Guest Opinion: Both Parties Offer Bad Trade Policy – The Coastland Times

By John Hood

RALEIGH – For all the obvious and consequential differences between Joe Biden and Donald Trump, the two have a lot in common on one point. Both current and former governments have used tariffs and other restrictions to advance special interests, at the expense of average North Carolinians and their counterparts in other states.

When Trump was in power, he led efforts to raise taxes (that is, tariffs) on goods imported not only from strategic adversary China, but also from countries such as Canada, Australia, South Korea and Europe.

When Biden took over in 2021, he surprised some observers (not me) by keeping most of Trump’s tariffs in place and hampering other trade negotiations by pushing to impose regulatory burdens in the US. other countries that would hinder their economies. According to a study by the Tax Foundation, the Trump-Biden tariffs already in place will eventually destroy hundreds of thousands of jobs and hinder the growth of the US economy.

Why? Because that’s what always happens when you limit competition. With few exceptions, all related to national defense, protectionism is a conspiracy against the public interest.

Those who try to put up barriers to international trade literally believe that prices here are high too low. The explicit goal of protectionist taxes and regulations is to make things more expensive, arguing that households and businesses should do so should to pay more for goods and services to keep domestic industries viable and their workers employed.

However, unless we are talking about domestic industries dedicated to national defense or sensitive technologies, this argument is theoretically flawed and empirically unsound. While some workers may receive higher wages, most households are net losers as their cost of living rises. And even in the case of Chinese companies involved in our defense-related supply chains, the most taxpayer-friendly policy is often to find new business partners in friendly countries with lower production costs, rather than trying to source everything we need domestically. to make.

Although politicians often deny this, the costs of tariffs and other trade restrictions fall mainly on domestic consumers, in the form of higher prices, rather than on foreign exporters. That’s what economists from Columbia and Princeton universities discovered when they studied the impact of Trump’s 2018 tariffs on Chinese products. “American consumers of imported goods are bearing the brunt of the tariffs through higher prices,” they concluded. All other things being equal, the policy lowered average incomes in both countries.

As Texas Tech economist Benjamin Powell noted in a recent piece for the Independent Institute, tariff supporters might find higher prices worth paying if the policy created jobs for Americans. However, that’s not how the math works. Other research shows that the tariffs “have not increased employment in the regions of the newly protected industries” and that “China’s retaliatory tariffs have reduced agricultural employment in the United States.”

Unfortunately, both presidential candidates continue to pursue protectionist policies. If Trump is elected this fall, he promises to impose a new 10% tariff on all imports from all countries, along with a 60% base tariff on Chinese imports and a 100% tax on Chinese cars. Democrats are already touting studies that estimate the average cost of Trump’s proposals at $1,500 per American family.

Unfortunately, Joe Biden shows no signs of rediscovering the benefits of free trade either. A second government would probably pursue the same policies as the first. The president’s U.S. trade representative, Katherine Tai, calls tariffs “a leveling tool” for “fixing unfair trade.”

Here in North Carolina, we cannot afford another round of costly trade wars that reduce foreign markets for the machinery, pharmaceuticals, agricultural products and other goods and services we produce. Nor should our households and businesses be hit by another round of price increases imposed by our own government – ​​supposedly for our own good.

Do you want to make it easier to start businesses and employees here? Let’s talk about real solutions. Raising prices is not one of them.

John Hood is a board member of the John Locke Foundation.

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