Protectionism Damages American Prosperity and Security


Tuesday, August 21, 2018

While today’s political climate is divisive, there are a handful of issues where conservatives and liberals agree. One of these issues is trade policy. Free trade is backed up by history and academic evidence. As trade barriers have collapsed, global quality of life has improved. Free trade has also brought the world closer together in terms of diplomacy. It’s difficult for two countries to go to war when goods and services are exchanged between their borders. Yet these facts have not been convincing for Donald Trump.

While Trump’s political views on topics from taxes to abortion have changed over the decades, his thoughts on protectionism have not changed. He has supported tariffs for a long time. This message resonated for many blue-collar workers who find economic nationalism appealing. The problem for tariff advocates is that they have always boomeranged around to damage the exact country they were meant to protect.

The idea that free trade has led to massive job losses in American manufacturing has been debunked. A study by economists Michael Hicks and Srikant Devaraj found that the real reason for job depletion in manufacturing has been due to increases in productivity. Thanks to automation, many tasks in a factory do not require people anymore. To be precise, they found that 87.8 percent of the job losses were from productivity while only 13.4 percent were from trade.

This hasn’t stopped Trump. Despite a mountainous majority of economists backing free trade and opposition to tariffs held by his economic advisor, Larry Kudlow, the President has decided to launch new tariffs. The tariff rates are 25 percent on steel imports and 10 percent on aluminum imports from the European Union, Canada, and Mexico. Tariffs like these will only backfire.

As a conservative, I applaud most of Trump’s fiscal policies. Tax reduction and deregulation help to grow prosperity. However, the economic boom he has been building is threatened by his love for tariffs. As Adam Smith wrote in The Wealth of Nations, trade makes countries wealthier because of comparative advantage. Efficiency is maximized when every countries produces what it is best at. Governments and businesses make trade agreements. Prices fall and consumers win.

When politicians engage in protectionism, prices and job losses rise. Trump’s two predecessors, George W. Bush and Barack Obama, largely supported free trade but backed tariffs at specific times. The economy was damaged in both cases. Bush implemented a tariff on steel imports in 2002. A study prepared by Joseph Francois of Erasmus University and Laura M. Baughman of Trade Partnership Worldwide found that the subsequent higher steel prices led to 200,000 job losses and $4 billion in lost wages from February to November 2002. Obama’s tariff on tires imported from China didn’t fare any better. A policy brief from the Peterson Institute for International Economics found that it did save 1,200 jobs in the American tire industry, but cost 3,700 jobs in retail. The cost to consumers was an additional $1.1 billion.

The new tariffs implemented by the President will have similar results and it doesn’t look like he plans stop any time soon. Trump routinely complains about the North American Free Trade Agreement and wants it to be renegotiated. NAFTA needs to be left alone. Dartmouth economist Matthew J. Slaughter analyzed the benefits of it this year. He found that NAFTA was responsible for a quadrupling of American trade in goods services, from $337 billion in 1994 to about $1.4 trillion in 2016. He found that more than 125,000 medium and small businesses exported to Canada and Mexico in 2014. These exports were valued at $136 billion. All of this is placed in jeopardy if NAFTA is disrupted.

Francois and Baughman also published a study about the termination of NAFTA. They found there would be large job losses in many Midwest states that Trump won in 2016. The end of NAFTA would mean 33,000 jobs lost in Wisconsin, another 51,000 lost in Michigan, and 71,000 lost in Pennsylvania.

As Trump continues to raise tariffs, economic growth will slow. It is the responsibility of every conservative to defend free trade. This means voting for candidates who oppose protectionism and conveying a persuasive message that challenges many myths about trade agreements. This message can be done in-person with voters or on social media. The bottom line is trade is one of many policies that places a country on a pathway to prosperity. It cannot be abandoned.

John Graber graduated from the University of Wisconsin-Madison where he received Bachelor of Arts degrees in history and political science. He likes economic and military history. He was born and raised in Milwaukee, Wisconsin.

The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.

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About John Graber

University of Wisconsin, Madison

John Graber graduated from the University of Wisconsin-Madison where he received Bachelor of Arts degrees in history and political science. He likes economic and military history. He was born and raised in Milwaukee, Wisconsin.

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