The Trump Chronicles, Volume 15: Tariffs Are a Bad Idea

Throughout the campaign and since the election we’ve heard President Elect Trump talking about “bring back manufacturing jobs.” In that light he talks about imposing tariffs, that is, charging other countries to import goods to the United States.

Historically we’ve used tariffs to prevent other nations from manufacturing or growing products cheaper and importing them to hurt our own manufacturers and farmers. In 1913 our government passed the 16th Amendment to the Constitution, allowing the government to collect taxes on the incomes of individual Americans. Before that, almost all government revenue came from tariffs.

But most economists hate tariffs. They feel that “government intrusion” on the free market chooses winners and losers. They feel that we all do better when the competition of the free market makes everyone work harder and produce better products.

So what happens if President Trump imposes tariffs? There’s a terrific article here that shows what happened in Argentina. In 2009 that nation imposed a 35% tariff on electronics as a way to protect the domestic electronic manufacturing industry. It went well for Argentinian manufacturing, but badly for everyone else.

It was a boon to the black market in electronics. But it was also a boon to Chile, next door. Droves of Argentinians streamed to Chile to purchase electronics. For example, an iPad mini 4 cost $1,260 in Argentina but only $640 in Chile.

So if you want the next generation of iPhone, you need to hope either (1) Trump isn’t successful, (2) You become wealthy enough to pay the 35% tariff, or (3) You live close enough to Canada or Mexico to skirt the tariff.

By the way, Argentina is repealing the tariff.

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