Milton Friedman, the patron saint of free markets and a founder of the Nobel-adorned Chicago school of economics, took a very dim view of all tariffs — ours, theirs, anyone’s.
Writing in Capitalism and Freedom, his surprising 1962 best seller, Friedman explained that if “unilateral free trade” is the goal, “reciprocal negotiations of tariff reductions… seems wrong.” First, it’s too slow; “He moves fastest who moves alone,” he admonished.
“In the second place,” he continued, “(i)t makes it appear as if tariffs help the country imposing them but hurt the other countries. In truth, the situation is quite different. Our tariffs hurt us as well as other countries.”
That’s Friedman’s entire tariff seminar: “Our tariffs hurt us as well as other countries.”
And don’t worry about other nations’ tariffs, Friedman adds. “We would be benefited by dispensing with our tariffs even if other countries did not.”
That’s not a political statement; it’s a key tenet of free trade from one of the most influential Nobel laureates in history. Many deeply conservative politicians worldwide — among them Barry Goldwater, Ronald Reagan and Margaret Thatcher — however, did adopt Friedman’s advocacy of the free market as their own.
So what’s changed in world markets since that Kennedy era pronouncement to now encourage former president Donald Trump to make import tariffs the centerpiece of his campaign’s economic policy? Absolutely nothing. Tariffs — ours, theirs and anyone’s — remain terrible economics; they still “hurt us as well as other countries.”
Confirmation of this straightforward reality comes courtesy of the last Trump tariff fight in 2018 and 2019 on, chiefly, U.S. imports of Chinese steel and aluminum and U.S. exports of ag commodities. Neither tariff delivered what was promised: more American jobs, better economic growth and increased U.S. sales. In fact, reported the New York Times on Aug. 27, 2019, “Lucrative contracts that farmers long relied on… have evaporated, with Chinese buyers looking to other nations like Brazil and Canada to get the commodities they need.”
The story then quotes an American Farm Bureau estimate that “total American agricultural exports to China were $24 billion in 2014 and fell to $9.1 billion last year,” the first year of the Trump tariffs on U.S. commodity exports to China.
The Times wasn’t the only one to notice Trump’s southbound tariff policy. In January 2020, Forbes reported that the “Trump administration gave more taxpayer dollars to farmers harmed by (its) trade policies than the federal government spends each year building ships for the Navy or maintaining America’s nuclear arsenal.”
Despite the clear evidence, the Trump campaign insists its current push for import tariffs — from 10% on all U.S. imports to 60% or more on U.S. imports from China — will ensure the American economy grows faster than competitors. Nonsense, says the Peterson Institute for International Economics, a nonpartisan economic research firm in Washington, D.C. “Unlike (today’s) Biden tariffs,” the Institute posted in January, “the Trump plan is for increased tariffs on all products from all countries.”
That’s “not just America First,” the analysis continues parroting the Trump campaign’s economic theme, “it is America alone.” Tariffs “are in fact added taxes on us, and having them will have real costs.”
American farmers are very familiar with those “real costs.” Within weeks of imposing 25% import tariffs on Chinese products in 2018, “Beijing accused the United States of ‘launching the largest trade war in economic history,’” reported the Los Angeles Times July 2018.
Then it “fired back with dollar-for-dollar tariffs mainly on American farm products and other food.” It also quickly pivoted to “buying more from Brazil and Argentina.” Which is the exact outcome Milton Friedman predicted in 1962: “Our tariffs hurt us as well as other countries.”
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