Virtue Magazine

What is it? The tariff!

Yes, that dirty rotten tariff. (I wasn’t exaggerating in any of those examples. I’ll discuss them in later columns.) Let’s start off by defining what a tariff is: a tariff is a tax placed on goods either exported from or imported to a country. “Ai! A tax! Why do we even have it then? We all know what taxes do!” Simple: a tariff is not presented as a tax. (If it were, we wouldn’t have any.) A tariff is (too) cleverly disguised as something else. A tariff is designed to artificially raise the price of an exported or imported good, and its most common use is to protect a home industry from foreign competition.

Unlike many of the other things we have been discussing, the tariff does exactly what it is designed to do. It does protect the industry from foreign competition; it does keep a flailing industry from going out of business; it does keep thousands of workers employed; and it does build up industries. And it does it very well. Okay, so…why is a tariff bad? If it does all this good stuff, why don’t you like it?

Because that’s not the only thing it does. Hazlitt explains using the American and British sweater industries as examples:

“Suppose there had been no tariff on foreign knit goods, that Americans were accustomed to buying foreign sweaters without duty, and that the argument were then put forward that we could bring a sweater industry into existence by imposing a duty of $5 on sweaters. “There would be nothing logically wrong with this argument so far as it went. The cost of British sweaters to the American consumer might thereby be forced so high that American manufacturers would find it profitable to enter the sweater business. But American consumers would be forced to subsidize this industry. On every American sweater they bought hey would be forced in effect to pay a tax of $5 which would be collected from them in a higher price by the new sweater industry. “Americans would be employed in a sweater industry who had not previously been employed in a sweater industry…but there would be no net addition to the country’s industry or the country’s employment. Because the American consumer had to pay $5 more for the same quality of sweater he would have just that much less left over to buy anything else…In order that one industry might grow or come into existence, a hundred other industries would have to shrink. In order that 50,000 persons might be employed in a woolen sweater industry, 50,000 fewer persons would be employed elsewhere.”1

After reading this, some of you might be thinking (be honest): “My gosh! This is exactly what minimum wage and all that other stuff does! Why do we have these things?! It’s like our country is being run by monkeys!” Ah ha, because a tariff is also unlike minimum wage and other fallacies in another aspect. This characteristic is what makes the tariff so effective and appealing, and so hard to repeal. Not only does the tariff do what it is designed to do, but it does it very VERY visibly. It is very VERY easy to count and chronicle how many new jobs have come into existence because of the great tariff, how much the sweater industry has grown by, and how much sweater production had increased. Everyone can see the wonderful benefits of the tariff!

But at the same time, how can you count how many potential jobs were lost by this tariff? They don’t exist, and never will. How can you count and chronicle each layoff in the hundred different industries that have taken a hit for the sweater industry? How can you measure how much those hundred industries have shrunken by? You can’t. Those hundred industries didn’t shrivel up and die overnight: the loss was spread out evenly in them over a long period of time, so that the individual loss in each industry is nigh impossible to detect. Hazlitt also marks this fact: “It would be impossible for anyone to know precisely how each consumer would have spent his extra $5 if he had been allowed to spend it.”2 Simply put, it is very very difficult to foresee or keep track of the negative consequences of a tariff by numbers.

So you say: “Who the heck cares! It doesn’t matter how I see it! It happens! Why, if I were President, I would toss out all the tariffs with the stroke of the pen! Who cares what CNN says! Nobody watches that crud anyway!”

Bold words, but also rash. Because from that bold stroke of the pen you would meet firsthand the greatest weapon that the tariff possesses, a weapon that is irresistible to all but the boldest and backboned of politicians. If the positive effects of imputing a tariff could be likened to a beaming 40-watt light bulb, the negative effect of repealing a tariff would be the noon sun, burning and glaring out the light of all those small stars in the sky.

“The tariff is repealed; the manufacturer goes out of business; a thousand workers are laid off; the particular tradesmen whom they patronized are hurt…but there are also results which, while much more difficult to trace, are no less immediate and no less real. For now sweaters that formerly cost retail $30 apiece can be bought for $25. Consumers can now buy the same quality of sweater for less money, or a much better one for the same money. If they buy the same quality of sweater, they not only get the sweater, but they have $5 left over…to buy something else. With the $25 that they pay for the imported sweater they help employment…in the sweater industry in England. With the $5 left over they help employment in any number of other industries in the United States.”3

Hazlitt goes on to talk about the further effects: buying imported sweaters makes the English pay dollars that they must, sooner or later, invest or consume in the United States, leading to more investment at home and more exports abroad. Both countries are better off.

But that doesn’t matter, because that’s almost impossible to see in light of the negative effects: it is very easy for the politician’s opponents and the press to scream about the loss of jobs, and to defame that politician’s name as cruel and uncaring (sound familiar?). Too easy. Any politician’s prestigious 50-year career could be annihilated in a single night by repealing a tariff.

Why? Because repealing a tariff does hurt somebody. It does hurt those people in a certain industry. It does cause them to be unemployed. But at the same time, it benefits countless others, though those effects are hard to see from a desk in Congress. For any politician to face a tariff, he must be willing to throw away his whole career for principle and for the entirely thankless benefit of faceless millions. I know of few politicians, even Republicans, who have the strength and character to do this.

I know of few people who have the strength and character to do this. There are few things in this world that have more effective powers of persuasion than a tariff.

1. Hazlitt, Henry. Economics in One Lesson. San Francisco: Lasseiz Faire Books, 1996., pp. 62-63


2. Ibid, p. 63


3. Ibid, p. 61