The fall and fall of U.S. tariff barriers

Click to enlarge. Hat to Barry Ritholtz

The United States, like almost all industrial countries, built up its infant industries behind protective tariff walls that shielded them from more efficient, because longer-established, competitors.

This historical graph shows what has happened since then.  Tariffs against foreign imports are down to a tiny fraction of what they were in the 1930s or 1940s.

President Trump deserves credit for forcing trade policy onto the national agenda.  Unlike his predecessors, he does not argue that more and more globalization is the answer  He is right that it is time for a change.

But trade wars aren’t an answer either

Rather the U.S. should do what successful exporting nations do, which is to build up their industries through a carefully targeted industrial policy.

Global American companies are shifting production into foreign countries.  Some times the reason is to exploit a low-paid work force.

But often the reason is that foreign governments refuse to allow American companies to enter their markets unless the American companies move production to their countries, hire local workers, allow local investment and in many cases transfer technological expertise to the host country..

The U.S. government sets no such conditions for access to the U.S. markets.

Trump’s protectionism may or may not bring trade concessions from China and other nations.  In and of itself. this will not build up America’s industrial strength.

But new versions of NAFTA and other failed trade treaties won’t work either.  Anti-Trump liberals and Democrats need to come up with an effective and targeted industrial policy of their own.

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