Punitive Tariffs and Regulatory Reform

Much has been written on Donald Trump’s contradictory stance to both decrease regulations and increase tariffs (for example, see Steve Horwitz’s article in FEE).  Some try to address this contradiction by saying “on net, he will reduce regulations, and that will offset any disruptions from the tariffs and grow the economy.”  Given Trump’s own comments on the issue, I am skeptical on the matter.

It is important to remember he is not proposing tariffs just large enough to make his other actions revenue-neutral.  He wants punitive tariffs.  In other words, he wants tariffs large enough to alter people’s behavior, not just fund necessary government reforms or operations.  These are not small changes, but rather significant, long-term changes.  By punishing companies and individuals from using the most efficient means possible to produce (and thus, preventing the most efficient means possible to increase wealth), Trump is proposing a large regulatory burden fall on Americans.  And, not to mention the unseen effects of the lost potential of growth because foreign companies reduce investment in the US.

And here is where we run into the problem of the justification espoused above: if Trump’s regulatory reductions actually stimulate growth and make America more competitive in the global market place, then there is no need for the tariffs.  The tariffs would simply reduce the effectiveness of these regulatory reforms then were the tariffs non-existent.  However, if these reforms do not stimulate growth, then it would suggest deeper issues with the US economy, one which punitive tariffs would only exacerbate.

The long and short of this post is: punitive tariffs are incompatible with regulatory reform and will only serve to limit the effectiveness of such reform.

5 thoughts on “Punitive Tariffs and Regulatory Reform

  1. Economically you’re correct, but politically it’s smart to pander to people who hold contradictory beliefs. People don’t trust government, but they jump when you suggest government is the solution for their problems. When the winter weather is unusually cold, it’s because of global warming. Raising the price of cigarettes lowers the quantity of cigarettes smoked, but raising the price of labor does not affect employment. Tariffs increase domestic jobs, but have no effect on the cost of goods.

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  2. ” . . . punitive tariffs are incompatible with regulatory reform and will only serve to limit the effectiveness of such reform.”

    And, using threats of punishment through twitter are far worse than legislation. Trump is effectively increasing the power of the Presidency v. Congress given that his threats through twitter seems to be having just as great an effect as such legislation being enacted by Congress. Thus, the legislative process is bypassed and the necessary debate and possibility of the proposals being defeated becomes a moot point.

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    • Face it. Congress is a collection of impotent wimps. They let Obama get away with it (though the courts in some cases didn’t). They’ll surely let Trump get away with it. If they don’t assert their constitutional position, it will just get worse. People already assume the President can do almost whatever he wants (except appoint his choice to the Supreme Court).

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      • Sam, Congress is a collection of political posturers and con men. They will support Trump wherever they think it will benefit them and vigorously oppose him when they think score them points with their targeted special interest groups. I see a number of Representatives and Senators opposing him on tariffs. I doubt it will be a majority, thus Trump will likely get his way on a lot of these protectionist economic policies.

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      • “He [Obama] combined progressivism’s oldest tradition and central tenet — hostility to the separation of powers — with a breezy indifference to the take care clause (the president ‘shall take care that the laws be faithfully executed’) and to the first sentence of the Constitution’s first article (‘All legislative powers herein granted shall be vested in a Congress’).”

        This is George Will’s comment about Obama and his legacy. The same will be said about Trump at the end of his term(s). Republican Senators and Representatives would be wise not to blindly follow Trump and let him (like Obama did with democrats) lead them to minority status again.

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