From a Foundation for Economic Freedom (FEE) is an article that discusses not just the initial reaction from a tariff (usually, an increase) but also the downstream consequences that few seem to be able to anticipate.
Five different tariffs are discussed, but for the purpose I have for this post is around an earlier tariff back when the General (now called Federal) government used ONLY tariff revenue for its operations. Yes, even back in the 1840s the government was into income redistribution as tariff revenue derived mainly from the cotton exports in the south would fund northern infrastructure projects, first with canals and then with railroads.
Specifically, the so-called Black Tariff of 1842:
The tariff was passed because of a deadline set 10 years earlier to lower tariffs, and instead did the opposite by raising tariff rates to almost 40 percent—displeasing Southern states and his own party members. The tariff was repealed four years later because of the negative impact it was having on the economy.
The fall-in trade that followed wasn’t the only negative impact of the tariff. The tariff further divided the country, since the South depended on trading cotton with the British. … Given that his tariffs are an explicit prioritization of one group’s economic interests over those of the rest of the country, his duties on steel and aluminum will likely make things worse.
Back in the 1800s the logic used for the railroad and then the steel industry was that these “young/emerging” industries needed out government’s assistance to keep them sustainable and therefore “protected” these industries with tariffs. It is simply amazing that after 150 years the steel and aluminum industries “need protection” on the world’s stage with all the technology we have ESPECIALLY in the US toward sustained innovation that COULD keep the US competitive. Unfortunately, my hunch is that the very hand that wants to help is the same hand that ties these industry’s hands in other ways making them into corporate welfare queens that they have become in 2018.
The ripple effect is that domestic use of steel and aluminum is about to get much more expensive ( “… President Donald Trump announced his plans to impose tariffs on steel and aluminum coming into the United States at 25 percent and 10 percent respectively ..” ) and is counter productive towards allowing free-market capital improvements to proceed in the US economy. The only real outcome of this is for our government to grab yet another revenue stream as it continues to spend money WORSE than a drunken sailor!
FYI, as a former sailor I know 1st hand that drunken sailors stop spending money when they run out of money, unlike our government.
SF1