Tariffs Can be Good or Bad, Depending on How You Look at Them

Tariffs are controversial nowadays, with fears of Donald Trump's use of them starting trade wars, but are tariffs really all bad? Do they have a proper place in our society?

You might be surprised to learn that the federal government relied very heavily on tariffs before income tax was first imposed during the Civil War. Ninety percent of revenue the government received was through tariffs, with the rest coming from taxes on land, houses, carriages, whiskey, and even slaves. In fact, many historians would argue a major factor that caused the Civil War was unfair tariffs on manufactured goods. As someone who finds personal income taxes combined with the welfare state as punishing productivity and rewarding failure, I find the idea of funding the government through consumption taxes (let's face it, government costs money) is a much more attractive option. I'd much rather have a consumption tax like tariffs instead of creating a huge bureaucracy to bill Americans for working such as the IRS. This is also because income taxes are so ridiculously complicated, many of us feel the need to hire accountants who could be helping commercial corporations with their accounting needs.

Now, there is a problem with tariffs when they are imposed improperly. If we were to implement tariffs to reciprocate the tariffs of other countries, I think we'd be doing what's right. Unfortunately, governments tend to abuse their power to tax, and imposing ridiculously high tariffs on certain countries amounts to economic protectionism instead of fostering fair competition on the international market. Many would view moves that help Americans compete with lower prices around the globe is a good thing, but I find that thinking slightly short-sighted. While I certainly don't want all of our manufacturing jobs to end up overseas, I think shielding American workers from having to compete in an international market could turn out to be a disservice. It's a bit like coddling or spoiling children. If you do too much of it, you end up with useless entitled brats that expect a lot without much effort on their part. This is the only reason I have to worry about tariffs. I don't want our economy to become coddled and weak in the international market.

One thing I have to consider though, is that coddling the American workforce might be a good thing in moderation. We enjoy an incredible standard of living compared to our competitors because of our labor laws, which would put us at a severe disadvantage with countries that lack them without tariffs to keep pricing competitive between foreign and domestic products. I consider myself quite lucky to not have to work sewing soccer balls all day like some children are expected to do in other countries. So, the real question is where is the right balance to maximize prosperity for ourselves? How much economic protectionism and "fair trade" deals do we need? Shouldn't we make it a little harder on ourselves to compete with other countries to spur innovation?

We've seen some success by focusing on technology, and creating an edge in manufacturing and other industries that way, but now fast food workers demanding fifteen dollars an hour are finding electronic kiosks replacing them instead of getting higher wages. I'd say in the long run that's a good thing, but I know some people will be left behind because they simply will never really be ambitious enough to be more than unskilled laborers. However, others will when pressured, adapt and learn new skills so they can compete in the jobs market. 

In the end, tariffs are in fact taxes.  While they can be used to level the playing field with competing industries of other countries, no matter how they are applied, consumers end up paying for them.  Like any other corporate tax, the cost is simply passed on to the consumer because business is about making money, not losing it.  

If you'd like to see where we are as a country as far as tariffs currently, you can find the Official Harmonized Tariff Schedule 2018 from the United States International Trade Commission here.