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April 2, 2018

Chinese Trade War Shows Tariffs Don't Make America Great Again

  Institute for Policy Innovation

DALLAS – As China increases tariffs on 128 U.S. products and the first sparks of a trade war begin to fly, President Trump demonstrates a failure to learn lessons from history in his pursuit to make tariffs great again.

In a new publication from the Institute for Policy Innovation (IPI), “Five Undeniable Truths About Tariffs,” resident scholar Merrill Matthews, Ph.D., says the Trump administration’s duties on aluminum and steel imports, with additional tariffs to come on more than $50 billion of Chinese goods, will undermine the economic boost of December’s historic tax reform legislation.

 “Since the disastrous passage of the Smoot-Hawley Tariff Act of 1930, in which Congress imposed high tariffs on goods across the board, most economists and policy experts have discouraged tariffs and import restrictions,” writes Matthews. “The better approach is for the president to give his tax cuts time to work by spurring economic growth and giving U.S. companies a more competitive edge globally.”

When it comes to tariffs, Matthews calls the following five facts indisputable:

  • A tariff is a tax;
  • A tariff is inflationary, increasing the price of a good without a corresponding increase in quality or quantity;
  • A tariff is a government-imposed price control;
  • A tariff is crony capitalism, with companies lobbying for tariffs to use the power of government to limit or punish competitors; and
  • A tariff’s biggest impact is downstream, adversely affecting millions of workers in dependent industries.

“Tariffs don’t make America great again, just more expensive—and a lot less competitive,” said Matthews. “Providing a low corporate tax rate and a light-touch regulatory environment, not tariffs, is the best way for governments to help challenged industries.”

 


 The Institute for Policy Innovation (IPI) is an independent, nonprofit public policy organization based in Dallas. IPI resident scholar Merrill Matthews, Ph.D. is available by contacting Erin Humiston at (972) 874-5139, or erin@ipi.org. 


 

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