How do tariffs work to protect infant industries?
Protective tariffs make foreign goods artificially more expensive. This allows the new domestic industry to compete by price while production ramps up to the scale when it can compete head to head with the foreign manufacturers. - .--
What did tariffs do to help northern industries? (1990's)?
nothing
How do tariffs harm domestic products?
Consider tariffs on steel and aluminum, the ones recently discussed and about to be imposed. Who uses steel and aluminum? Boeing. Ford. GM. Toyota and Mercedes in their U.S. manufacturing plants. Keep going. Those manufacturers use more steel and aluminum than the domestic manufacturers produce, so the tariffs make those domestic manufacturers’ raw materials more expensive and their products more expensive, so less attractive to buyers in the rest of the world. Not to mention more expensive for American consumers.The tariffs do benefit domestic producers of steel and aluminum and the workers in domestic factories. The benefits to those producers and workers, the data show, are dwarfed by the costs to the losers—the domestic consumers of steel and aluminum.And we haven’t even started to discuss the secondary effects of retaliation by other countries who will impose tariffs on the goods we send to them, curtailing our sales to them, harming our domestic producers. We’ll sell fewer Harley-Davidsons and soy beans as soon as those other countries impose tariffs on them.
How do domestic industries benefit from protectionism?
They don’t.Now a particular domestic industry can benefit since they gain a monopoly, but monopoly grants benefits the more people you can rob and the smaller you are. By the time you are talking about “domestic industries”, everybody is both consumer and producer and everybody suffers the disadvantages while there is nobody left to rob. You may sell at high prices, but the prices you buy at are just as high and your benefit is gone.“Protectionism” is a con game the nation can’t win.
How did the protective tariffs protect the N. industries?
Yes, Manufactured goods from Europe were taxed, in a way, there was a charge for bringing them into the country. The idea was that US Manufacturers would be able to manufacture the same or similar goods, and, since there was no additional tax on them, they could be sold for lower prices. There were goods that were imported from overseas that had to be paid extra for, so some consumers were willing to pay the extra cost. When our diplomats, including Henry Clay, a strong supporter of the high protective tariff, went overseas, they went with shopping lists from their family and friends, and could bring European goods with them as luggage, bypassing the tariff. The purpose of the mercantile system, as the system existed before the Revolution, was that raw materials were exported from the Americas, and finished goods were imported from England. This guaranteed them a market for their goods. Shipping interests here in the USA were still anxious to restore the export and import business in the early years. One of the first things John Adams had on his agenda was to reestablish trade between England and the US. As manufacturing began increasing in the nineteenth century, though the shipping interests still wanted to keep those markets unimpeded by tariffs, the manufacturing interests, many in Massachusetts, needed the tariff to build their own markets. The manufacturers in Britain and France still wanted American customers, but they were losing them to American competition. In retaliation, they would apply tariffs to raw materials, particularly cotton and tobacco, imported from the USA. This affected the South especially, and the country as a whole to a lesser degree, since the economy prior to the panic of 1837 was based on the cotton market.
Should the government use protective tariffs to protect domestic industries?
Yes, to countries that don't allow our goods to make it to their markets. No, to countries that do allow our products in their markets.
How will Trump's new tariffs affect my business?
Obviously, the answer depends on what your business is. But businesses find ways to work around most cost increases, this is just another. Depending on what you do, you may well find the tariffs don’t matter much, or that a certain amount of flexibility and creativity can mitigate the damage substantially.The longer view, though, is the way to invest, and to direct the way your business grows.President Trump has imposed these tariffs for two reason:He want to increase the domestic manufacture of steel and aluminum, two strategic metal that are needed for the military buildup he’s been planning for from the beginning. We have good reason to believe that China anticipates conflict with the US soon, perhaps as soon as 2020. Obama left us with a military in a shambles; we have very little time to repair the damage he left and we will need the strategic metals available on a domestic basis.For many years, we’ve been using trade deals negotiated back when the U.S. was trying to build up the economies of other countries. We have moved on, and that is no longer an appropriate model for international trade. Our trading partners would like to try to keep things as they used to be. Trump is using the 25% tariff on steel and the 10% tariff on aluminum to shock the world into realizing we’re serious, and that he is not a president to be trifled with.In the long run, President Trump unquestionably would prefer a world where the tariffs were all reduced to 0%, and no subsidizing of domestic industries was permitted. None of us are likely to live to see that happen, but we can begin to negotiate more realistic trade policies immediately.Obviously, both factors provide investment opportunities. For businesses, it is reasonable to assume that the Trump economy is just beginning to grow.There are numerous exciting technologies just waiting to be developed and some of them may be applicable to your business. It doesn’t make any sense to spend a lot of money on old fashioned technology — keep your powder dry and continue to investigate solutions that might be available soon.