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While no economist is yet advocating tariffs, except perhaps Peter Navarro (who's not taken that seriously), the attitude among economists that free trade is unequivocally a good thing is starting to change. There is traction for the work of David Autor where he argues that the effects of trade are unevenly distributed and thus some people do not benefit from free trade. The policy ramifications of this gaining traction could wind up with economists favoring tariffs in some cases.

The grocer example isn't really applicable. We both use the same currency so the grocer can use the local currency I pay for groceries to buy goods elsewhere or pay their employees. With foreign trade you have different currencies and a current account, the trade equation isn't as straightforward. An accurate analogy would be buying groceries via a barter system where I'd exchange good or services for groceries or a promise for future goods or services (eg, "luke-bucks") in exchange for groceries.

Yes this is critical - free trade benefits the economy/country as a whole but the benefits do not accrue evenly across society.

Laymen have basically been saying this for years while being ignored by the ruling elites but economists have been slowly starting to get on board.

Even post Trump I suspect that the global attitude toward free trade will become much more nuanced than it had been over the past 20+ years.

No economist has ever claimed that global trade is Pareto-optimal inside nations. It's well known fact that some industries suffer and some thrive. It's just that the total sum is positive.

The trade shocks should not be handled with tariffs or restricting trade. It's domestic policy issue.

This needs to be emphasized more - Economics is given a bad rep for creating inequalities, but the field is playing with half the handbook - domestic policy in the form of fiscal policy (i.e. decision on how much and where to spend $), as well as distribution policy (i.e. how much redistribution to engineer via taxation/subsidies, etc.) has never been in the hands of any real economists - domestic politics has always taken the forefront in these decisions, and rightfully should take the blame for the results.

The issue is that distributional losses historically have been significantly underestimated in terms of scale and persistence or glossed over as insignificant. Economists traditionally have held that workers who lose their jobs to free trade, while losing their job in the short term, find a new job elsewhere and ultimately are better off. This is turning out to not be the case, some workers persistently remain worse off.

To be fair, the rate of economic change is increasing, so part of the problem is that workers over-invest in skills only to have those skills obsoleted by the changing landscape.

So of course the worker who over-invested in job A and was compensated based on that over-investment is going to be worse off in job B when he/she has under-invested in the skills needed for job B.

The fields that are best for workers today are those that have built in required continuing education, or fields in which rapid change is widely acknowledged and understood by the workforce (software engineering, etc.)

> No economist has ever claimed that global trade is Pareto-optimal inside nations.

This is an important point, and I think plays into the question about tariffs (which, to be clear, I think are probably net negative).

The conventional argument is that free trade is a Kaldor Hicks [0] improvement, not a Pareto improvement. KH means that the sum of benefits and costs is positive, and it would be possible (in principle) to tax the beneficiaries and pay off the people harmed and create a synthetic Pareto outcome.

You could view tariffs as a clumsy attempt to apply the Kaldor-Hicks concept. I personally think there are much better ways, but I think the argument is at least plausible.

[0] https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficienc...

I think this is a fair point, but I'd argue that there are two separate issues, trade policy and job training programs, etc.

We've seen a lot of innovation in the area of free trade, commerce, etc., but virtually no innovation in education, on the job training, and other areas where policy can help make the economy stronger overall.

So in my view, tariffs are used in a way that is meant to undo the damage from decades of neglect of our educational and skills training infrastructure.

This doesn't call for a more nuanced view on trade (freer is always better), it is a call for us to begin to think rationally about job training.

Whatever job anyone has today, whatever product is demanded today, etc., will not necessarily be the same tomorrow. When we pretend otherwise -- such as the fiction that first world nations should manufacture steel -- we invite all sorts of bad policy when what we really needed was honest understanding that economies change.

Keep in mind that most moral progress over time is not the result of rational people convincing others of something that was previously opaque, it is due simply to economic progress. In other words, moral progress is a luxury we buy with prosperity.

Where we lag in this area most today is that we fail to understand that we must invest heavily in job training, education, entrepreneurship, and other areas that create new life when industries change, move abroad, or shrink.

It so happens that in US politics there are some influential electoral districts that contain steel mills and which have suffered from economic globalization. Sure the easiest way to placate those districts is to introduce tariffs or use other means to offer welfare that prevent those impacted from adapting.

Most of the buildings that house startups in urban parts of the US were once used for manufacturing or meat packing. This is a good thing in the medium term.

But creating job training or investing in new industries to replace old ones is not economics, it's social policy. We should not make the mistake of confusing it with economics.

The real weakness of democratic societies is that the general understanding of the world don't transfer into politics.

Mercantilism as a zero sum game where you export more than you import and then you get rich reasonable first theory if you start to think trade from the scratch, but it's wrong.

It was already debunked by Adam Smith in "The Wealth of Nations" 1776. Then came Ricard's comparative advantage (1817), the emergence of Classical Theory Of International Trade, then New Trade theory then New New trade theory.

Every area of politics that touches issues like medicine, chemistry, genetics, climate science, macro economics, trade economics, urban economics, etc. is always facing arguments that were outdated hundreds or thousands of years ago.

> The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue.

The obvious endgame is not for the US to keep these tax increases. The administration stated the goals fairly clearly, and almost(?) none of them are controversial:

https://www.whitehouse.gov/briefings-statements/president-do...

Tariffs are leverage. Economists not liking them is a lot like an economist pointing out that manufacturing bullets has a fair bit of dis-utility. It's true at face value but you might want to use them for something like if there's, you know, a war going on. If a war is ongoing and an economist wants to talk about how bullets have a lot of dis-utility when we could be manufacturing more spoons, that's fine I guess. But it misses the whole point.

Anti-tax Republicans including the current admin obviously don't want tariffs around either. But they do want to use them for a short while as a tool to get China to stop the practices outlines above. No one in the republican administration intends to impose the tariffs for the sake of collecting tax revenue or anything like that.

Interesting point. It is probably the most charitable way of looking at how tariffs could possibly have been instituted by a party that claims to value economic freedom.

We're told that finally a master negotiator is at the helm and that he will renegotiate trade deals that leave the US at a disadvantage.

One data point that offers evidence counter to that view is the president's vocal opposition to NAFTA, a deal that resulted in a large (mostly) free trade zone and lower tariffs on US goods than on those from the other participants.

I think the most likely explanation is that the tariffs are viewed as a way for the executive branch to unilaterally redistribute wealth to key swing states that have been hit hard by globalization.

If your speculation is true, then the administration must believe not just that escalating tariffs will move trade negotiations to the brink and will allow the US to negotiate freer trade... but it must also believe that the negotiated freer trade will be economically significant nationally AND to the swing state areas hit hard by globalization.

It is my understanding that if the above is true about the administration's beliefs, that the numbers quite obviously do not add up.

So while the US would certainly be better off with freer trade, the economic cost of tariffs is not enough to move the needle economically in a significant way (per an analysis done by Reason magazine). This directly contradicts the claims made by the administration.

So unless there is a deep factual discrepancy between the analysis conducted by Reason magazine and the analysis the administration is doing, the tariffs seem intended mainly as a tactic to rally key groups of voters, and there appears to actually be no broader strategic significance or possible negotiated outcome that would achieve the goals the administration claims will be possible via the tariff escalation.

That said, the tariffs are probably a smart way to try to win a few elections. They allow the public to view other nations as adversaries and to rally behind the US "winning" over other nations. They also prop up the fiction that trading partners are in fact adversaries rather than cooperators. Such adversarial rhetoric is obviously a useful political tool.

So since this kind of us vs them, zero-sum rhetoric has been such a key element of the administration's message, I find it unlikely that it would ever seem desirable to remove the tariffs and to reframe the US relationship with other nations as constructive rather than as adversarial. Why give up such a useful enmity if it's working politically?

My concern is that the tariffs will cause unexpected and sudden economic harm, which could quite suddenly cause a lot of the players to lose their perspective and actually begin to act adversarially.

FWIW tariffs also reduce trade cooperation between nations and reduce the disincentive for armed conflict.

Doesn't this all assume that all trading partners are being fair and honest, though?

For example, let's say a country artificially keeps prices low for microchips in an effort to infiltrate the US market (for whatever underlying reason). Or some other country's clothing is super-cheap because they use forced labor.

I'm no economist, and I'm not even well-versed in the subject. I don't even know if these are real-world scenarios. But it's things like this that have always bothered me when people advocate for straight-up libertarianism, or complete lack of government oversight. Because there are always people who don't play fair.

If a foreign government subsidizes manufacturing of things that are exported to the US, it is taxing its own citizens and effectively paying US firms/individuals to import those goods at a discount.

If it were that simple than no one would care if Walmart dumps a ton of goods on the market at below cost to drive its competitors out of business.

Companies always try to undercut competitors. That is just how it works when you have competitive markets. If China subsidizes steel production, the subsidy is benefitting US firms that import steel.

If there is a need for the US to have steel production capacity domestically, then why not keep steel reserves in a warehouse somewhere. This would cost a fraction of the cost of tariffs. The same rationale is used with oil reserves.

Keeping reserves costs a bit of money and requires a small number of people to administer the project. Contrast this with a tariff that props up a dead industry and results in thousands of workers being paid to work a job that shouldn't really exist and is essentially a welfare check in disguise.

Far better to use the money to directly and transparently address any resource needs, national security, etc,. and then also use money to directly and transparently provide job training to help workers deal with slower-paced but obvious economic trends.

To answer your high level question: Absolutely not.

International trade theory's core concepts are structured as a n-player game, with n being the number of nations. That is to say, a nation has a fixed amount of resources. If a domestic policy is chosen to optimize for the production of cheap microchips (because you can't produce under-cost for a significant period of time), you are impacting the production of other goods.

When a nation optimizes for the production of a good it can produce advantageously (see: comparative advantage), the world benefits (As you make less of the goods you produce less efficiently). Sure, individual members within the nation may receive subsidies or subsidize others, but that's a domestic issue.

It's difficult to explain this in the level of detail that it warrants to the layman, because the underlying theory is built upon a substantial chunk of underlying economic theory. The biggest issue with Econ is that it's simply unintuitive, and that it takes a lot of effort to switch your mindset.

>>>They simply are not a bad thing.

Not being antagonistic hear - but your sentence reads like you meant it in absolute terms, as if they are never a good thing.

That's quite a claim - can you elaborate on it? Your post gives a trivial example, would be great to hear your actual reasoning.

The "trade deficit" is simply a number that measures the value of exports minus the value of imports.

It has no relationship with the health of the economy whatsoever. Firms within an economy have their choice of whether to import inputs from domestic providers or foreign providers, and they choose the option that offers the best value.

Let's use the example of a company that is considering opening a 50K square foot call center for customer service. The company will decide whether it makes sense to open that call center in an expensive place like downtown San Francisco, but it may also consider opening it in a place that would be more affordable.

If you focus only on the call center workers in downtown San Francisco, it will look like perhaps a tariff should be created by the city of SF to prevent firms from opening call centers in Iowa. After all, where will those call center workers find jobs?

But think about the rest of the firm. Maybe with the money it saves by opening the call center in Iowa, it can open an R&D office in downtown SF instead. Maybe in a few years the R&D pays off and now the firm can hire 1000 more workers in SF for other jobs.

But if we rewind and consider the situation with tariffs. The firm still decides to open the call center in Iowa but now must pay a tariff, which reduces the profitability of the decision. Now it can't afford to open the R&D office and ends up a few years later going out of business.

Or, suppose that the tariff is high enough that the firm does open the call center in SF. Due to the costs there is still no money to open the R&D office and so the company still fails.

The counter-intuitive thing about economics is reasoning about counter-factual scenarios... all the things that might have happened if things had gone differently.

In the above example, SF loses the higher skilled R&D jobs due to the tariff and also loses the 1000 new jobs a few years later. But it's easy to ignore those since they are counter-factual. The politicians can point to the SF call center employees and say "See, the tariffs got these people jobs, look how we're helping the economy!"

But the truth is quite the opposite, the tariff prevented the company from having the capital to invest in R&D, cost the Iowa call center jobs AND the SF R&D jobs AND the 1000 other jobs that would have happened due to growth.

In a nutshell, the mindset that makes people think tariffs are a good idea is anchored on the idea that the economy is static and that someone is winning only at the expense of someone else losing. In the tariff supporter scenario, Iowa would have "won" if SF had not instituted those tariffs to keep the jobs at home.

I use SF and Iowa as an example here just to make the concept more simple and to remove the confounding ideology of nations being adversarial to one another. Trade makes otherwise adversarial nations into partners and allies, so you could substitute SF and Iowa for the US and Canada respectively.

Economists are rarely outsourced to China.

For the benefit of HN readers, no serious economist supports tariffs in any form.

I'm not going to pretend to be an economist, serious or otherwise, so I won't dispute this notion.

Tariffs appeal to the naive idea that trade imbalances between two nations are a bad thing.

This, however, needs some augmentation.

Tariffs are a tool. Like most tools, they can be used multiple ways.

Tariffs aren't only for balancing trade. The most common use is to punish another country economically for engaging in an action, such as doing business with the wrong people, or imposing other tariffs.

Tariffs are also used to create jobs. To me, this is the most important function of a tariff, and one which the current American has very visibly implemented repeatedly.

A high import tariff on a particular type of product can help create jobs in that sector domestically.

There are vast numbers of people in every nation who are not able to — and will never be able to — code a program, or invest in the stock market, or found a startup, or work a robot assembling a car. But they can snap plastic forks off of a mold in a factory, or drive a forklift in an aluminum plant, or mix the concrete that paves the roads you drive on every day.

These are actual, real human beings who deserve to have jobs and dignity.

In SV this these people are often dismissed as undesirables who just need to be "re-trained." But a significant percentage of the population cannot be re-trained, for various reasons ranging from mental capability to physical limitations to family obligations to things you an I will never experience.

The real re-training that has to happen is in the chattering internet classes who think the majority of the nation is like them, and it's OK to leave everyone else behind because... progress.

A tariff won't create the next American entrepreneur. But if it keeps 10,000 people from becoming homeless, I'm all for that.

Your point is well taken. In my view, tariffs should not be used to achieve social welfare goals. When we create economic distortions the cost is usually much higher than it appears.

I'm not sure, however, how you can say that working in a steel mill that would not be in business if it weren't for tariffs on imported steel comes with any dignity. Sure there is the dignity of showing up for a job and doing good work, but ultimately that job is being funded by welfare, and is itself a handout being received by the worker.

The economy is a rapidly changing thing, and there is no reason to believe that any industry that is thriving today will still be thriving in a decade.

But rather than undertake the worthy and challenging task of positioning our economy (via job training, entrepreneurship, etc.) to be resilient to change, we prop up industries that are much more efficiently done elsewhere.

Consider how this would have played out in the early days of the automobile. Soon most of the blacksmiths who had been gainfully employed putting shoes on horses would find themselves out of work because people started preferring motorized cars to horse-drawn transit.

By your logic, we should have idealized that horse-drawn era and should have put policies in place to guarantee that all of those blacksmiths were able to continue the dignity of their trade even though their skills were demanded much less.

While there is something nostalgic about the days of horses and pre-industrial society, most of the important humanitarian (moral, etc) advances that have been made since then have been due to the proceeds of the improved economic output of an industrialized economy.

What happened to those blacksmiths? Some probably ended up out of work and had to struggle to survive, while others likely transitioned their skills doing metalwork in the industrial sector.

All humans have value as humans and I believe that the vast majority have strong work ethic and a desire to support themselves and their family through work and discipline.

Nonetheless, as the economy changes rapidly, we find that we (industrialized nations) have lagged significantly when it comes to our educational system. Our modern schools still do many things the same way they were done in a one room schoolhouse.

There are many reasons why this happened -- I'd argue that the biggest one was the state takeover of education during the industrial era to free up more workers by providing free daycare (not education). So the root cause of worker displacement is connected with industrialization, but it is due to state monopoly power and the destruction of liberal educational ideals in favor of daycare and rudimentary skills training. In other words, we should not teach people a trade we should teach them how to learn for themselves.

Our educational system today is still very trade oriented, and that creates calcification in the economy and is ultimately a grave threat to national security.

But politicians will of course prefer to prop up dying factories in dead industries in exchange for primary votes rather than tackling the much harder problem of figuring out how first world education should work in 2018.

> traditionally have frowned upon receiving welfare

You weaken your (otherwise solid) argument when you do that. Tariffs and welfare are two different things, and you know that, and everybody reading this knows that, but you try to sneak in a conflation anyway. They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for. Trying to imply that they're the same just looks like you're trying to score cheap points with people who have poor critical thinking skills.

> They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for.

If Mr. Widget isn't competitive at $100 vs. imports sold at $90, and you add a tariff of $10 so its "competitive", suddenly Mr. Widget's sales will increase. The other country, knowing their widgets aren't competitive (except $$ wise) then tariffs something like solar panels to protect a nascent solar panels industry.

Tariffs are a form of welfare for domestic corporations. Creating a new Mr. Widget on the assumption that tariffs will remain the same is an expensive gamble you take only if you are sure your widgets are better than Mr. Widget's widgets.

Subsidized loans (i.e. "The Bank of Boeing") are another example of welfare for domestic corporations.

Well, you can argue (as you seem to be, although I'm not entirely convinced) that tariffs and welfare lead to the same result, but to imply that opposing welfare means you must also oppose tariffs is a non-sequitur.

"Welfare" in this sense could mean imposing artificial limits on competition. The domestic industry receiving the shelter of the tariff benefits from increased supply. Although not a direct handout of cash, the industry benefits all the same. The benefits from a tariff for a domestic industry should be short lived. In the long run, tariffs hurt everyone.

The administration has also set aside $12 billion to relieve farmers hurt by the tariffs. [1] This money could come from the money generated by the tariffs, making it look more like a handout.

[1] https://www.npr.org/2018/07/24/631953880/trump-administratio...

Then you're diluting the term, which is also unfortunate. Corporate welfare is a useful term to refer to subsidies (again, completely different than tariffs), which actually _are_ income redistribution and should be opposed on the same basis.

Not sure why you find it necessary to draw such a firm distinction between subsidies, tariffs and the many other ways that firms can obtain advantages via crony capitalist schemes created in cahoots with sympathetic (if not corrupt) regulators.

Firms are going to be clever and will find ways to have laws passed that give them advantages over other firms.

This is one reason Zuck said he thinks Facebook should be regulated. As the biggest player in the space, Facebook can afford to hire the lawyers and additional staff necessary to comply with such regulation. Smaller firms on the other hand will be less able to afford this and so the regulation serves as a barrier to competition that insulates Facebook from competition.

Government crony deals come in all different shapes and sizes. In the early 2000s the government gave a big handout to oil companies by changing the accounting rules, allowing the firms to sell lots of oil at a massive profit without having to claim the profit, since they could suddenly consider the "cost" of the oil based on LIFO rather than FIFO. This small change gifted the industry with billions of dollars that would otherwise have been paid in corporate tax.

You might think that all these crony deals are a good thing and are just capitalism in action. Quite the contrary. Firms should be innovating better products and services, not figuring out ways to come up with sweet deals with regulators that give them advantages and steal from society or unfairly harm smaller, non-incumbent firms.

And to be sure, whenever those policies can be framed as being essential to national security, they will be, as this helps make the crony capitalism harder for the average person to spot and lets the jingoistic ideal of "helping our firms vs foreign firms" be the focal point.

I strongly disagree. Tariffs and welfare are both ways that the same thing manifests itself. They're both government handouts; just one is to those who are destitute, and one is to the wealthy.

Are you sure you're not mixing up tariffs and subsidies? Subsidies _are_ welfare - the government collects tax revenue and gives it to corporations. Tariffs are taxes imposed on imported goods. EvilEndures's argument (seems to be) that when you impose taxes on imported goods, exporters stop or reduce exportation (which is true, that's the point of tariffs after all) so that buyers are forced to buy through domestic manufacturers. The chain of causation there is pretty fragile, but that's _still_ not comparable to welfare where your money is forcibly redistributed - you were going to buy _x_ anyway, but you end up buying it for possibly a bit more money from a domestic supplier rather than a foreign one. It's not a good idea and it doesn't work to stimulate the economy the way its supporters want it to, but it's still pretty far from "welfare" in any common definition of the term, corporate or otherwise.

Tariffs are a subsidy.

I meant corporate welfare.