The Case for Trump’s Tariffs Doesn’t Persuade

They may be emotionally resonant, but they’re at odds with economic theory and mountains of evidence

Letters to The WSJ. 

"In “The Case for Trump’s Tariffs” (op-ed, Sept. 20), John Paulson asks, “Isn’t it better to tax foreign entities for entering the American market than impose new taxes on American families?” His question is emotionally resonant but at odds with economic theory and mountains of evidence.

As every economist can tell you, and as my introductory economics students will learn over the next few weeks, tariffs are “new taxes on American families.” Free trade became “orthodoxy” among economists in response to compelling theory and overwhelming evidence. This time isn’t different: American consumers, not foreign producers, will bear any tariff’s brunt.

Prof. Art Carden

Samford University

Birmingham, Ala.

Mr. Paulson’s defense of former President Donald Trump’s protectionism is seriously flawed. As documented by economist Michael Strain and others, wages haven’t “stagnated” since 2000. Real average hourly earnings of production and nonsupervisory workers are today 25% higher than in 2000. Nor has the merchandise trade deficit “been devastating for U.S. industry.” American industrial capacity is at an all-time high and 17% greater than in 2000, while industrial production is 1% shy of its historical peak in September 2018.

One reason the merchandise trade deficit hasn’t devastated U.S. industry is that nearly 80% of American gross domestic product is produced in the service sector. It’s unsurprising Americans import more merchandise than we export—and export more services than we import. Further, more than half of our imports are intermediate goods used by U.S.-based producers. American industry is helped, not harmed, by this net inflow of goods from abroad.

Finally, Mr. Paulson errs by describing tariffs as taxes on foreigners. Tariffs protect domestic producers only insofar as they raise prices that consumers pay for imports. In other words, U.S. tariffs are taxes paid by Americans who purchase either imports or domestically produced outputs, the prices of which are artificially raised by tariffs.

Veronique de Rugy

Mercatus Center, George Mason U.

Arlington, Va.

Mr. Paulson joins the chorus propagating the debunked belief that the “smart use of tariffs” will “restore American manufacturing.” Nothing could be further from the truth. But don’t take my word for it—ask Donald Trump’s own Council of Economic Advisers from when he was president.

In its 2019 report, signed by Mr. Trump, the council details that the tariffs he enacted failed to achieve any beneficial changes in other countries’ trade policies. Quite the opposite: “Canada, China, the EU, Mexico, Russia, and Turkey imposed retaliatory tariffs.” That same year, the Federal Reserve released its own report on Mr. Trump’s tariffs. The result: “U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment.” This comports with more recent research, which finds that “the costs of US tariffs continue to be almost entirely borne by US firms and consumers” and U.S. tariffs imposed on China are accompanied by “an overall welfare loss of 0.12 percent of GDP.”

Tariffs are a rotten deal for America and its people. We need fewer barriers to trade, not new ones.

David Hebert

American Inst. for Economic Research"