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.