garynorth.com / Gary North / March 01, 2017
Whenever the government intervenes, there are winners and losers. Follow the money.
A popular slogan in favor of tariffs is this one: “Tariffs protect Americans.” It is an accurate slogan. The question is: “Which Americans are protected?” Another question is: “Who pays?”
In this world, you don’t get something for nothing. If some Americans are protected, then other Americans are paying to grant them this protection.
Who are the winners? Who are the losers?
The winners are a relatively small percentage of American workers who produce goods at higher prices with lower quality than imported goods offered to consumers. The only reason why these workers need protection is because they are not efficient workers.
Who judges efficiency? Consumers do. The heart of the free market system is this: people who spend money have final authority in the economy. This means consumers. Any attempt by the government to intervene in the economy to help special interest groups always comes at the expense of consumers who would have bought whatever it was that competitors were offering for sale, but who are unwilling or unable to buy the goods because of some government regulation.
A tariff is a sales tax on imported goods. Therefore, the sales tax is discriminatory. It is not paid by everybody. It is paid by those members of the workforce who are facing foreign competition. It is also paid by exporters in the United States, because foreign buyers cannot get access to the domestic currency, precisely because foreign exporters cannot get buyers in the domestic currency. So, exporters are hurt and importers are hurt. This means that American consumers are hurt.