What to read to understand tariffs

DONALD TRUMP has single-handedly brought tariffs from the back of textbooks to the front pages of newspapers. The president has imposed taxes on thousands of products since returning to the White House. After April 2nd—what he calls “Liberation Day”—he is set to impose 25% levies on imported cars and country-by-country “reciprocal” tariffs, which may cover a number of countries that have so far been spared.

Before governments had sophisticated ways of monitoring sales or incomes, tariffs were the least complicated way to raise revenue. Often they were intended, as they are by Mr Trump, to protect industry at home from competitors abroad. These books show that the concept of taxing imports is not new: if anything, free trade has been the historical exception.

This book methodically debunks trade-policy myths—in particular the idea that protectionism made America a great industrial power. In some industries, tariffs may have sped up development by a few years. But economic growth during the protectionist period in the 19th century had less to do with such duties and more to do with the country’s abundant resources and openness to people and ideas.

Not all defences of free trade are long and technical. This brief essay—which Milton Friedman called a “classic” (and which is available to read online)—describes the materials and expertise required to make a basic writing utensil. When it was published in 1958, a pencil took graphite from Sri Lanka, wood from California and the colouring for its pink eraser from Italy. That supply chain may have changed in the intervening years. Nevertheless this is a worthwhile study of the complex processes required to produce seemingly simple goods.

To understand the America First perspective, read Mr Trump’s former trade chief. Mr Lighthizer argues that other countries misbehaved by subsidising exports and stealing American technology and that Washington policymakers paid too little heed to the impact on American workers wrought by offshoring. Mr Lighthizer’s account is one-sided: he makes no mention of America’s own rule-breaking (such as its subsidies to cotton farmers in the 2000s in an attempt to stay the world’s largest exporter of cotton).

David Ricardo published his treatise against Britain’s Corn Laws, a set of tariffs on grain imports, in 1817 and established the principle of comparative advantage. The theory suggests that, even if a country is worse at producing everything than its trading partners, it is still better for each to specialise in an area in which it is more competitive, as then all countries will get richer. Some economists have questioned the theory’s practicality, as specialisation might lock countries into less productive industries.

Joe Biden’s administration demonstrated that it is not just right-wingers who have forsaken free trade. Yet there is a rich history of the left’s support for free trade, including that of Karl Marx (who, admittedly, saw it as a waypoint towards communism). Opponents of the Corn Laws argued that tariffs were nationalistic and imperialistic: removing them, they said, would bring peace, or “Pax Economica”. Mr Palen’s telling of why leftists abandoned that tradition is imperfect but revealing. ■