The Biggest Myth About Tariffs Is Finally Debunked

June 6, 2019 Updated: June 10, 2019

Commentary

One of the most consistent criticisms leveled against President Donald Trump’s trade policy is that tariffs will hurt the economy and cost jobs. But what if the exact opposite is true?

According to a recent study from the Coalition for a Prosperous America (CPA), the 25 percent U.S. tariff on all Chinese imports that Trump recently announced will produce “a significant, sustained boost to the U.S. economy, including the addition of $125 billion to GDP in 2024 and the creation of 721,000 additional jobs.”

The CPA analyzed the potential impact of a permanent, across-the-board 25 percent tariff on all U.S. imports from China between 2020 to 2024, projecting it would contribute 0.5 percent of additional GDP in 2024.

Contrary to the claims of skeptics, the CPA’s assessment confirms that Trump’s trade policy functions exactly as advertised—by protecting domestic producers from unfair foreign competition, tariffs spur the creation of U.S. jobs and accelerate economic growth.

Of course, no one disputes that tariffs on goods from China will raise the prices of those particular imports—in fact, that’s the only direct consequence of such tariffs. That doesn’t mean consumers will necessarily find themselves paying higher prices in the stores, though. Just as raising the cost of Chinese imports makes domestic producers in some industries more competitive, it also encourages firms to move the production of some goods from China to lower-cost third-party countries, offsetting much or all of the impact on import prices in the United States.

While it might seem preferable for U.S. companies to pick up all of the slack created by tariffs on Chinese goods, there will always be some products that make more sense to import, since U.S. workers can be employed more productively in higher-value pursuits.

According to the CPA report, now is a particularly opportune time to impose across-the-board tariffs on China, because production costs in China have been rising “dramatically” in recent years. There are now nine countries with a lower manufacturing cost index than China, and tariffs would accelerate the process of shifting production from China to those countries, which some firms have already begun to do.

In other words, imposing 25 percent tariffs on goods from China might actually result in lower prices for U.S. consumers.

Economic benefits aside, there are other compelling reasons to consider the 25 percent across-the-board tariffs on China that the CPA envisions, starting with the fact that China has been waging economic war on the United States for decades—a 25 percent tariff would represent a proportional response.

For years, Beijing has utilized a variety of protectionist trade policies designed to give its domestic producers an unfair competitive advantage, such as “dumping” Chinese steel in the U.S. market at artificially low prices in order to drive U.S. producers out of business.

After Presidents Bill Clinton and George W. Bush helped grease the wheels for China to join the World Trade Organization (WTO) as a gesture of goodwill, China repeatedly violated WTO rules against nontariff trade barriers.

China has also consistently and brazenly stolen intellectual property from U.S. companies, proving that Beijing isn’t interested in fair and honest trade relations with Washington.

Some believe that the United States should remain complacent and do nothing to combat these offenses, but that’s the strategy we’ve been using for decades, and China has only grown more aggressive in its trade cheating. Thankfully, Trump recognized that tariffs had the potential to severely weaken China’s economy. The International Monetary Fund confirmed the validity of that approach last year, estimating that a 25 percent tariff would reduce China’s GDP growth by 1.6 percent.

Many have argued that stopping China’s hostile trade practices is worth whatever minor economic pain the United States might experience from tariffs, but the CPA analysis shows that Trump’s tariffs will actually help the U.S. economy in the long run.

China is reportedly preparing for a lengthy stalemate in the ongoing trade negotiations with the United States, but that might just be the best possible outcome for the United States.

Dr. Gina Loudon (@RealDrGina) is a bestselling author, columnist, and frequent news commentator. She was a Trump delegate to the Republican National Convention and currently serves on the Donald J. Trump for President Media Advisory Board.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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