The Folly of Tariffs

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By Richard Colman

Tariffs on imported goods only prop up inefficient firms. 

Simply put, a tariff is a tax.  And the money from that tax goes to government. 

Tariffs also raise prices on consumers. 

If the Japanese can make better and cheaper cars than the Americans, let the American auto manufacturers figure out how to do better. 

In early March 2018, President Donald Trump announced that he wanted to put a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.  A few days later, he exempted Canada and Mexico from these tariffs. 

Earlier in his administration, Trump proposed tariffs on washing machines and solar panels. 

Suppose Company A in America makes chairs at a cost of $20 each. 

Suppose Company B in China makes the same chairs for $5 each. 

How can Company A survive, assuming that there is free trade between America and China? 

If Company A can use automation (like robots), Company A may be able to make chairs at a cost of $1 each. 

The  key to making Company A competitive is to have automation, flexibility in the workforce, and low taxes on business. 

Forget tariffs.  Give Company A the freedom to innovate, and Company A will beat Company B. 

Improvements in productivity are not new in America.  In the nation’s early years, 50 percent of all Americans worked on farms.  Today, that percentage is just two percent.  American farms are so efficient that America is able to feed not only itself but much of the rest of the world. 

If America believes that imported steel from a nation such as China jeopardizes American national security, the best approach is to place a quota — not a tariff — on imported steel from China. 

Just think of all the innovations America has brought to the world.  American inventors developed the telegraph, the telephone, airplanes, polio vaccine, photocopying (think Xerox), and Silicon Valley (which has such firms as Intel, Apple, Facebook, and Google). 

Luckily, America is still a free country.  But if America succumbs to the power of government to tax and regulate commerce and allows unionized labor to interfere with a company’s ability to innovate, then American will become a second-rate (or worse) nation. 

The genius of America is letting individuals and businesses be free to invent and improve.  Now — or any time in the future — is not the time to strangle liberty and the benefits that come with liberty.

Richard Colman is the founder and president of Biomed Inc., a biotechnology, publishing, and informatics company.  He is a biochemist and earned masters and doctoral degrees from the University of California at Berkeley.  He lives in Orinda, California.


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