It’s time to call off the trade war

view original post

After decades of lowering its import barriers, U.S. trade policy has careened off course over the past several years. First ushered in by former President Donald Trump’s withdrawal from the Trans-Pacific Partnership (TPP) trade deal, protectionism later kicked into high gear under the Trump administration with new tariffs on solar panels, washing machines, steel, and aluminum, as well as tens (eventually hundreds) of billions of dollars worth of Chinese goods. President Joe Biden has endorsed this approach by keeping the tariffs largely intact — and even adding a few more. 

After six years of this protectionist project, it’s worth asking what the country has to show for it. Aside from higher costs, lost jobs, increased business uncertainty, and bewildered allies, the answer is precious little. Trade wars, it turns out, are neither good nor easy to win

Washington must abandon this misguided approach and return to a policy that favors free trade. 

Trump’s rationale for imposing new trade barriers was that they would generate important benefits, including curbing unfair trade practices by China — a genuine concern — and revitalizing key industries such as steel manufacturing. But it has not worked out that way. These tariffs have been in place for years, but a recent government report admitted that Beijing has retained many of the policies targeted by the U.S. and that its few encouraging moves did not “represent a systematic and sustained response” to U.S. criticisms. 

Similarly, the promised boost to steel and aluminum production has not come to pass, with both sectors featuring lower output last year than when the duties were first imposed.  

While their promised benefits have proved elusive, the tariffs have predictably succeeded in inflicting economic harm. Higher steel and aluminum costs, for example, adversely affect businesses that rely on these metals, such as manufacturers and construction companies. Duties on imported consumer goods, meanwhile, raise costs for American families and further aggravate inflationary pressures. 

Retaliatory measures from U.S. trading partners further compound the damage. One government study calculated that such actions caused farmers alone to suffer more than $27 billion in lost exports between mid-2018 through the end of 2019 (which led to a bailout paid for by all Americans). 

On top of that must be added the lost opportunities from Trump-Biden protectionism. For example, Trump’s decision to walk away from the TPP meant turning the country’s back on a deal that one think tank study estimated would have increased U.S. incomes by $131 billion per year. So much for that. And what further opportunities could have been unlocked if the United States hadn’t stood on the trade sidelines for the past two administrations without concluding new agreements?

Frustratingly, one hardly needed a crystal ball to foresee the failure of this protectionist embrace. Shortly after Trump’s tariffs on steel and aluminum were announced, a panel of economists was asked about their possible effects — not one agreed that they would improve the country’s welfare. 

Economists have long recognized that protectionism is pure hokum. It just doesn’t make sense. Raising the cost of imported goods and services to discourage their purchase might make a few (usually politically well-connected) U.S. companies or industries better off, but it comes at the expense of everyone else. 

The path to prosperity and a higher standard of living lies in making products as affordable as possible. Protectionism does the opposite. There’s a reason why economic embargoes that cut off a country’s access to foreign goods are wielded as a punishment and not a reward. 

Beyond economics, protectionism isn’t doing the United States any favors on the foreign policy front either. While China has spent recent years forging new trade agreements and linkages to boost its economy and international influence, the United States has mostly alternated between sitting on its hands and actively antagonizing longtime partners and allies — an odd approach in the competition with Beijing for global leadership.

More broadly, trade openness has long been recognized as an important tool of statecraft for promoting development and calming strained international relations. Countries that prosper and trade together are less likely to engage in conflict with each other. Yet U.S. policy tilts toward trade barriers in a world with no shortage of geopolitical tensions.


The foremost reason to break from Trump-Biden protectionism, however, is a philosophical and moral one. A commitment to the free exchange of goods and services keeps with the finest traditions of a liberty-loving country whose Declaration of Independence thunders against being cut off from trade. 

A belief that people should be free to buy and sell with who they like is part of the American DNA, and for the government to interfere in such trade it must have a strong justification. Recent experience shows that it does not.

Colin Grabow is the Associate Director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.