High trade deficits in the United States have produced a large group of people, including presidential candidates like Donald Trump and Bernie Sanders, who support economic protectionism.
Economic protectionism is the idea that domestic industries can be protected through a series of restrictions on imports. With this policy, foreign competition is blocked out by an increase in tariffs and subsidies placed on imports. The price increases that tariffs lead to are not only a fact, but are the actual motivation behind the position. Theoretically, higher costs should both (1) turn consumers towards domestic goods that are not affected by the tariffs, and (2) also incentivize companies to create more jobs domestically and avoid tariff fees.
Sounds great, right?
The problem is that it is substantially more expensive to create those kinds of manufacturing jobs in America. The jobs being brought back to the states are not desirable for many Americans, and jobs that are worth $3 an hour or less do not have a place in the United States as a result of minimum wage laws and other legal barriers. Additionally, companies are currently invested in the manufacturing process they already have overseas. In order to create new jobs in America to replace those abroad, companies would need to repatriate those investments and the capital they use to pay for them. Current tax penalties make this a highly unfavorable option.
Take, for example, the iPhone: the product is designed in the United States and manufactured in China. There are reasons why businesses are paying men and women in China extremely low wages to assemble an iPhone: we do not have the physical infrastructure or labor force to compete. Americans currently cannot compete with the capabilities of the Chinese work force, in large part because the push for a “livable wage” makes low-paying manufacturing jobs undesirable and further excludes us from the world manufacturing market.
America has moved from the manufacturing industry towards the information and technology sector, and protectionism alone will not magically bring back the manufacturing sector back to America. Even if it were to accomplish this feat, do we really feel that an increased manufacturing base is the hallmark of a successful 21st Century nation?
If individuals expect the mass production of goods like the iPhone, then they also need to understand that competition is what promotes the innovation and productivity needed to mass-produce these goods. Without foreign competition, the cost of manufacturing would skyrocket as American companies monopolized the marketplace. Middle class individuals could no longer own iPhones. More jobs might exist, but consumers won’t be able to afford anything.
Tariffs only hurt the people they are meant to protect: working-class Americans.