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Protectionism keeps making Americans poorer

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“President Trump’s decision to impose tariffs on imported washing machines has had an odd effect,” notes Jim Tankersley in the New York Times. “It raised prices on washing machines, as expected, but also drove up the cost of clothes dryers, which rose by $92 last year.

Tankersley is referring to a new report by a team of economists at the University of Chicago and the Federal Reserve Board that studied the effects of Trump’s 2018 tariffs on imported washing machines. Their report finds that,

Despite the increase in domestic production and employment, the costs of these 2018 tariffs are substantial: in a partial equilibrium setting, we estimate increased annual consumer costs of around $1.5 billion, or roughly $820,000 per job created.

The workers certainly didn’t get paid $820,000 a year to make washers, so where did money go? It went into the coffers of the Treasury and into the pockets of companies that manufacture washing machines and dryers. “Companies that largely sell imported washers, like Samsung and LG, raised prices to compensate for the tariff costs they had to pay,” says Tankersley. “But domestic manufacturers, like Whirlpool, increased prices, too, largely because they could.”

When the companies pushed for the tariffs to “save American jobs” what they were really doing was increasing their own profits by preying on the economic ignorance of the American public about the effects of tariffs. (Crony capitalists are gifted in finding ways to get the public to support policies that make them richer while making other citizens poorer.)

This is a classic example of how protectionism focuses on that which is seen and ignores what which is not seen. Like the president, it’s easy for us to “see” that 200 jobs were “saved.” What is harder—indeed nearly impossible—for the public to see is the cost of the protectionist policy, including the jobs that weren’t created because of the tariffs.

Because Americans had to spend about a billion dollars more for washing machines and dryer than they would have without the tariff, they have less to spend on other goods and services. While those 200 workers may have been better off (depending on whether or not they could have found other jobs), the American public overall was made much, much worse off.

Somewhere a parent wasn’t able to buy new clothes for their children because they had to spend more money than was necessary on tires. Somewhere a single mother had to choose between putting food on the table and getting a washer and dryer to clean her family’s clothes. Those are the types of tradeoffs the tariff forced Americans to make.

Also, keep in mind that we are only talking about the effect of one tariff on one small industry. Imagine the effect of all unnecessary tariffs on the entire economy, an effect estimated to be $500 billion a year. How many more good and services did we have to give up to “protect” those jobs?

This is why protectionism makes us poorer, not richer. While it looks like we are “saving” some jobs, what we don’t see is that it is costing us other job and that everyone, especially the poor, has to bear the burden in the form of higher prices. The more tariffs we impose, the more industries we “protect,” the poorer we all become.

 

Image source: Pixabay

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Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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