Milton Friedman, the patron saint of free markets and co-founder of the Nobel Prize-winning Chicago School of economics, was highly critical of all tariffs – ours, theirs and everyone else’s.
In his surprising 1962 bestseller, Capitalism and Freedom, Friedman declared that if “unilateral free trade” was the goal, “mutual negotiations on tariff reductions were wrong.” First, it was too slow. “Those who act alone are the fastest,” he warned.
“Secondly,” he continued, “the tariffs make it seem as if they help the country that imposes them but hurt other countries. In reality, the situation is quite different. Our tariffs hurt us as much as they hurt other countries.”
That’s Friedman’s entire tariff seminar: “Our tariffs hurt us as much as they hurt other countries.”
And there is no need to worry about other countries’ tariffs, Friedman adds. “We would benefit from waiving our tariffs even if other countries did not do so.”
This is not a political statement, but a central principle of free trade from one of the most influential Nobel Prize winners in history. However, many deeply conservative politicians around the world – including Barry Goldwater, Ronald Reagan and Margaret Thatcher – have adopted Friedman’s advocacy of the free market.
So what has changed in global markets since that Kennedy-era statement that is now encouraging former President Donald Trump to make import tariffs the centerpiece of his campaign’s economic policy? Absolutely nothing. Tariffs – ours, theirs, and everyone else’s – remain a terrible economic policy; they “hurt us as much as they hurt other countries.”
This simple fact is confirmed by Trump’s last tariff dispute in 2018 and 2019, which focused primarily on U.S. imports of Chinese steel and aluminum and U.S. exports of agricultural commodities. None of the tariffs delivered on their promises: more American jobs, better economic growth and higher U.S. sales. In fact, the New York Times reported on August 27, 2019, “Lucrative contracts that farmers had long relied on … have evaporated as Chinese buyers look elsewhere, such as Brazil and Canada, to get the raw materials they need.”
The article then cites an American Farm Bureau estimate that “total American agricultural exports to China were $24 billion in 2014, falling to $9.1 billion last year” – the first year of Trump’s tariffs on American commodity exports to China.
The Times wasn’t the only one to notice Trump’s tariff policies. In January 2020, Forbes reported that the “Trump administration gave more taxpayer money to farmers hurt by its trade policies than the federal government spends annually on building naval ships or maintaining America’s nuclear arsenal.”
Despite the clear evidence, the Trump campaign insists that its current push for import tariffs – ranging from 10% on all U.S. imports to 60% or more on U.S. imports from China – will ensure that the American economy grows faster than its competitors. That’s nonsense, says the Peterson Institute for International Economics, a nonpartisan economic research institute in Washington, DC: “Unlike (today’s) Biden tariffs,” the institute said in January, “the Trump plan consists of higher tariffs on all products from all countries.”
This does not only apply to ‘America First,’ the analysis continues, echoing the economic motto of the Trump campaign, “it only applies to America.” Tariffs “are actually additional taxes on us, and imposing them will impose real costs.”
American farmers are well aware of these “real costs.” A few weeks after imposing 25% import tariffs on Chinese products in 2018, “Beijing accused the United States of ‘starting the biggest trade war in economic history,'” the Los Angeles Times reported in July 2018.
Then it “shot back with tariffs, imposed primarily on American agricultural products and other foodstuffs.” It also quickly moved to “buy more from Brazil and Argentina.” And that was precisely the result that Milton Friedman predicted in 1962: “Our tariffs hurt us as much as they hurt other countries.”
