Economics Dictionary of ArgumentsHome
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| Tariffs: Tariffs are taxes imposed by a government on imported goods. They are used to raise revenue or protect domestic industries by making foreign products more expensive. Tariffs can influence trade balances, consumer prices, and international relations. While they may benefit local producers, they often lead to higher prices for consumers and potential retaliation from trading partners. See also International relations, Taxation, International trade._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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IMF Working Papers on Tariffs - Dictionary of Arguments
Ostry I 3 Tariffs/Free trade/Furceri/Hannan/Ostry/Rose: More than on any other issue, there is agreement amongst economists that international trade should be free.(1) This view dates back to (at least) Adam Smith and is supported by much reasoning. In general, economists believe that freely-functioning markets best allocate resources, at least absent some distortion, externality or other market failure; competitive markets tend to maximize output by directing resources to their most productive uses. >Market failure, >Markets, >Free markets, >Trade, >International trade, >Competition. Of course, there are market imperfections, but tariffs - taxes on imports - are almost never the optimal solution to such problems. Tariffs encourage the deflection of trade to inefficient producers, and smuggling to evade tariffs; such distortions reduce welfare. >Welfare, >Imperfect competition, cf. >Perfect competition. Consumption: Further, consumers lose more from a tariff than producers gain, so there is “deadweight loss”. The redistributions associated with tariffs tend to create vested interests, so harms tend to persist. Broad-based protectionism can also provoke retaliation which adds further costs in other markets. All these losses to output are exacerbated if inputs are protected, since this adds to production costs. >Production, >Production costs, >Protectionism, >Consumption, >Market Imperfections. Ostry I 4 (…) there are strong theoretical reasons that economists abhor the use of protectionism as a macroeconomic policy; for instance, the broad imposition of tariffs may lead to offsetting changes in exchange rates (Dornbusch, 1974(2); Edwards, 1989(3)). And while the imposition of a tariff could reduce the flow of imports, it is unlikely to change the trade balance unless it fundamentally alters the balance of saving and investment. Further, economists think that protectionist policies helped precipitate the collapse of international trade in the early 1930s, and this trade shrinkage was a plausible seed of World War II. So, while protectionism has not been much used in practice as a macroeconomic policy (especially in advanced countries), most economists also agree that it should not be used as a macroeconomic policy. Times change. Some economies have recently begun to use commercial policy, seemingly for macroeconomic objectives. So it seems an appropriate time to study what, if any, the macroeconomic consequences of tariffs have actually been in practice. Most of the predisposition of the economics profession against protectionism is based on evidence that is either a) theoretical, b) micro, or c) aggregate and dated. 1. For example, see the survey on free trade in Initiative on Global Markets (University of Chicago Booth School of Business): http://www.igmchicago.org/surveys/free-trade. 2. Dornbusch, Rudiger, 1974, “Tariffs and Nontraded Goods,” Journal of International Economics, vol. 4(2), pp. 177-85. 3. Edwards, Sebastian, 1989, Real Exchange Rates, Devaluation, and Adjustment (Cambridge, Massachusetts: MIT Press)._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers Ostry I Jonathan D. Ostry Davide Furceri Andrew K. Rose, Macroeconomic Consequences of Tariffs. IMF Working Paper. WP/19/9.International Monetary Fund. Washington, D.C. 2019 |
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