Monday, March 5, 2018

“We’ll Injure Ourselves If You Injure Yourself!”

A Don Boudreaux letter to the New York Times:
Josh Bivens errs when he asserts that Trump’s tariffs may “do some good” because they provide “temporary relief for specific sectors (steel and aluminum) facing a specific problem (global excess production capacity, propped up by foreign governmental subsidies)” (“Don’t Worry About Trump’s Tariffs,” March 5).
To the extent that foreign steel-making capacity is the result of foreign-government subsidies, that capacity isn’t excessive from Americans’ perspective.  Instead, it’s foreign-governments’ way of giving to us Americans gifts of steel and aluminum – gifts that we should welcome just as we welcome the sun’s gift to us of light and warmth.  Nor is there any reason to believe that that steel-making capacity is temporary.  The political forces and economic misunderstanding that propel governments to subsidize industries are notoriously tenacious.
But if this alleged excess capacity is indeed temporary, steel and aluminum companies should turn to private financial markets.  Supplying financing to weather passing commercial storms is among the core roles of financial markets.  By taxing American buyers of metals in order to relieve American producers of the need to seek and pay for such financing, our government does exactly what it deplores other governments doing – namely, subsidizing the operations of their politically powerful domestic producers.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek.


  1. A friend of mine observes, "In spite of all the free marketers who support globalization, this is not a level playing field. US jobs have been exported to profit corporations wanting to move to starvation wage locations, or to pay back political client states.

    Much as I like free trade as an abstract idea, it has been used against the US economy as a part of conscious US policy since the General Accord on Tariffs & Trade in 1947. In the last two or three decades the US has been stripped of a tool & die industry, steel industry, cotton mills, clothing manufacturers, and shoemakers. Don’t bother honking at me that now those things cost consumers less, because it also means that jobs have been exported from all those industries. In no small part today the opium epidemic is due to the hopelessness and uselessness felt by vast swaths of working class people as their jobs disappear.

    Free trade is great, but shouldn’t it be fair to the US?"

    1. What exactly do you/he mean by “fair”?

      To me “fair” would be leaving people alone to conduct commerce as they see fit, rather than lamenting the reality of competition.

    2. My friend writes, "I mean by 'fair' negotiated trade deals which put the US at a disadvantage.

      What is the reality of competition between 50¢ and hour and $15 an hour?"