Tariffs Versus Free Trade

U.S. President Donald Trump signs executive orders on the first day of his second term, Jan. 20, 2025. Credit: White House. - Daniel Torok

Lots of fuming and teeth gnashing over tariffs these days. This professor from Missouri argues tariffs can beneficial. Makes sense to me.

Raising Wages and Preserving Social Cohesion: President Trump and the Unseen Benefits of Tariffs - Emir J. Phillips

Though sometimes dismissed as antiquated economic measures, tariffs have great advantages when seen holistically. Critics point out possible rising consumer prices, but a closer look shows that tariffs not only boost wages but also conserve vital skills, support social stability, and help to offset the negative consequences of unemployment. In a close-call cost-benefit study, tariffs are indispensable even if the consumer cost matches wage gains since their long-term social and economic advantages exceed their negatives.

Strategic use of tariffs allows countries to not only attain economic resilience but also achieve a more equitable distribution of wealth—a concept firmly anchored in the background of American economic policy. Under leaders such as Abraham Lincoln, the Whig Party accepted tariffs as a pillar of national progress. Lincoln’s advocacy of protective tariffs served to finance infrastructure, boost industrial development, and guarantee young, aspirational America’s economic independence—not to mention win the Civil War.

Consumer Costs vs. Worker Gains: A Socio-Economic Calculation

A common argument against tariffs is that they raise prices for consumers, eroding disposable income. While this is partially true, research suggests that the wage increases resulting from tariffs often offset the additional consumer costs. A study in The Review of Economics and Statistics (Autor et al., 2020) found that U.S. manufacturing tariffs implemented between 2018 and 2019 resulted in measurable wage increases for domestic workers, even as they marginally increased consumer prices. Crucially, these wage increases helped stabilize industries that might otherwise have collapsed under foreign competition oftentimes where unions are illegal (Communist China and Communist Vietnam) and these workers in “Worker Soviet States” have tawdry labor rights.

In industries protected by tariffs, workers are more likely to retain and hone their skills, which would otherwise atrophy due to job displacement. The loss of employment in skilled trades leads to a deterioration of the workforce’s capabilities, creating long-term structural weaknesses in the economy. A displaced worker may never regain their previous earning potential, as demonstrated in research published in The Quarterly Journal of Economics (Jacobson, LaLonde, & Sullivan, 1993), which found that displaced workers often experience persistent earnings losses, even after re-employment.

Truth is, tariffs effectively act as a counterbalance to the “race to the bottom” in global labor markets, where corporations exploit cheap overseas labor at the expense of domestic workers. By imposing a cost on imported goods, tariffs incentivize companies to invest locally, fostering a virtuous cycle of job creation and wage increases. This dynamic is particularly critical in sectors like manufacturing, where wages have historically supported middle-class stability.

That's just the introduction. You can read the whole thing here.

Note - the photo was included in the linked article, but I couldn't copy it from there, so I asked Google. Google turned up multiple copies, so I copied it from a site that would let me. The story on that site has nothing to do with tariffs, but I linked to it anyway, just to give them credit for posting the image.

P. S. I wonder who the guy standing next to the Donald is. He's not getting enough credit for his role in keeping the mob under control.