At the last GOP debate, Ted Cruz repeated the same argument that we've heard from free traders for years: that a tariff on Chinese goods entering the U.S. would simply be passed on to American consumers. In responding to Trump's suggestion that he would impose a tariff as high as 45% on Chinese products if the Chinese did not stop their unfair trade practices, Cruz said that Americans would have to pay 45% more for those goods.
But that is not necessarily true at all, because companies that sell Chinese products in the U.S. would not dare pass on the entire cost of that tariff to consumers. If they did so, those products would suddenly cost more than competing American products, and consumers could buy the American products instead.
Furthermore, we know from history that protective tariffs encourage the domestic production of products to compete with foreign-made products, precisely because of the tariffs imposed on foreign-made products. Conversely, without protective tariffs, the incentive for American companies to produce competing products is greatly reduced. With protective tariffs in place, a company that made products in the U.S. could sell those products to American consumers without having to worry about tariff rates, because their products would not be subject to tariffs.
China already imposes heavy tariffs on American products sold in China. We are already in a "trade war." The problem is that the other side has been doing all the fighting and we have been getting clobbered--hence our half-trillion trade deficit with China.
And, note that Trump has said he would only resort to a protective tariff on Chinese goods if he could not get the Chinese to stop their unfair trade practices.
I might add that for the first several decades of its existence, the Republican Party, starting with Abraham Lincoln, strongly pushed for protective tariffs to shield American companies and industries from unfair foreign competition.
Trade With China Isn’t Free or Fair | Economy In Crisis
China's Not-So-Fair Trade
But that is not necessarily true at all, because companies that sell Chinese products in the U.S. would not dare pass on the entire cost of that tariff to consumers. If they did so, those products would suddenly cost more than competing American products, and consumers could buy the American products instead.
Furthermore, we know from history that protective tariffs encourage the domestic production of products to compete with foreign-made products, precisely because of the tariffs imposed on foreign-made products. Conversely, without protective tariffs, the incentive for American companies to produce competing products is greatly reduced. With protective tariffs in place, a company that made products in the U.S. could sell those products to American consumers without having to worry about tariff rates, because their products would not be subject to tariffs.
China already imposes heavy tariffs on American products sold in China. We are already in a "trade war." The problem is that the other side has been doing all the fighting and we have been getting clobbered--hence our half-trillion trade deficit with China.
And, note that Trump has said he would only resort to a protective tariff on Chinese goods if he could not get the Chinese to stop their unfair trade practices.
I might add that for the first several decades of its existence, the Republican Party, starting with Abraham Lincoln, strongly pushed for protective tariffs to shield American companies and industries from unfair foreign competition.
Trade With China Isn’t Free or Fair | Economy In Crisis
China's Not-So-Fair Trade
