An Honest Look At Tariffs

Let's try examining tariffs in an attempt to decouple the idea from the current political polarization. I'll use a similar approach to examining minimum wage in my post Intellectual Vision.

Tariffs are a tax on goods or services from another country. A tariff schedule includes a detailed list of products along with tariff rates (% of value and/or a specific amount) and country of origin. 

Raising Tariffs

If a country raises tariffs, the importer (not exporter) pays the fees. The importer can pay the fees out of profits or pass the costs onto customers. The customers may just agree to pay the extra costs or may decided not to buy the product. If they don't buy the product, they may be able to find another equivalent alternative. If they can find another alternative, it will most likely cost more than or not be the ideal fit of the import. If the alternative product is produced domestically, then these businesses can benefit from the additional demand and potentially increase production. Since this demand is essentially incentivized by the tariffs, the business is not experiencing competituve pressure to innovate or cut costs, potentially resulting in higher costs than necessary.

If the customers can't find an equivalent alternative, they will have to find a product that doesn't meet the same needs or may have to make due without the product. 

The fees paid by the importer are collected by the government. These fees can be used by the government for productive manipulation of the economy, for example, by lowering taxes on consumers, offsetting the increased costs. These fees can also be used for non-productive applications, such as paying for excess government spending or special programs. In this case, the customer of the tariffed product ends up subsidizing the government program.

With complicated global supply chains, raising tariffs can end up hurting domestic producers that rely on foreign goods to make their products. Raising tariffs can have hidden costs such as creating an extra burden on businesses to adapt to changing rules.

Lowering Tariffs

After WWII, the U.S. lowered tariffs to promote global trade and economic recovery to help with post-war reconstruction.

If tariffs are lowered, a greater variety and quality of products can be found by consumers. Prices typically drop and global competition forces all suppliers to become more efficient. Foreign products may harm domestic suppliers if they can compete with cheaper foreign imports (due to cheaper labor or less regulation). Some domestic producers may benefit if they can by cheaper foreign parts for their products. If companies become dependent on foreign parts, this could result in supply chain disruptions, for example during a pandemic or war. If a domestic product is considered nationally strategic (e.g. defense, semiconductors), then lowering tariffs can put the national interests at risk.

With lower tariffs, a foreign government may reciprocate with lower tariffs. If they do, this may open new foreign markets for domestic producers. 

An example of this is NAFTA (The North American Free Trade Agreement), where lower tariffs between the U.S., Mexico, and Canada resulted in generally lower prices on imports from the other countries, however many small Mexican corn farmers were put out of business as they couldn't compete with the large U.S. subsidized corn farms.

These last two examples bring up the issue of unfair trade practices, where a government can subsidize a product, then flood a foreign market with cheaper goods to destroy local industries. This can result in foreign monopolies taking over. This is the reasoning for high tariffs on many Chinese products.

Foreign governments may instead keep their tariffs high, creating an unfair trade balance. 

Additional Thoughts

Intellectual Humility - I am not an expert on the intracies of tariffs.

Intellectual Curiousity - I am curious enough to investigate the nuances of tariffs.

Intellectual Honesty - I am open to the truth about tariffs, even when it makes me uncomfortable.

Intellectual Access - I recommend going to objective sources of information and avoid politically motivated sources.

Intellectual Prudence - I have attempted to critically evaluate the pros and cons of tariffs and avoid sensationalism (though I may have oversimplified this whole idea of tariffs with this post).

Intellectual Tolerance - I haven't taken political or nation sides, recognizing the consequences on all parties.

Avoid Persuasion, Seek Understanding - I have tried to create a shared pool of understanding and not persuade you to take one position or the other.

Promote Empathy and Compassion - I recognize that their are winners in losers in the current system and in currently proposed changes, whether or not either are optimal. 

Reference:

https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States

Intellectual Vision: Four Truths and Eightfold Path

I’m trying to develop an idea like Buddhism’s Four Noble Truths and The Eightfold Path, which applies to human understanding of reality. 

The Four Truths

1) There is an absolute, objective reality 

2) Humans (as individuals or collectively) are incapable of knowing reality completely 

3) Humans need to understand reality as much as possible for our well-being and survival

4) Humans can best do this by following an Eightfold Path

An Eightfold Path

1. Intellectual Humility – Recognize the limits of your understanding and be open to new insights, even if you consider yourself an expert. Recognize your own biases. Embrace the mysteries of the past and uncertainties of the future.
2. Intellectual Curiosity – Cultivate a deep desire to seek knowledge and explore reality.
3. Intellectual Honesty – Pursue and accept truth with honesty and integrity, even when it may be disadvantageous to yourself, your group, or your cause.
4. Intellectual Access - Make collective understanding available to all people. Share critical knowledge openly and ensure access for everyone. Practice transparency.
5. Intellectual Prudence - 
1. Avoid sensationalism or oversimplification. 
2. Critically evaluate information, verifying facts before accepting them or spreading them.
3. Avoid jumping to conclusions or being swayed by misinformation. 
4. Thoughtfully apply knowledge and consider how it affects others or society. 
5. Practice responsible environmental stewardship by reducing waste, conserving resources, and supporting sustainable practices.
6. Intellectual Tolerance - Accept diversity and differences, understanding that everyone has a unique life experience and perspective.
7. Avoid Persuasion, Seek Understanding – Engage in dialogue to understand and establish a shared pool of understanding rather than to persuade, manipulate, or win an argument.
8. Promote Empathy and Compassion - we are all human and make mistakes. We should not treat others harshly. It takes enormous energy to be informed on many subjects, and some truths are difficult to accept. “I’m striving to follow the eightfold path to truth. If I stray from the path, I appreciate earnest reminders from others. I recognize that not everyone shares my same conviction.

Example: Raising the minimum wage 

The Left and Right will make claims about what will happen if the minimum wage is raised. The Left claims it will give money to the people. The Right claims it will put companies out of business and may make it harder for teenagers or others to enter the job market, among many other unintended consequences. But no one knows the consequences for sure.  Let's look at this more openly.

If the minimum wage is raised, some businesses will comply, and others will not. Those who don’t comply may get away with it or face consequences.

Those that comply with it will pay for it out of profits or by raising prices. If they raise prices, they may gain or lose some of a particular customer's business.

If business decreases, the owners can cut costs by reducing their employees' hours, reducing the number of employees, or replacing employees with robots or other sources of automation. They could also find other cost-cutting measures like using cheaper materials, reducing energy use, or finding cheaper suppliers.

If employees leave (forced or voluntarily), they may find a better opportunity, the same, or worse. Some employees may stay enticed by the higher wages and miss out on other opportunities.

When replacing employees who leave, the employer may have an easier or more challenging time finding new employees. The employer may be more or less picky in their selection of future employees. If they are more picky, this could result in someone less qualified not getting the opportunity to get work experience.

If the minimum wage only affects a portion of businesses, it may be more or less challenging for other companies to find qualified workers (after the $20/hour minimum wage for fast food restaurants, my neighbor's company lost employees and ended up moving their manufacturing over the border).

Lower profits from any cause could end an ailing business, resulting in loss of employment for the people generously granted a higher wage. Some of these businesses may have ended regardless of the increased minimum wage, and there is no way of knowing at this point.

How each of the owners, employees, and customers responds is individual and based on that person's life experience and circumstances, and it can greatly differ by location (city, state, country).

The truth isn't necessarily black and white.

Resources

This post was inspired by Thomas Sowell's book Knowledge and Decisions. Specifically, the idea behind using the phrase "Intellectual vision" is from the book.

Intellectual Vision - a central set of premises from which particular positions can be deduced as corollaries . What makes them a coherent vision is the high degree of correlation among the particular conclusions reached among highly disparate subjects. An ideological vision is more than a belief in a principle. It is the belief that that that principle is crucial or overriding, so that other principles or even empirical facts must give way when in conflict with it.

You might call this post an "Intellectual Vision" to improve how ideas and beliefs can be formulated.