Trump loves tariffs. He is a mercantilist. Only economically illiterate people believe in mercantilism. It means you have either never heard of or do not understand ricardo's law of comparative advantage. We have seen this in practice. The era of trade liberalisation has seen trade grow quite strongly. In Australia we have seen this up quite close since we started to lower out high tariff wall. Australia has become a richer and stronger economy.
Let us go back to the USA. When the manufacture a car a lot of its inputs come from overseas mainly Canada and Mexico. This is because those inputs have lower cost there than in the USA. If tariffs are raised or created then import prices will rise. Imported car prices will rise but US car prices will rise as well because their costs rise as well.
What's more it won't increase employment either. .Employment in manufacturing might rise BUT there are many more jobs in the tertiary industries. Think sales, repairs, design etc. Employment will fall because less cars will produced because of the price rises.
It is the ultimate lose-lose situation!
Only a person of limited intelligence would implement such a policy. Autocrats are attracted to mercantilism. Why I will leave to others.
Whoopsy I forgot to mention that tariffs are simply an indirect tax on imports and thus are quite regressive. Yet again Trump hurts his own supporters
No comments:
Post a Comment