Tariffs: A Theoretical Understanding
- Apr 8, 2025
- 3 min read
Updated: Apr 11, 2025
In my earlier write-up, I said that 90% of economists would argue against tariffs. Why do I think that they are wrong or at least incorrect? Their root problem is that they either forgot the theory on tariffs has a limited application domain or failed to understand the big picture. Any assertion (law) of economics (for that matter politics) must be put into a larger context. The context here is in an increasing order: politics, international relations, philosophy, and religion (the Bible especially). See Basic References below.
The economic rationale of tariff removal is explained clearly in [1]. Study Chapter 15 [2]. I will not go into the details for two reasons. First, you need to learn how to analyze economics if you have not studied Economics 101. (This is highly non-trivial, and you should study all previous chapters. This takes about half a semester.) Second, any results in economics, political science, or even philosophy are subject to restrictions.
To understand the big picture, it is helpful to know when and how economics became an independent discipline. Philosophy began with Socrates and Plato. Aristotle introduced the term science, which divides philosophy into focused areas to study. Aristotle’s classic Politics is mainly about politics, but some topics belong to economics. Modern economics was mainly due to Adam Smith’s work (1770s). One must be aware of the limits of economic analysis. (You should ponder Basic References) This is why 90% of economists are negative against tariffs. Their mistake may be viewed in twofold. First, they forget the application domain of a particular theory, which is limited. Second, personal safety and national security take precedence over efficiency. Economics began AFTER national security and personal safety were known. Specifically, Chapter 15 of [1] assumes national securities as a precondition. Without it, economic efficiency makes no sense.
I have written two tariff related write ups [3,4]. Because related, good commentaries continue to appear, I will not put them in the main news line but append them to [3,4], mainly [3]. Many commentators are good. But two commentators are excellent: Victor Davis Hanson and Bill O'Reilly [6,7]. On this particular topic, Mark Levin’s commentary stands out because it is correct, easy to understand, and complete [5].
Chapter 10 of [1] concerns monopolistic competition. Even though the topic is studied in the context of domestic economy, it has a resemblance in international trade. You also may think about them when watching [5-7]. In domestic politics, one may apply certain methods to combat monopolies. But in international trade, they do not work.
Separately, globalization created challenges in social fabric and cohesion. I addressed these in [8]. My solution to the social problems is controlled globalization [9]. Trump has now adopted a drastic solution. I understand his approach, but I am anxious about it.
References:
[1] Paul A. Samuelson and William D. Nordhaus, "Economics", McGraw-Hill, Irwin, c2005 18th ed
[2] The chapter and pages may vary for different editions. You also may use another economics textbook. Search for tariff, Comparative Advantages, or David Ricardo, then you should find relevant discussions.
[5] **Mark Levin: We've never seen anything like this (4-6)
[6] *Trump's Tariffs and the Great Depression (4-6) VDH
[7] *The Tariffs That Shocked the World (4-5) BOR
Basic References:
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