About once a decade, the question of Protective Tariffs finds its way into the national debate. Whether a political candidate dares to raise the issue or a clever collection of activists and analysts work together to inject it into the national discussion, the reaction is always the same from the halls of entrenched power - hysteria and panic over the mere discussion of tariffs.
Both the establishment Right and the establishment Left in the United States argue that tariffs represent an end to industry and trade, that they deny opportunity to the third world, will only raise prices for American consumers, and that they are the first shot in a tragic trade war. In the halls of corporations and academia, everyone seems to agree – tariffs are bad for the economy and the country as a whole. Predictably, corporate property in Congress parrot the same line and it appears that opposing tariffs is one of the few areas where Democrats and Republicans can agree.
Thus, when anti-tariff politicians, CEOs, and academics speak, their warnings that tariffs represent an end to their globalist vision where international corporations continue to abandon Western workers with their pesky wages, rights, and protections while exploiting third world workers for lower wages, easy replacement, and lack of concern for basic human needs are thinly veiled. This latter, more honest, concern is, in fact, correct. tariffs do threaten globalism and corporate exploitation of workers and societies.
Particularly older working class citizens remember the days of American Tariffs and the undeniably better economic distribution of wealth and opportunity they afforded. Younger (middle aged) Americans remember at least the removal of those Tariffs and the "giant sucking sound" of American jobs leaving for Mexico, South and Central America, Asia, and China that decimated their communities and the American economy before their eyes. Indeed, it seems that the working class inherently understand the benefit of Tariffs and Protectionism, at least when they are properly explained. This is why such a massive and sustained media, academic, and governmental propaganda campaign has been invoked to convince them otherwise and why, whenever Tariffs are mentioned in the public discourse, they are immediately attacked as fringe, crazy, xenophobic, racist, populist, and dangerous.
What Are Tariffs?
Simply put, tariffs are a tax on goods or services imported from other countries. Tariffs serve to protect domestic production by making it more expensive or prohibitively expensive for foreign corporations to export or dump products into the domestic market. They also make it too expensive for domestic corporations to offshore production and import cheaper, foreign made goods into the domestic market.
The tariffs are paid by the company or entity importing the product. Thus, tariffs increase the price of goods and foreign services that are imported into the country, which protects domestic producers and American jobs.
Tariffs can be used for more than protecting existing industry. For instance, tariffs may also help infant industries (a term used by Alexander Hamilton) grow and develop until they are able to safely compete with foreign industry producing the same product.
The American Economic Golden Age
In the 1950's and early 1960's, even extending to 1971, the United States had produced the greatest and most equitable economy the world has ever seen. Regardless of its past or future, this accomplishment alone is something Americans should be immensely proud of. Indeed, this fact alone will cause the United States to live forever in the annals of history. For the first time, there existed an economic system in which there were more middle class individuals than poor and rich combined.[1]
During this period, upward mobility was greater for every American regardless of age or race. The high levels of (high wage) employment resulted in increased demand and individuals inclined to start their own businesses were able to do so, all without governmental and bureaucratic boundaries that have currently helped hamstring America's culture of entrepreneurship. This resulted in immense innovation, new inventions and developments, high levels of high wage employment, and an extremely high rate of private/individually-owned businesses. In addition, Federal, State, and Local governments invested heavily in infrastructure - from electrical grids and water treatment plants to roads, bridges, and general improvements and upkeep. Large scale high wage employment saw increased home ownership across the board, both young and old.[2]
The Golden Age of the American economy was a stout answer to the questions raised by the opposing systems of its day and recent past. It still stands as a shining example of what Americans can re-obtain provided the same policies are pursued and the political will exists to pursue them.
Other Successful Tariffs
The Golden Age of the American economy is the best instance of the successful implementation and use of tariffs (and other economic policies) in American and, indeed, world history. However, there are many other successful examples of proper usage.
The tariffs in existence during the Benjamin Harrison administration serve as a striking piece of evidence in favor of their use. While Harrison is demonized by corporate think tanks and Free Trade academics (even blamed for the Panic of 1893), the fact is that, under the Tariffs in existence during his administration, the American economy was expanding and the revenue collected by the Tariffs was such that the Federal government was actually running a surplus. These Tariffs were originally imposed after the end of the Civil War to protect American industry and promote a recovery. Just two decades after the entire country was ravaged and destroyed by a civil war, the country was rebuilding, expanding, and running a surplus.[3]
Also demonized by the corporate media, international corporations, and Free Traders were the Donald Trump Tariffs implemented during his first term as President. Although imposed on a much smaller scale than Harrison's or those of the Golden Age, the Trump Tariffs were a starting point toward an apparent policy of protective tariffs doubling as a negotiating tool. Nevertheless, the effects of the Tariff were felt amongst the working class of the United States who, for the first time since a brief dead cat bounce in the eighties, saw the future of working people beginning to improve instead of consistently getting worse. Those economic gains, of course, were quickly wiped away with the worldwide COVID hoax and the resulting lockdowns and governmental wars waged on their own economies. Still, the tariffs were so effective and popular, the Biden administration, publicly opposed to anything Trump-related, maintained them in order to avoid public backlash over removing them and the inevitable economic downturn that would follow if they were removed.
While these are only two examples, it is important to note two things. First, mainstream academics admit that the Trump Tariffs were politically successful even though they do not admit their economic success. They also note that Grover Cleveland, Benjamin Harrison's predecessor, was warned not to publicize his opposition to tariffs since the issue would hurt him politically. It is thus important to ask, "If Tariffs are so destructive to the working class and consumers, why are they so popular amongst the working class?"
Second, it cannot be ignored that both Presidents were summarily demonized by monied globalist interests and, to date, were driven from office after only one term by forces united in opposition to them at the upper levels of American and European societies. Trump did, in the end, find a second term, however. This second term victory involved a campaign in which Trump criticized globalism, “Free Trade,” and touted tariffs upon his return to office.
The History Of Anti-Tariff Globalism
As previously mentioned, the crusade against tariffs has been led by a coalition of strange bedfellows. The most obvious is a collection corporate and banking interests, desiring to exploit the working class for cheap labor and for acquisition of cheaper raw materials combined with lower environmental standards in "third world" countries. These interests tout the benefit of allegedly "lower prices" on consumer goods but, in reality, they are merely producing higher profits for themselves at the expense of the American worker and American society. American workers are thus caught in a cycle of lower wages and thus a need for even cheaper goods. The further production of cheaper goods in foreign countries thus lowers wages and living standards in the United States, precipitating a need for lower prices in order to survive. This cycle continues. Of course, inflation, higher taxation, and other crises prevent even the slight benefits of cheaper goods from being realized and, instead, workers experience only de-industrialization, unemployment, low-wage employment, infrastructure collapse, and the general lowering of living standards. Meanwhile, these corporations and banking interests continue to make record profits and parasitize off government debt or gain valuable assets in the process.
The second collection of Free Trade promoters is that of the neo-liberal globalists. These promoters of exploitation argue greater access to goods across the world and play on Western guilt, accusing them of exploiting and punishing third world countries by virtue of their own success and high living standards, and demand that wealth be "shared" with those less fortunate countries. Sweat shops and slave labor pop up in place of high wage industry and toxic chemicals flow down rivers where the living standards of American workers might as well reside.
Marxists, Libertarians, and Anarchists all argue for the elimination of Tariffs and the promotion of Free Trade, many simply misguided but many understanding full well how the working class is exploited and reduced to peasantry as a result of Free Trade. Libertarian ideology often transcends national interests as do those of anarchists of all stripes. Marx, for his part, supported Free Trade not because he believed protectionism doesn't work. In fact, it was quite the opposite. Marx knew Protectionism worked but supported Free Trade because it would worsen conditions for the working class and thus hasten the worker's revolution he predicted and desired.[4]
What Is "Free Trade?"
At this point the phrase "Free Trade" must be defined correctly and clearly so as to avoid misunderstandings. The fact that Tariffs have historically been widely popular among the working class presented a unique obstacle to those interests opposed to protective action. Dismantling measures designed to protect American industry (and doing so effectively) is a hard item to sell. Although anti-Tariff agreements and treaties had been signed in the past under various guises, a massive debate took place within the United States electorate over the question of NAFTA (North American Free Trade Agreement) in the 1990s. While the term "Free Trade" has long been used to describe anti-Tariff globalism prior to the NAFTA debate, it was at this time the phrase became part of the national discourse.
The majority of the country overwhelming opposed the implementation of NAFTA, well aware of what removing Tariffs between Canada, the United States, and Mexico would do to the American economy. Yet, NAFTA was approved and signed anyway. During the debate, however, NAFTA proponents began used the term "Free Trade" to describe their plans to eviscerate the American economy. Free Trade was deliberately confusing since it sounds like Free Enterprise, a hallmark of the American philosophy. The use of the term Free Trade did not persuade Americans at the time but the agreement was signed nevertheless. However, incessant use of the term by Free Trade proponents, politicians, media, and academics in the aftermath have, by now, successfully confused Americans so that few are now willing to state that they are opposed to Free Trade. Indeed, multiple generations have grown into adulthood believing that tariffs are evil and Free Trade is the only method of trade available. They have been brought and brainwashed to believe that competing with slave labor in a race to the bottom is the only way to survive.
There should be no doubt, Free Trade is not within the American economic tradition. While increased competition in the American market generally leads to lower prices, increased services, higher wages, and higher living standards, Free Trade achieves the reverse. Free Trade is a race to the bottom, eliminating high wage jobs and domestic production in favor of low wage foreign labor.
Free Trade is the exploitation of the working class and, often, child and slave labor. It is also of grave danger to national security. Allowing foreign countries to produce and control the supply of vital goods, technologies, and components that a country needs to thrive and even defend itself weakens the ability to provide for the common defense and places the country in a precarious position, not to mention a population of impoverished, stressed, and struggling workers.
The creation of the term “Free Trade” to refer to the removal of tariffs and protections, flooding and dumping of foreign products into the American market, and globalist economic policies of de-industrialization is perhaps the greatest public relations victory in recent history, malevolent as it may be. Make no mistake, however, Free Trade does not represent freedom, it represents poverty.
This is because “Free Trade” represents the systematic removal of tariffs and “barriers” to trade, thus allowing foreign nations to import cheaper goods made by workers paid much lower wages, often under unsafe and inhumane conditions and few environmental restrictions. The result is the undercutting of American industry, widespread loss of jobs, and the hollowing out of the domestic economy.[5]
The Giant Sucking Sound
Predictability, as soon as the efforts to dismantle protectionism began to take hold in the United States, industry started to disappear. Unemployment rose and living standards began to decline. Factories began to close in rapid numbers and the industries surrounding those factories closed as well. Likewise, American infrastructure suffered immensely. Since the end of the Golden Age of the American Economy, the United States has been on the steady decline, with the 1990's representing a nosedive after the signing of NAFTA. Independent Presidential candidate Ross Perot warned that, if NAFTA were signed, it would create a "giant sucking sound" of American jobs rushing to Mexico.[6] He was proven correct immediately as American industry began disappearing left and right, a trend accelerated through various Free Trade deals signed between the United States and the rest of the world, particularly China. It is precisely the reason China and Southeast Asia function as the factory for the world today. These were jobs that were previously held by American workers who were paid relatively high wages. Those workers were transitioned from high-skill, high-wage jobs to act as competition for other workers in similar industries (lowering wages) or to retail and service jobs. Worse, the workers were simply forced into unemployment.
Now, the American working class is forced to slave away in a "service economy," "gig economy," and a torrent of stolen innovations, driving down the incentive to innovate in the first place. Of course, a service economy is the equivalent of a dog paddling in the ocean. It can keep its head above water for a short time but will soon run out of energy. When it does, it all collapses and the economy dies, drowning the working and middle class with it.
One need only look around the world today to see the results of Free Trade and globalization. The Western world, once the standard bearer for living standards, labor standards, and quality of life is now a shell of its former self, with real unemployment numbers at Great Depression levels, low wages all around, increasingly poor working conditions, and the general decline in the standard of living.[7] The third world has absorbed these jobs but they fill their employment roles with slave labor, virtual slave labor, and bare subsistence living.
For instance, in a relatively conservative estimate by the Economic Policy Institute (EPI) written in 2022, it was stated that between 1998 and 2021, 5 million American manufacturing jobs and 70,000 manufacturing plants were lost due to Free Trade policies with China, Japan, Mexico, the EU and other countries.[8] This study bears no mention of additional casualties such as shops, restaurants, and other services and goods that pop up around manufacturing facilities and disappear when those facilities or jobs evaporate.
Robert E. Scott of EPI also wrote an article in 2011 entitled “Heading South,” where he estimates the amount of American jobs lost as a result of NAFTA at close to 700,000.[9]
Forty heavy years of globalist economic strategy has turned a country of high wages and the biggest middle class in world history into a nation of unemployed or struggling workers competing for minimum wage jobs amid a collapsing infrastructure, lower living standards, poorer health, and a food supply that scarcely resembles actual food. In other words, anti-tariff activists have their own results readily available to disprove anything they have to say.
Tariffs have always been generally positive and beneficial
to national economies going all the way back to the English Corn Laws, the
removal of which cause massive social upheaval and agricultural collapse and,
conveniently, a flight to the cities where thousands and thousands of
destitute, broke, and starving people had no choice but to compete for work in
abysmal factories for extremely low wages and an early death.[10]
It was, no doubt, a nightmare for the vast majority of British people but it
was also a Free Trader’s paradise. The beneficiaries? International
corporations and the large industry that needed additional workers in the city.
Likewise, America’s economic glory days – the 1950s to the early 1960s – were
based on a system of tariffs and protectionism, among other factors now
considered taboo by Free Trade fetishists. In fact, it was the systematic
dismantling of tariffs that gradually reduced the American work force over the
ensuing decades before the “giant sucking sound” of NAFTA turned the job exodus
up several notches. Indeed, the subsequent trade deals like CAFTA and the
various bilateral deals with China and other “developing” countries have
exacerbated the problem that much more, even making NAFTA pale in comparison.
Tariffs are a necessary part of a healthy national economy and must be revived if anything resembling reasonable living standards are ever going to return to America.
The Anti-Tariff Argument
Free Trade proponents argue that producing goods in the United States will drive costs of those products up and that it will make a bad situation worse for most Americans. This is the constant droll from Free Traders. "Tariffs will make goods more expensive and Americans will no longer be able to afford the cheaply made items they have become accustomed to."
We must admit that their fears are not completely without merit. Labor costs and regulations are higher in the United States. That is part of the reason that major corporations have been moving overseas for years – i.e. to take advantage of legalized rape and pillage of the environment and workers in less developed nations. For that reason, an argument for further globalization and Free Trade is an argument in support of the exploitation of the poor and working class. The Free Trader can hide this fact in political language, dress it up as anarchy, ironically claim it is based on the concept of freedom and choice, or use Western guilt all he likes, but he is still arguing for exploitation, nonetheless.
To the question of higher prices, however, it is important to point out that the predictions of scorched fields and cities full of despondent shoppers hopelessly looking through storefront windows at plastic gadgets they can no longer afford to buy is merely a scare tactic. It is a prediction that has proven baseless every time tariffs have been implemented on the small or large scale. Indeed, before the concept of Free Trade was forced down America’s throat (despite the opposition of the American people), America produced its own goods domestically, were paid well for doing so, and could afford to purchase those goods. In fact, they were much better economically speaking than they are today. If we did it once why allow ourselves to be convinced we are unable to do it again?
But the answer to this question is not merely hypothetical or relegated to past allegories.
Will Tariffs Raise Prices?
We have recent data to determine the effect tariffs have on the prices of goods in the short and long term. Remember, as recently as 2018, under the Trump administration, tariffs were levied on China. As Fidelity, a widely respected financial trading, investment, and planning institution writes,
Critics say tariffs do more harm than good by increasing the prices that consumers pay. However, the US tariffs of the past decade have not been accompanied by a sustained rise in inflation. When the US imposed its initial round of tariffs on China in January 2018, the US Consumer Price Index (CPI) stood at 2.1%. By mid-year, inflation had ticked up to 2.9% before dropping back to 1.9% in December for an annualized rate of 2.4%. Over the following year as trade tensions between China and the US continued, inflation in the US never exceeded 2.5% until the impact of COVID-related policies began appearing in 2021.
. . . . .
Director of Quantitative Market Strategy Denise Chisholm looks to history to anticipate what might happen in the future. She notes that when the US first began imposing tariffs on imports from China, “They were not really inflationary. However, the S&P 500 did experience a 15% peak-to-trough contraction in 2018. But at that time, unlike now, the Fed was also raising interest rates, real rates were much higher, and maybe most importantly, valuation spreads were low. Today, though, valuation spreads are wide, which says to me that the market is uncertain and that the higher the uncertainty, the more likely the equity market is to climb the wall of worry.”[11]
In other words, tariffs are not actually inflationary both in terms of general inflation and in terms of raising the prices of goods. In the immediate aftermath of the implementation of the tariffs (i.e. the period in which the markets recognize the introduction of a new policy and a new variable) prices may rise. However, the prices tend to come back down once the market adjusts and corrects.
This also eliminates the fearmongering over the alarmist claims that tariffs will harm workers since the claim is that, by making products more expensive, less products will be sold and thus less workers will be needed to produce them. If the prices do not rise significantly after market correction as is demonstrated by the data, such fear is entirely misplaced. Indeed, workers not only don’t have to fear tariffs, they should look forward to them, since tariffs will bring jobs back to the United States, thus increasing the domestic ability to purchase those goods once again.
Dispelling The Myths Surrounding Tariffs
During the Presidential Campaign in 2024, candidate Donald Trump repeatedly stated his support for tariffs, even stating that he would impose tariffs on China as high as 60% and a global tariff of 10-20%. Predictably, mainstream media outlets that have pushed and promoted globalism for decades reported for duty. Trump’s statements were met with derision, mockery, and protest. For instance, a headline from CBS read, “Trump Is Proposing A 10% Tariff. Economists Say That Amounts To A $1,700 Tax On Americans.” The arguments all center around frightening Americans into believing that a vote for tariffs is a vote for higher prices and inflation, perhaps even fewer jobs.
“But in making that argument,” writes Oren Cass, “economists are abandoning some of their most basic analytic principles.”
Cass is correct. In his article, “Trump’s Most Misunderstood Policy Proposal,” published in The Atlantic on September 25, 2024, Cass writes,
Their first mistake is to consider only the costs of tariffs, and not the benefits. Traditionally, an economist assessing a proposed market intervention begins by searching for a market failure, typically an “externality,” in need of correction. Pollution is the quintessential illustration. A factory owner will not consider the widespread harms of dumping pollutants in a river when deciding how much to spend on pollution controls. A policy that forces him to pay for polluting will correct this market failure—colloquially by “making it his problem.” It imposes a cost on the polluter in the pursuit of benefits for everyone else.
Tariffs address a different externality. The basic premise is that domestic production has value beyond what market prices reflect. A corporation deciding whether to close a factory in Ohio and relocate manufacturing to China, or a consumer deciding whether to stop buying a made-in-America brand in favor of cheaper imports, will probably not consider the broader importance of making things in America. To the individual actor, the logical choice is to do whatever saves the most money. But those individual decisions add up to collective economic, political, and societal harms. To the extent that tariffs combat those harms, they accordingly bring collective benefits.
Some opponents of tariffs ignore those benefits because they don’t believe that manufacturing things domestically matters. For example, Adam Posen, the president of the Peterson Institute for International Economics, has called Trump’s proposal “lunacy” and “horrifying.” But he has also dismissed concern for American manufacturing as “the general fetish for keeping white males of low education outside the cities in the powerful positions they’re in.” Similarly, Michael Strain, the head economist at the American Enterprise Institute, believes that tariffs “would be a disaster for the U.S. economy.” In his view, the United States cannot be a manufacturing center again, “and we should not want to be.” [12]
In other words, according to Adam Posen, if you believe in protecting domestic manufacturing and keeping Americans employed, you’re racist. Such arguments don’t deserve counter-arguments. Yet they are important to mention so that the substance of the anti-tariff argument is exposed. Notice that, implicit in Posen’s attempt to scare off any attention from being paid to the consideration of tariffs, is the admission that tariffs work. While Posen’s argument seems to suggest that only “white males of low education” work in manufacturing and that manufacturing jobs are “powerful positions,” he still admits that it works by saying tariffs keep those jobs in existence.
As Cass writes,
These arguments may be internally coherent, but they are wrong. As the fallout from globalization has illustrated, manufacturing does matter. It matters for national security, ensuring both the resilience of supply chains and the capacity of the defense-industrial base. It also matters for growth. “Countries grow based on the knowledge of making things,” Ricardo Hausmann, the director of the Growth Lab at Harvard, has said. “It’s not years of schooling. It’s what are the products that you know how to make.”
Manufacturing drives innovation. As the McKinsey Global Institute has noted, the manufacturing sector plays an outsize role in private research spending. When manufacturing heads offshore, entire supply chains and engineering know-how follow. The tight feedback loop between design and production, necessary to improvements in both, favors firms and workers positioned near the factory floor and near competitors, suppliers, and customers. And the rudimentary matters as well as the advanced: When Apple tried to make its high-end Mac Pro in Texas, the effort foundered on a paucity of screws.
Production in the physical economy, whether manufacturing or agriculture or resource extraction, also has an outsize effect on economy-wide productivity growth. It anchors local economies in a way that personal services cannot. It preserves economic balance, so that trade is genuinely trade, instead of a lopsided exchange of cheap goods for financial assets.
Contrast economists’ disdain for tariffs with their enthusiasm for carbon taxes. Taxing carbon would make many things more expensive for consumers, but economists embrace it as an elegant way to reduce emissions. Imposing a cost on a category of economic activity cannot be inherently foolish in one case (tariffs) and brilliant in another (carbon taxes). The question must be whether imposing that cost would be worth the benefits that it brings.[13]
Cass also points out how economists are generally focused on long term effects of economic policy. That is, unless the topic is tariffs. He writes,
The second big trap economists fall into when discussing tariffs is an obsessive and uncharacteristic focus on short-term consequences. In most situations, economists encourage people to think about long-term impacts, taking into account how the various affected parties will react to a policy and adjust over time. Will a free-trade deal cause factories to close? Yes, economists concede—but in the long run, they argue, the efficiency gains created by free trade will lead to new and better jobs.
Strangely, economists have little patience for assessing tariffs in the same way. A 2018 report by the Tax Foundation, for example, models tariffs as a tax on American manufacturers. Its authors emphasize the new tax’s drag on growth, but ignore even the possibility that higher import prices might encourage investment in domestic production. The equivalent would be modeling a carbon tax as a corporate tax increase and then declaring that it does nothing to reduce carbon emissions.
Another illustration comes from the University of Michigan economist Justin Wolfers, who recently posted a chart on X illustrating laundry-equipment prices immediately following the imposition of tariffs in early 2018. According to Wolfers, “Trump raised the tariff on washing machines by about 9%-pts and the price of laundry equipment rose by about 9%,” demonstrating that the tariff “was an impressively destructive policy.”
When economists account for a tariff’s full range of effects, however, the picture changes dramatically. For example, researchers at UCLA studying tariffs imposed on China in 2018 estimated that higher import prices were costing the U.S. economy $51 billion annually. But with a “general equilibrium” model that attempted to account for the economy’s response, that estimate fell by 85 percent and became statistically indistinguishable from zero. “We find substantial redistribution from buyers of foreign goods to U.S. producers and the government,” they concluded, “but a small net effect for the U.S. economy as a whole.” If this were in turn to prompt greater investment in domestic production, the net effect might eventually turn positive.
Which brings us back to washers and dryers. If we extend the data a bit further, through the end of 2019, the higher prices completely vanish. (They spike again in 2020, after the pandemic begins wreaking havoc upon global supply chains.) This could be because Samsung and LG brought U.S.-based factories online after the tariffs took effect, expanding domestic supply. The LG plant has now become the first American appliance plant recognized by the World Economic Forum as a “Lighthouse Factory” at the cutting edge of advanced manufacturing. More recently, LG has announced a new $3 billion investment to build a factory in the same town to produce electric-vehicle-battery components.
The story is reminiscent, on a smaller scale, of what happened when the Reagan administration negotiated import quotas on Japanese automobiles, which in the 1980s posed an existential threat to Detroit. Halting any further growth in imports did cause the price of the imported cars to increase initially by 5 to 10 percent. But it also caused the Japanese automakers to make enormous investments in building production capacity in the American South—first assembly plants, then entire supply chains, and eventually research and development facilities as well. Innovation, recall, follows manufacturing. Within just a few years, the quotas were lifted because they were not needed. Prices had returned to normal, and imports no longer flooded the market. The cars were being made in the U.S. by American workers.[14]
We can look at yet another example of when tariffs, even when applied in a targeted and isolated manner, produced positive results for American manufacturing. Fidelity explains why the American pickup truck market is largely dominated by American products when it writes,
Proponents of tariffs say they protect existing companies and the people and communities that rely on them for jobs and income. For example, since 1964, the US has charged a 25% tariff on imported light trucks. The tariff was originally intended to penalize European governments that the US administration claimed were allowing European chicken producers to dump their products into the US market at artificially low prices. Since then, the so-called chicken tax has helped US truck manufacturers to continue to dominate the US pickup truck market, even as they’ve watched their share of the US car market (which is not protected by tariffs) shrink from 90% to 40% over the same period.[15]
Where Does The Money Collected From Tariffs Go?
On the campaign trail and early on as President, Donald Trump suggested that he wished to move the United States away from an income tax economy to a tariff economy. Setting aside the larger argument surrounding taxes, implicit in his statement is the answer to the question of where the money goes from the fees imposed on importers – i.e. the United States Treasury.
As Cass writes,
Finally, in assessing a tariff’s costs, a holistic analysis must consider where the money goes. The peculiar assumption underlying many anti-tariff arguments is that tariff revenue simply disappears. “If a million people each pay $5 extra in tariffs to save one factory job, that’s $5 million per job,” hypothesizes the policy journalist Matt Yglesias. The reductio ad absurdum of this mindset appears in the Tax Foundation’s model, which not only refuses to consider how tariffs might affect economic activity, but also ignores the value of any tariffs collected. As far as its estimates for growth and employment are concerned, tariff revenue might as well be set on fire.
In fact, if 1 million consumers each pay a $5 tariff, $5 million has not been set on fire—it has moved from their pockets to the U.S. Treasury. The nation is not necessarily any richer or poorer. Some other tax could be reduced by $5 million. The $5 million could be rebated to consumers. It could be invested in some other activity—say, building a new bridge—that might have benefits greater than the cost.
If none of that happens, the money would reduce the federal deficit and the need for borrowing. This would be no small thing given the federal government’s current fiscal crisis. Most people of common sense and good faith agree that tax revenue needs to increase and that spending needs to decrease. An oft-cited letter from 16 Nobel Prize–winning economists expressing their concerns about a second Trump administration emphasizes “a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets.” But if fiscal responsibility is the concern, shouldn’t the fact that a tariff that could raise hundreds of billions of dollars in annual revenue merit some mention?
To be clear, tariffs do impose costs that are not captured as revenue. One of these is what economists call “deadweight loss,” created when resources are used less efficiently than they could be. Damage is done when a consumer who would have benefited from a $30 toaster chooses not to buy one for $33. A second cost appears as consumers switch to domestic options that are more expensive. The consumer who buys the $32 toaster made in America pays the extra $2, but the government collects no extra revenue.
Still, the share of the $32 purchase price that would once have gone to a Chinese factory and its workers now goes to an American firm and its workers instead. It pays American taxes and supports American families in American communities. And as the cases of laundry machines and Japanese cars underscore, when firms have incentives to invest in the United States, American workers prove every bit as capable as foreigners of producing efficiently and driving costs down. The standard anti-tariff narrative ignores all of this.
Protectionism can go too far: Insulating firms from any concern about foreign competition could lead to stagnation. Completely foreclosing access to imported components would make domestic production harder. But public policy is about trade-offs, and the trade-offs presented by tariffs have been well understood for centuries. The United States relied upon high protective walls to develop its own industrial base as it became the world’s foremost economic power in the first half of the 20th century. Asian nations likewise drove their own export-led growth with both industrial policy and tariffs. Most prominently, China has used every trade barrier possible in pursuit of global manufacturing dominance. Conversely, the U.S. saw its industrial base collapse and its trade deficit explode once it left its own market unprotected and welcomed China into the World Trade Organization.
In Economics, the industry-defining textbook first published in 1948, the Nobel laureate Paul Samuelson argued aggressively for free trade. He did not, however, deny that tariffs work; under the heading “Beggar-Thy-Neighbor Policies,” he listed the many ways that policies like “protective tariffs” could help “create a favorable balance of trade.” Rather, Samuelson urged that “any intelligent person who agrees that the United States must play an important role in the postwar international world will strongly oppose the above policies,” because to do otherwise would be to “attempt to snatch prosperity for ourselves at the expense of the rest of the world.” As C. Fred Bergsten, the founding director of the Peterson Institute, acknowledged in 1971, “The economic argument was always marginal” for free trade. “It was the foreign policy case which provided the real impetus for liberal trade policies in the United States in the postwar period.”[16]
The Need For Protective Tariffs Today
The United States is currently sinking under the mire of Free Trade. We have at our fingertips the ability to return to an equitable economy that not only brings Americans out of poverty, but one that raises most Americans to the status of Middle Class. We have the ability to return to near full employment levels, high wage jobs, high skill jobs, a reasonable number of hours in a work week, a family-oriented economic structure and plentiful revenue for the federal government. It will provide a remedy to the culture of dependency currently so pervasive in the country.
How The Protective Tariff Would Work In Today's World
1.) A Protective Tariff of 15-20% applied to all goods being imported into the United States.
In today's world of Free Trade agreements, Tariffs applied to only one country serve only as a negotiating tactic. A Tariff aimed at one country alone has minimum benefits. Thus, a Protective Tariff of at least 15-20% should be applied across the board to all goods being imported in to the United States. A reasonable exception can and should be made for goods that cannot be reasonably produced here for reasons of access to raw materials, environment, etc.
However, while some exceptions to tariffs may be made, 15-20% may not be enough for some products. Thus, tariffs may be raised accordingly, even to 100% and beyond if necessary.
While at risk of widening the discussion beyond that of Tariffs, it must be noted that, due to the disaster of Free Trade, there will necessarily be an adjustment period. Decades of buildings, factories, equipment, and infrastructure lying dormant, having lost their use due to Free Trade policies and a workforce no longer fully skilled as a result of lack of work and failed education system have left the United States a shell of its former self. However, with investment in physical infrastructure and the education and training of the workforce, the United States would be fully prepared for the return of vast amounts of American jobs and industry.
It is within the power of the U.S. Federal government, ideally through a nationalized (or at least partially nationalized) Federal Reserve to offer credit stimulus and no-interest loans, which would simultaneously begin investing in retraining the workforce, rebuilding and retrofitting dormant facilities, in a truly environmentally friendly manner at the same time as the announcement of the Protective Tariff. Even absent this preparatory and assistive effort, the implementation of a Protective Tariff is absolutely essential to economic recovery, prosperity, and freedom. The question would only then be: “How long will the adjustment period last?”
Conclusion
America’s economic glory years were built by a policy of high wages, high skills, and protectionism. Abandoning those policies was an act of foolishness by some and an act of treachery by others. It is high time we begin to reverse the policy of shipping American jobs overseas so that they can be manned by impoverished laborers. Decades of globalism and Free Trade have collapsed the Western world from within, the United States in particular, and has wasted the lives of millions of people in the developing world. Let the corporations and bankers scream as loud as they want. Let media outlets predict the end of the world. But Free Trade has had its time and that time is over. If Free Traders insist on shouting their opposition, they must do so over the hum of American factories.
[1] “The State of the American Middle Class.” Pew Charitable Trust. November 22, 2024. https://www.pewtrusts.org/en/trust/archive/fall-2024/the-state-of-the-american-middle-class
[2] Gold, Howard. “The US Economy Will Never Have Another Golden Age.” Market Watch. September 1, 2017. https://www.marketwatch.com/story/the-us-economy-will-never-have-another-golden-age-2017-09-01
[3] Tarpley, Webster Griffin. “Surviving The Cataclysm: Your Guide Through The Greatest Financial Crisis In Human History.” Progressive Press. 3rd Edition. 2011. Pp. 705-737.
[4] Marx, Karl. “On The Question of Free Trade.” Works of Karl Marx, 1848. Speech to the Democratic Association of Brussels at its public meeting of January 9, 1848. MECW Vol. 6, p. 450. First published as a pamphlet in Brussels, February, 1848.
https://marxists.architexturez.net/archive/marx/works/1848/01/09ft.htm
“But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.”
[5] Culbertson, John M. “The Folly of Free Trade.” Harvard Business Review. September, 1996. https://hbr.org/1986/09/the-folly-of-free-trade
[6] “The 1992 Campaign: Transcript Of 2nd TV Debate Between Bush, Clinton, and Perot.” New York Times. 1992. https://www.nytimes.com/1992/10/16/us/the-1992-campaign-transcript-of-2d-tv-debate-between-bush-clinton-and-perot.html
[7] Alternate Unemployment Charts. February 3, 2025. Shadow Government Statistics. https://www.shadowstats.com/alternate_data/unemployment-charts
[8] Scott, Robert E.; Wilson, Valerie; Kandra, Jori; Perez, Daniel. “Botched policy responses to globalization have decimated manufacturing employment with often overlooked costs for Black, Brown, and other workers of color.” January 31, 2022. Economic Policy Institute. https://www.epi.org/publication/botched-policy-responses-to-globalization/
[9] Scott, Robert E. “Heading South.” Economic Policy Institute. May 3, 2011. https://www.epi.org/publication/heading_south_u-s-mexico_trade_and_job_displacement_after_nafta1/
[10] Van Vugt, William E. (1988). "Running from ruin?: the emigration of British farmers to the U.S.A. in the wake of the repeal of the Corn Laws". Economic History Review. 41 (3): 411–428. https://www.jstor.org/stable/2597368?origin=crossref
[11] “What To Know About Tariffs.” Fidelity. January 14. 2025. https://www.fidelity.com/learning-center/trading-investing/what-is-a-tariff
[12] Cass, Oren. “Trump’s Most Misunderstood Policy Proposal.” The Atlantic. September 25, 2024. https://www.theatlantic.com/politics/archive/2024/09/economic-arguments-tariffs-trump/680015/
[13] Cass, Oren. “Trump’s Most Misunderstood Policy Proposal.” The Atlantic. September 25, 2024. https://www.theatlantic.com/politics/archive/2024/09/economic-arguments-tariffs-trump/680015/
[14] Cass, Oren. “Trump’s Most Misunderstood Policy Proposal.” The Atlantic. September 25, 2024. https://www.theatlantic.com/politics/archive/2024/09/economic-arguments-tariffs-trump/680015/
[15] “What To Know About Tariffs.” Fidelity. January 14. 2025. https://www.fidelity.com/learning-center/trading-investing/what-is-a-tariff
[16] Cass, Oren. “Trump’s Most Misunderstood Policy Proposal.” The Atlantic. September 25, 2024. https://www.theatlantic.com/politics/archive/2024/09/economic-arguments-tariffs-trump/680015/
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