The Danger Of Trade Tariffs

The renewed danger of trade tariffs by various presidential candidates is a clear and present danger to free trade and the world economy.

In today’s globalized world, trade is the lifeblood of economies; connecting nations and fostering prosperity. However, there is a contentious tool that is often used in international trade relations: tariffs.

Tariffs are taxes imposed on imported goods, ostensibly to protect domestic industries or gain a competitive edge. They are sometimes recommended and promoted by those who think they have identified an “unfair advantage” existing between trade partners.

Even though politicians say otherwise, tariffs are guaranteed to produce net negative results that are much worse than any short-term theoretical benefits.

ECONOMIC DISRUPTION

The primary danger of trade tariffs is the economic disruption they can cause.

When tariffs are imposed, they disrupt the equilibrium. Domestic industries might benefit in the short term, but at what cost?

Since the prices of imported goods rise due to tariffs, consumers end up paying more for the things they want to buy.

Trade tariffs often trigger a chain reaction, leading to retaliatory measures from affected countries.  Full-blown trade wars can result…

“America’s last major trade war happened after imposition of the 1930 Smoot-Hawley Tariff, which increased 900 import tariffs from 40-48%. It was supposed to support U.S. farmers whose land had been devastated by the Dust Bowl, but it resulted in higher food prices for Americans who were already crippled by the Great Depression.

America’s trade partners at the time hit back with their own tariffs and global trade fell by 65%, worsened the depression, and contributed to the beginning of World War II.

After Smoot-Hawley, the country suffered tremendously. The general public had little understanding of tariffs or trade agreements.” Tariffs And Trade Wars… by Anna Kucirkova

NEGATIVE IMPACT ON SMALL BUSINESS

Small businesses bear the brunt of trade tariffs. Without the resources to absorb the increased costs imposed by tariffs, They struggle to compete with larger companies that have more significant financial reserves.

Moreover, the uncertainty created by trade tariffs can deter small businesses from growing and expanding, stifling growth and harming the overall economy in the long run.

INEFFICIENT RESOURCE ALLOCATION

Trade tariffs can distort the allocation of resources within an economy. When protectionist measures artificially support certain industries through tariffs, it can lead to inefficiencies.

Resources can flow to industries that are protected rather than those that are genuinely competitive.

This misallocation of resources hinders economic growth and productivity. It may also delay the necessary transitions to more sustainable industries, as resources are tied up in less efficient sectors.

CONCLUSION

Regardless of the intentions of the countries involved, and irrespective of who levies the first assessment (penalty), tariffs and other protectionist trade measures come with unintended consequences which outweigh exponentially any perceived benefits. In addition, they hinder cooperation on other global issues.

In short, they do not work. Historically, they have always failed – despite the near-sighted promises and illogic of the politicians.

It is no different this time. Beating up on China won’t solve any problems. As bad as things appear to be economically for both the United States and China, expect them to get worse if either country takes action.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Gold – After Inflation, What Is Left?

GOLD AFTER INFLATION

The closing price for spot gold in New York today is $1915. Forty-three years ago, in May 1980, gold was priced at $515.

Being somewhat generous, and since gold has been higher (above $2000) recently, we might say that the gold price has quadrupled over those forty-three years.

Read more

Gold And The Shrinking Money Supply

GOLD AND THE MONEY SUPPLY

A recent article (Credit Crunch: The Money Supply Has Shrunk For Eight Months In A Row) by Ryan McMaken of the Mises Institute explained clearly the historical significance of the contraction in the money supply that has occurred over the past eight months.

In this article, I will be talking about the possible effects of this ongoing contraction as they relate to the price of gold.

Read more

Silver Coin Premiums Are Smaller, But…

SILVER COIN PREMIUMS ARE SMALLER 

One year ago I published the article Silver Coin Premiums – Another Collapse?. In it, I expressed concern about the high premiums being paid by stackers and others for the privilege of owning silver in coin form, particularly Silver Eagles…

Read more

Gold Convertibility – NOT Gold Backing

GOLD CONVERTIBILITY IS THE KEY

All the talk about BRICS countries possible issuance (not anytime soon) of a gold-backed currency, and most of the analysis, misses a key point.

The success of any fiat currency or real money substitute (in other words, anything other than gold itself as the medium of exchange) depends on its convertibility into gold – on demand.

Read more

Gold Is LITERALLY Priceless

GOLD IS PRICELESS

Over 5000 years of recorded history, gold has proven itself to be real money. Gold’s value is in its use as money. That value is unquestioned.

Whatever arguments are put forth against gold’s use as money are attempts by government to free itself from the restrictions that gold imposes. Gold, when used properly,  limits the ability of government to inflate and debase its money.

Read more

Investor Expectations Versus Fed Intentions

 INVESTOR EXPECTATIONS VERSUS FED

Quite a few people are convinced that they know what the Fed will do next, and why. How do they know? Is it really that obvious?

There are more questions to consider, too. Will the effects of continued actions, or changes for any reasons, achieve the desired results? If they don’t, what comes after that?

Read more

How High Can Silver Go?

SILVER – HOW HIGH CAN IT GO?

The price of silver jumped higher by nearly $2 oz. over a two-day period last week. The white metal now sits just under $25 oz. and this is depicted on the chart (source) below…

Read more

The Price Of Gold Is Irrelevant (AUDIO)

PRICE OF GOLD IS NOT ABOUT GOLD

Attempts to analyze and value gold are superfluous. Gold’s value – its use as money – has already been established. That value is constant and unquestioned.

The price of gold does not tell us anything about gold or its value. The gold price tells us only how much purchasing power the U.S. dollar has lost – nothing else.

Read more

Gold At $4000 – What Will It Take?

GOLD AT $4000?

For that to happen will require something almost unbelievable – if you expect gold to be at $4000 anytime soon, that is. The problem with most predictions for higher gold prices is that they fail to account for the financial and economic turmoil that would accompany those higher prices.

What is so unbelievable that would need to happen for gold to go to $4000 oz.?

Read more