[[{“value”:”I cover these in my latest Bloomberg column, here is one excerpt: A new paper from the National Bureau of Economic Research shows that tariffs probably did more harm than good. Using meticulously collected industry-level and state-level data, the paper traces the impact of specific tariff rates more clearly than before. The results are not pretty. One
The post New results on tariff history do not favor protectionism appeared first on Marginal REVOLUTION.”}]]
I cover these in my latest Bloomberg column, here is one excerpt:
A new paper from the National Bureau of Economic Research shows that tariffs probably did more harm than good. Using meticulously collected industry-level and state-level data, the paper traces the impact of specific tariff rates more clearly than before. The results are not pretty.
One core finding is that industries with higher tariffs did not have higher productivity — in fact, they had lower productivity. Tariffs did raise the number of US firms in a given sector, but they did so in part by protecting smaller, less productive firms. That was not the path by which the US became an industrial giant, nor is it wise to use trade policy to keep lower-productivity firms in business. Not only does it slow economic growth, it also keeps workers in jobs without much of a future.
These results contradict the traditional protectionist story — that tariffs allow the best firms to grow larger and capture the large domestic market. In reality, the tariffs kept firms smaller and probably lowered US manufacturing productivity.
The paper also finds that the tariffs of that era raised the prices for products released domestically. That lowers living standards, and should give a second Trump administration reason to pause, as he just won an election in which inflation was a major concern. The finding about inflation also counters another major protectionist argument: that tariffs eventually lower domestic prices because they allow US firms to expand and enjoy economies of scale. That is the opposite of what happened.
The paper also details how lobbying, logrolling and political horse-trading were essential features of the shift toward higher US tariffs. A lot of the tariffs of the time depended on which party controlled Congress, rather than economic rationality. Trump is fond of citing President William McKinley’s tariffs, but they are evidence of the primacy of political influence and rent-seeking, not of a well-thought out strategic trade policy.
The authors of the new research are Alexander Klein and Christopher M. Meissner.
The post New results on tariff history do not favor protectionism appeared first on Marginal REVOLUTION.
Economics, History, Uncategorized
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