Summary: Tariffs can help protect domestic manufacturers and support national security, but they often raise consumer prices and costs for businesses. Targeted tariffs, like those used by Biden against China, are more effective than broad tariffs that impact U.S. allies. Overall, while tariffs can be beneficial in specific situations, Trump’s proposed tariffs on Canada and Mexico are not likely to achieve the desired outcomes.
putting tariffs on U.S. allies doesn’t guard against forced deindustrialization by China; in fact, it makes the problem worse, by disrupting North American supply chains and raising costs for U.S. manufacturers. (View Highlight)
Increasing returns to scale are just anything that gives big companies a cost advantage over smaller ones — maybe network effects, or big fixed costs, or a “superstar” effect that draws in top talent, etc. In a world of increasing returns, the winning companies make a lot of profit, and smaller companies don’t. (View Highlight)
three basic arguments in favor of tariffs — national security, national champions, and infant industries. (View Highlight)