Opinion from a Libertarian ViewPoint

Trade Myths – LewRockwell

Posted by M. C. on July 10, 2018


I received several comments and questions regarding trade after the publication of my recent article, “Stupid Countries Restrict Trade.” Here is a summary of some questions that a few people had:

What should the government of the United States do if other countries impose tariffs on U.S. goods exported to their countries?

What should the government of the United States do if a country subsidizes its exports to the United States?

What should the government of the United States do if it had no tariffs on foreign imports but other countries imposed tariffs on U.S. exports?

Trade myths die hard. Here are three of them I want to refute based on the comments and questions I recently received.

Trade takes place between countries.

To the contrary, trade almost never takes place between countries. Although people often talk about the United States trading with China, India, or Canada, foreign trade really just occurs when entities in one country engage in commerce with entities in some other country…

Subsidized exports justify protective tariffs.

Some countries, for a variety of reasons, subsidize certain of their export industries. This means that a country’s government uses tax money taken from its citizens to subsidize the manufacture of some products offered for sale to individuals, organizations, and businesses in other countries. Such subsidies make the economy less efficient, substitute the judgment of government bureaucrats for that of private actors in the marketplace, encourage overproduction, favor the few at the expense of the many, shifts production among sectors within the economy rather than adding to the overall level of economic activity, and reduce total national welfare…

Retaliatory tariffs are sometimes needed.

…Of course not. To advocate for such practices is to be ignorant of the effects of tariffs. When an importer in the United States has to pay a tariff to the U.S. government on goods he imports, it raises his costs of doing business. He can then either lower his profits by charging Americans the pre-tariff price for his goods, pass all of his increased costs on to American consumers via higher prices, or lose some of his profits and pass some of his increased costs on to American consumers….

Be seeing you




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