The Bottom Line: Obama's tariff helps special interests, endangers U.S. economy
Dan Clements
Issue date: 9/22/09 Section: Opinion
President Obama's decision last week to impose a 35 percent tariff on imported Chinese tire imports threatens the long-term health of our economy and reflects the triumph of special interests over the common good. The move was made in response to a complaint filed by the United Steelworkers union (which represents many U.S. tire workers). The new tariff has no support among economists, though it is in the favor of the president's political backers. This decision was the folly of the president, and, if he wants to ensure the health of the U.S. economy, he should avoid such reckless choices in the future and work to augment U.S.-China economic relations.
First of all, one cannot stress enough the benefits of free trade. Since the days of Adam Smith, the father of the study of economics, it has been recognized as an economic fact that free trade is beneficial to both participating parties. Allowing American consumers to purchase cheaper foreign goods leads to a net gain for the economy and opens up other markets for American goods. It is as true today as it was in 1776 when Smith published "The Wealth of Nations." According to Harvard economist Greg Mankiw, 93 percent of economists agree with the statement: "Tariffs and import quotas usually reduce general economic welfare."
Albeit the gain does not come without its drawbacks as those domestic producers who cannot compete with their foreign counterparts cease to exist. Although this comes as a negative to this particular group (in this case the United Steelworkers union), the gains to the American consumer and the new markets for other American goods far outweigh the downside. While the closing of domestic industries is not something to celebrate, the alternative to stand athwart this change would merely protect the well-being of a few at the expense of everyone else. Economist Frederic Bastiat satirized this notion in suggesting that we block out the sun for its unfair competition against candle makers.
First of all, one cannot stress enough the benefits of free trade. Since the days of Adam Smith, the father of the study of economics, it has been recognized as an economic fact that free trade is beneficial to both participating parties. Allowing American consumers to purchase cheaper foreign goods leads to a net gain for the economy and opens up other markets for American goods. It is as true today as it was in 1776 when Smith published "The Wealth of Nations." According to Harvard economist Greg Mankiw, 93 percent of economists agree with the statement: "Tariffs and import quotas usually reduce general economic welfare."
Albeit the gain does not come without its drawbacks as those domestic producers who cannot compete with their foreign counterparts cease to exist. Although this comes as a negative to this particular group (in this case the United Steelworkers union), the gains to the American consumer and the new markets for other American goods far outweigh the downside. While the closing of domestic industries is not something to celebrate, the alternative to stand athwart this change would merely protect the well-being of a few at the expense of everyone else. Economist Frederic Bastiat satirized this notion in suggesting that we block out the sun for its unfair competition against candle makers.
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