President Trump has announced that he plans to impose tariffs on steel and aluminum imports. While the government will try to convince you that this will help create and sustain American jobs, the fact is that, in addition to starting a dangerous trade war with China, these tariffs will actually end up hurting both American taxpayers and the United States economy in the long run.
A tariff is another word for a tax, and Trump seems to believe that if we increase the price of imports through additional taxes, then it will become more cost-effective for Americans to purchase these materials from American producers.
He uses the emotional argument, which is used by many politicians, and that is to say that if American companies purchase aluminum and steel from American producers, then all of the people who work for those producers will have JOBS, and the increase in demand will result in the creation of even more jobs! Because there is nothing we love more in this country than when Americans have jobs.
But to use that argument, you are forced to only look at the effect of a tariff during a short period of time. Sure, it may look like it helps to create and sustain jobs initially.
But if we had a free market where there were no tariffs at all, then American companies would be more likely to purchase aluminum and steel from countries like China because it is cheaper. Let’s say the difference in price is so significant that steel and aluminum producers in the U.S. are forced to lay off thousands of workers.
Now we have thousands of Americans without jobs, which is bad… if you’re only looking at the short term. When you start to look at the long term, you will see that all of those workers will go on to find new jobs in other industries, and they will contribute more to the economy because they are working in industries that don’t need help from the government in order to flourish.
You will also see that all of the companies that would have been forced to pay a higher price for steel and aluminum because of the tariffs imposed by the government, can now take that extra money and pour it back into the economy.
Then when Americans use their dollars to import steel and aluminum from China, it gives China the opportunity to use those dollars to import goods from the United States, which continues to help our economy!
The fact is that when an industry has to receive help from the government—which translates into more money stolen from taxpayers—it actually discourages new innovations and reduces labor productivity in that industry.
If the government has to impose a tariff, then it is evidence that instead of looking for new innovations to compete with other countries that are offering the product for less, an industry is choosing to play the game of “special interest politics” by running to the government to level the playing field, even though it will end up harming Americans in the long run—and that is something everyone should be talking about.