When Goods Don’t Cross Borders

The Protectionist in Chief has decided that “trade war” is a sound approach to foreign policy. From Canada to Russia and China, among others, the Big Cheese-Doodle has signed on to several efforts to “protect” the interests of American business by limiting and taxing businesses and industries located in nations deemed trading adversaries. As Otto T. Mallery stated in Economic Union and Durable Peace, a quote oft attributed to Frédéric Bastiat, “When goods don’t cross borders, armies will.” As a result, describing Mr. Trump’s initiatives as “war” is far more apropos than his highness might prefer.

When the coercive force of government is employed, markets are kept from being free. In the case of tariffs, nations with competitive advantage are targeted with import premiums or restrictions. The effect of such “protectionism” is to negatively impact the livelihood of those people living in the nations or regions targeted. As a result, the people impacted become belligerent and bellicose, escalating tensions and increasing the risk of conflict. Before long, this sentiment results in military action.

While protectionism increases the likelihood of tensions and conflict, it also negatively impacts the very people supposedly benefited. When a good like imported steel is targeted, for example, the price of this good increases for everyone in the importing nation. The argument is that this makes domestic steel producers more competitive. However, domestic producers are only made more competitive in domestic markets at the expense of consumers in that market. As a result, U.S. consumers pay a higher price for such goods than the rest of the world enjoys. Additionally, the tariffs themselves are paid to the U.S. government, benefiting those who dictate the increased prices.

In the end, tariffs benefit states. While the price is borne by the people within the state enforcing tariffs, targeted nations seek remedies through other means like military confrontation. If military conflict results, individual people subject to the control of the states involved again pay the price. In the end, protectionism hurts individuals and benefits states regardless of where it is tried.

More of that which is Seen and that which is Unseen
We respect your privacy. Et Invisibilium will never sell or share your email address.

Leave a Reply