Is “cheap stuff” the right goal for our trade policy?

Economists – who have predicted seven of the last four recessions – will tell you that trade tariffs are bad. The reason tariffs are bad is that they make imported goods more expensive. The money for the tariff has to come from somewhere, so it gets built into the price of the product.

So, the effect of an American tariff on, say, televisions made in China is to raise the prices to the American consumer.

OK, I buy that. But what does that mean in real life?

It means that a family in Peoria that would like to buy a 60” TV might have to settle for a 52” screen.

That strikes me a something less than catastrophic. If that’s a “global trade war” then these economists never studied the lead-up to World War Two.

But still, I admit that settling for a 52” TV rather than a 60” TV is not a positive. It’s a negative. Especially if you combine it with settling for a phone with a camera having 2X zoom rather than 3x zoom, and settling for a car that goes 0-60 in 5.9 seconds rather than 5.6 (both of which are way faster than the muscle cars of yesteryear, by the way), and settling for a dishwasher that you can turn on and off easily but not from France.

So, I do acknowledge that tariffs entail some cost to people who like to buy stuff – and we all do like to buy stuff. But that’s not the whole story. Credit Donald Trump and J.D. Vance for starting a discussion on this.

There are several legitimate reasons for tariffs. One is to protect a strategic American interest. Steel is used throughout industry, from buildings to tanks. Sure, we could import all our steel from China, for now, but what happens when we close our steel mills and then have a conflict with China and they cut off our supply?  

A second reason for tariffs is to use them as a bargaining chip. Foreign countries sometimes unfairly protect their industries from American goods, whether it’s the vineyards in France or the chip-makers in Taiwan. We can unilaterally remove our own trade barriers while they retain theirs, but a smarter approach is to threaten a tit-for-tat where we impose barriers unless they remove theirs. This typically works.

Everyone admits both of these reasons. Weighing and applying them can be complicated, but there’s no doubt about their legitimacy.

A third reason for tariffs is more subtle. It’s to protect American culture – and French and Italian and Korean culture.

Economists will tell you that the best economy is the one that’s the most efficient. That sounds logical. It means that if wine can be produced most efficiently in Italy, then that’s where is should be produced. If steel can be produced most efficiently in China, then that’s where it should be produced. If AI software can be produced most efficiently in America, then that’s where it should be produced.

The reason that efficiency trumps everything else, the economists will say, is that the efficient production of goods leads to the lowest prices for those goods. Low prices mean greater availability to poor people. What could be more important than globalized trade that results in cheap goods for poor people?

Culture, that’s what. And the best culture is not necessarily the most efficient one.

Maybe good wine can indeed be produced more efficiently in Italy than in France (my own judgment notwithstanding). Does that mean the French vineyards should be put out of business?

Maybe cars can be produced more efficiently in Korea than in Italy (which is surely the case). Does that mean the car factories in Italy should be demolished so that they can be made into vineyards and we should all drive a KIA and not a Ferrari?  

An economist would answer “yes.”

But an economist knows the cost of everything and the value of nothing. Destroying those French vineyards exacts a cultural toll on the French countryside and its people that is impossible to assign a Euro value to. Destroying those Italian car factories that build automotive works of art is almost like destroying Florence.

And what about the personal toll on the workers and their families?

What’s that you say? They should “learn programming?” But AI is putting programmers out of business too.

Economic efficiency is not the highest and best goal of a trade policy, especially in a rich culture. The loadstar of our trade policy – and our foreign policy – should be something more than that.