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Taxes benefit the regime while impoverishing the rest of us. To favor “free trade” is to favor lowering taxes on Americans and depriving the regime of funds. To favor protectionism, whether it be for some foreign-policy crusade, or to “create jobs” is to simply be in favor of raising taxes and handing over more Americans’ wealth to the state.

https://mises.org/mises-wire/tariffs-are-taxes-americans-protectionists-pretend-otherwise

04/18/2024 • Mises Wire •Ryan McMaken

During the 2016 and 2020 campaigns, Trump’s opponents in the Democratic party (and elsewhere) often pointed out that Trump’s protectionism hobbles private markets and the economy overall. Yet, the allegedly anti-protectionist Biden administration has done virtually nothing to end Trump’s protectionists policies put in place from 2017 to 2020. The motivation is unclear, but it is possible that the Biden administration realized that protectionism is a useful political tool. These policies offer a way of punishing opponents, rewarding allies, and pandering to voters. 

Now that it’s election season, the pandering side of the equation is in full swing. Biden this week called for “sharply higher U.S. tariffs on Chinese metal products.” Appropriately, Biden included this new spate of protectionism in what Reuters calls “a package of policies aimed at pleasing steelworkers in the swing state of Pennsylvania.” 

Biden’s pandering will likely bear some fruit, politically speaking. Protectionism remains popular. But, as Henry Hazlitt put it, voter support for raising tariffs is “the result of looking only at the immediate effects of a single tariff rate on one group of producers, and forgetting the long-run effects both on consumers as a whole and on all other producers.” Those who are incapable or unwilling to examine policies beyond their most short-term effects are easy targets for protectionist rhetoric.

The reason there are so many negative effects, of course, is that tariffs are nothing more or less than taxes and they produce the same effects as any other type of tax: when Country A imposes tariffs, Country A’s government is enriched while both producers and consumers living in Country A must endure higher prices and a less productive economy. 

Even those voters who imagine themselves as opposed to taxes and “big government” often embrace tariffs—apparently fooled by the misconception that tariffs aren’t taxes or that they are only paid by foreigners. Many conservatives and protectionist “libertarians” create a wide variety of ornate theories with big words designed to distract from the fact that American tariffs are taxes on Americans. Ultimately, however, these people are simply pushing for tax increases. 

It’s Not that Complicated: Tariffs Are Taxes 

A tariff is a tax that is collected when a good crosses an international border. In the United States, as with any country that imposes tariffs, any good that is subject to tariff can only enter the country when the extra tax is paid upon entry. (This tax is in addition to any other taxes that must be paid down the line, such as sales taxes.) As with any similar transactional tax (e.g., sales taxes) the result is higher prices and fewer choices for consumers. It must also be noted that the “consumer” of imported goods need not be the retail consumer or end consumer. A great many imported goods are intermediate goods that are used in the creation and production of other goods produced and sold within the United States. That is, tariffs are often taxes on materials used by American entrepreneurs and business owners to produce American goods. 

Raising taxes (i.e., tariffs) raises costs for all these American producers and consumers. Yes, it is true that Americans do not suffer the full consequences of taxes on foreign goods. As with a sales tax, a tariff imposes some costs on the seller by raising prices and thus reducing total sales. But it is simply wrong to portray tariffs are taxes primarily on foreigners, since, as Murray Rothbard notes, “Tariffs injure the consumers within the ‘protected’ area, who are prevented from purchasing from more efficient competitors at a lower price. 

Yet, protectionists have long been in the business trying to explain that tariffs are not actually taxes on Americans at all. Or, as Rothbard puts it: 

Tariffs have inspired a profusion of economic speculation and argument. The arguments for tariffs have one thing in common: they all attempt to prove that the consumers of the protected area are not exploited by the tariff. These attempts are all in vain.

Old habits die hard, however. Even among readers of mises.org, one finds plenty of readers involved in the quest to convince others that raising taxes is a good thing. One such claim is that since other countries impose high import taxes on their own citizens, the US government must do the same. Consider this response to a recent mises.org article on trade. The reader states: “Baloney. Horse manure. ‘Free trade’ is a meaningless slogan. The issue of trade is much more complex than slogans. You can’t have free trade with Japan and China, which uses massive protectionist policies to help its own workers and industries. The wages are not comparable!!!”

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