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Why Tariffs Don’t Save Jobs

Written by Gary North on February 25, 2017

Economist Walter Williams points out the following:

In his 2012 State of the Union address, President Barack Obama boasted that “over 1,000 Americans are working today because we stopped a surge in Chinese tires.” According to a study done by the Peterson Institute for International Economics (http://tinyurl.com/jdtbktu), those trade restrictions forced Americans to pay $1.1 billion in higher prices for tires. So though 1,200 jobs were saved in the U.S. tire industry, the cost per job saved was at least $900,000 in that year. According to the Bureau of Labor Statistics, the average annual salary of tire builders in 2011 was $40,070.

Here’s a question for those of us who support trade restrictions in the name of saving jobs: In whose pockets did most of the $1.1 billion that Americans paid in higher prices go? It surely did not reach tire workers in the form of higher wages. According to the Peterson Institute study, “most of the money extracted by protection from household budgets goes to corporate coffers, at home or abroad, not paychecks of American workers. In the case of tire protection, our estimates indicate that fewer than 5 percent of the consumer costs per job saved reached the pockets of American workers.” There is another side to this. When households have to pay higher prices for tires, they have less money to spend on other items — such as food, clothing and entertainment — thereby reducing employment in those industries.

Those corporate officers who line their pockets with millions of extra dollars extracted from consumers by means of the violence imposed by the state never mention this. They want the public to believe that the tariff is a benefit to workers. There is some marginal benefit to specific workers in protected industries. But if we’re talking about who really profits from tariffs, we should not focus on workers. We should focus on the employers of a tiny handful of workers who are benefited by the tariffs.

The ability to look beyond the immediate is a truly remarkable ability. The great economist Henry Hazlitt discussed this in his book, Economics in One Lesson (1946). He quoted from a French economist a century earlier: Frédéric Bastiat. Bastiat spoke about the thing seen and the thing not seen. In this case, President Obama, or at least his speech writer, saw 1,000 jobs that were saved as a result of tariffs on tires. But he did not see the jobs lost in those industries that did not get orders from American consumers, because consumers paid money that they would not have paid, had there been no tariff on tire manufacturers.

(For the rest of my article, click the link.)

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