A remarkably large number of people seem to think that imposing tariffs on imports into the United States would be a good idea. That number, unfortunately, including the President-elect, Donald Trump. However, we do have an American industry which is protected by exactly such trade tariffs, the sugar one. And we even know what the effects of those sugar tariffs are--they make all Americans poorer. So, if that is true then what is the effect of the more general tariffs Donald Trump and others want going to be? Well, obviously, they're going to make everyone poorer, aren't they?
And if we're honest about it making the citizenry poorer is not normally regarded as a general aim of economic policy.
That the US sugar industry is protected is well known:
The United States (U.S.) is the fifth largest sugar producer and fifth largest consumer of sugar in the world. The U.S. sugar industry has enjoyed trade protection since 1789 when Congress enacted the first tariff against foreign-produced sugar. Since then, the U.S. government has continued to provide trade support and protection for its domestic sugar industry.
The framework for the current U.S. sugar program has its roots in the so-called “Farm Bill” enacted in 1990. The farm bill is the primary vehicle for setting U.S. sugar policy and that policy is currently based on three main pillars: price support through preferential loan agreements, domestic market controls and tariff-rate quotas.
Very well protected in fact. And the effects of the protection are also well known:
In fiscal year (FY) 2013, Americans consumed 12 million tons of refined sugar, with the average price for raw sugar 6 cents per pound higher than the average world price. That means, based on 24 billion pounds of refined sugar use at a 6-cents-per-pound U.S. premium, Americans paid an unnecessary $1.4 billion extra for sugar. That is equivalent to more than $310,000 per sugar farm in the United States.
Now, we could just regard that as a transfer from one group of Americans to another. And perhaps sugar farmers are such righteous beings that we should be forced to pay them more. But the net effect is not zero, it's negative:
U.S. sugar policy costs taxpayers millions of dimes per year. According to the U.S. International Trade Commission, the sugar program imposes a $49 million net cost on the economy.[9] According to a study commissioned by the Sweetener Users Association, the program costs consumers $2.9 billion to $3.5 billion.[10] According to a study by the American Enterprise Institute, the program costs consumers $2.4 billion per year, with a net economic cost of $1 billion per year.
Note that while the estimates vary there's no one there stating that the program doesn't have a negative overall cost. And a negative overall cost is the same as stating that everyone is being made poorer. They're the same statement in fact.
So, now we've got Donald Trump:
Though threats of tariffs could be a bargaining tool, Trump has been talking up the idea for years. In a 2011 book, he called for a 20 percent tax on any foreign country shipping goods into the U.S. He promised them consistently throughout his campaign, and doubled down in the first news conference since his election, pledging a "major border tax" for firms that shift jobs abroad. Trump has suggested a tax of 45 percent on imports from China and 35 percent on goods from Mexico. His nominee for U.S. trade representative, Robert Lighthizer, noted in a 2011 article that using tariffs to promote American industry has been a part of the Republican Party’s toolkit since its founding.
The effect of the already existing tariffs is to make Americans poorer, the effect of the new tariffs will be to? Yes, well done, to make Americans poorer.
Which really leaves us with only the one question. Why does the about to be President dislike Americans so much that he wants them all to be poorer? And yes, there is actually good reason why 100% of economists asked said that import tariffs are a bad idea.
