Why Tariffs On More Countries Can Be Better
Brian Albrecht, ICLE Chief Economist, was recently quoted in Marginal Revolution article discussing how uniform tariffs can be less distortionary than selective tariffs by avoiding costly trade diversion. Read the full article here.
In general, as Brian Albrecht argues, tariffs are a costly way to raise revenue. Selective tariffs are especially inefficient and wasteful. Sad to say, the U.S. tariff system today is highly selective — wildly different rates on different countries and times. Trade diversion isn’t a necessary consequence of selective tariffs but our current high and chaotic tariff structure makes it all but inevitable. Thus selective tariffs mean standard deadweight losses will compound with large-scale trade diversion and inefficiency, raising losses above headline numbers. Finally, the selective structure invites rent seeking, as firms and industries lobby for favorable treatment — adding yet another layer of economic waste.