,000 sugar growers by sacrificing the sugar refining and food manufacturing industries. Since 1980, sugar trade barriers have destroyed ten jobs in food manufacturing for every sugar grower.
Unfortunately, neither today’s politicians nor the pundits recall that protectionism helped cause the American Revolution. In l750, Britain, in order to force America to buy from Britain, prohibited Americans from erecting any mill for rolling or slitting iron. British parliamentary leader William Pitt exclaimed, “It is forbidden to make even a nail for a horseshoe.” The Sugar Act of 1764 resulted in British officials confiscating hundreds of American ships, based on mere allegations that the shipowners or captains were involved in smuggling. To retain their ships, Americans had to somehow prove they had never been involved in smuggling—a near-impossible burden.
The British government issued “writs of assistance” entitling British soldiers to search the home of any colonist for evidence that tariffs on tea or whiskey had been shirked. Massachusetts lawyer James Otis denounced those writs for conferring “a power that places the liberty of every man in the hands of every petty officer.” British politicians responded to colonists’ protests by enacting the Declaratory Act, which proclaimed that Parliament “had, hath, and of right ought to have, full power and authority to make laws and statutes of sufficient force and validity to bind the colonies and people of America, subjects of the crown of Great Britain, in all cases whatsoever.” Such authoritarian language helped spark the Declaration of Independence, which specifically denounced King George for “cutting off our trade with all parts of the world.”
But don’t expect either Biden or Trump to learn anything from American history; they both sound as if they failed Econ 101. Perhaps the next round of trade follies will spur Americans to recall William Graham Sumner’s 1888 axiom: “The prosperity which we enjoy is the prosperity which God and nature have given us minus what the legislator has taken from us.” We have a choice of free trade or mindless protection; a protectionist regime that shoots blindly at people’s living standards, a protection that is simply a political auction, and a political spoils system consisting of the entire national economy.
