Senator Rand Paul (R-KY), who is known for his libertarian views, published an op-ed in the Wall Street Journal this week asking why some Republicans favor protectionism when “free trade lowers prices and pre-empts war.” Paul opined that many in his own party have forgotten the wisdom of Ronald Reagan and instead insist on imposing tariffs that would “raise the prices of everyday goods and services as well as destroy the commercial incentive for nations to live in peace.”
Such advocates claim that tariffs protect American workers from foreign competition. In practice, they hurt the workers they purport to help. Consider Chinese-made electronics. When tariffs are imposed on products like smartphones and laptops, as Donald Trump is proposing to do, American consumers end up paying higher prices. A report from the Consumer Technology Association projects that Mr. Trump’s proposed tariffs could raise technology prices for U.S. consumers by as much as 21%. China accounts for more than 90% of U.S. laptop and tablet imports. Its manufacturers won’t bear the brunt of these tariffs—American consumers will, as the levy will be passed on to them in the form of higher prices.
This is basic economics at work. When we place a tariff on a foreign product, we artificially inflate its price and allow domestic producers to raise their own.