Free Trade for Glorious Victory! (aka: Why Import Tariffs Suck)

Day 688, 13:38 • Published in USA United Kingdom • by Devoid

I've been messaged by enough people who seem to think that jacking up import tariffs is a good idea. So, time for an economics lesson!





Let's pick a good. We'll call it oil. This is all hypothetical.

$50 is the world price; that is, the selling price from those who can produce it cheapest globally. This is the price we in the US will buy at if trade is truly free.

$70 is the domestic price without any foreign competition.

$60 is our domestic price after we've slapped a $10 tariff on imports.



So what happens? Well...

- Consumers lose the area between CEJF. Stuff is more expensive, and some get priced out of the market, while others overpay for the oil, and are therefore worse off.

- Producers gain the area between CDGF. Their prices are higher, so they make more money, even though their sales are less.

- The government gains the area between DEIH. Obviously a tariff means they're collecting money on imports.


So what about what's left over? Those two dark triangles, DHG and EJI? This is where we lose. They're gone. It's an area where people used to buy and no longer do because of the higher price. The government doesn't gain it, the producers don't gain it, but the consumers certainly lose it.

Moral of the story: Free trade for glorious victory!


Some have whined about how cheap imports hurt domestic suppliers. Yup, they do. Or how they hurt workers in the industries affected. Yup, they do. I didn't say this was perfect. But if oil is cheap, then guess what? Our moving ticket companies benefit, and so do the workers in that industry. And if moving tickets are cheaper, consumers spend less money on moving tickets, meaning they have more to spend on other stuff. It works out, and it works out wonderfully. The free market is a magical thing.


Others have whined about how foreign countries have 99% import taxes, while ours are low. They shouldn't be whining though. Because this is great! It means more nations are going to export stuff to us, and it's going to be real cheap. Cheap stuff is awesome! See above.



And before anyone says it, yup, I have a company in America (and others elsewhere). I directly compete with foreign imports. I'd rather do without them, but I live with it. I run a good enough business that I can compete successfully with them and still make a profit. So please none of the WELL ITS EASY FOR YOU TO SAY blah blah...


In short: Free trade provides benefits for every country who participates in it. Business owners, stop whining, stop messaging me to increase tariffs, and put up or shut up. To everyone else, enjoy the cheap stuff!

Post comments in the comments section, ask any questions you might have, and vote it up 😃