Don’t Get Played by Protectionists
Here’s a letter to National Review.
Editor:
Trying to defend Commerce secretary Howard Lutnick’s attempt to justify Trump’s tariffs, Michael Brendan Dougherty points out how many ordinary goods in U.S. households are made in America (“Made in America,” March 10). The implication is that there’s no need to fear tariffs because, behind the higher tariff walls, we Americans will only have more such goodies to enjoy.
Mr. Dougherty is badly mistaken on both the facts and the economics.
First the facts. “Made in” labels – such as “Made in America” – are today highly misleading. Because of the vast integration of supply sources from around the world – sources that form, not many supply chains, but one globe-spanning supply web – nearly every manufactured good today is the product of ideas, financing, and materials from many different countries. The “Made in America” label on a Rickenbacker guitar – an example used by Mr. Dougherty – really means “Final Assembly Occurred in America.” Although it boasts of keeping its production in America, Rickenbacker itself admits that it imports some of the wood for its guitars from Africa and Asia. And even if all other obvious components of Rickenbacker guitars – such as the strings, knobs, and electrical jacks – are “Made in America,” chances are nearly 100 percent that many of the materials from which these components are themselves constructed – the metal, the plastics, the dyes for the paint, the miniature electronic parts – are either themselves imported inputs are were produced in the U.S. with imported inputs.
Chances are also nearly 100 percent that many of the tools used by Rickenbacker workers, as well as large portions of the factories in which they work, were either imported into the U.S. or were constructed from imported inputs.
And because Rickenbacker exports many of its guitars – it even has a line of guitars called “Export Model” – much of the financing for its domestic operations is “imported” from abroad.
Now the economics. Even if, contrary to fact, every “Made in America” label were literally true, protectionism would not simply result in us Americans enjoying an unchanged level of consumption with the only change being that more of what we consume is “Made in America.” Not only would protectionism raise the costs of production of Rickenbacker and countless other American producers (thus causing them to produce less) – and not only would protectionism shrink the export market for Rickenbacker and many other American producers (thus further reducing their production) – those relatively few American producers who expand because of high tariffs will necessarily draw resources away from other American producers, causing their production to fall. (If Rickenbacker is one of these other American producers, this effect of tariffs would be a third source of declining output for that guitar maker.)
The bottom line is that Mr. Dougherty is wrong to suggest that the existence today of several high-quality goods that are “Made in America” implies that protective tariffs will simply result in more such goods for Americans without any net negative impact on Americans’ economic fortunes.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The post Don’t Get Played by Protectionists appeared first on Cafe Hayek.
