New research shows how taxing imports a century ago hurt productivity, increased costs and invited corruption.
Updated: 3 minutes agoFILE - Shipping containers are stacked at a port in Tianjin, China, Monday, Jan. 16, 2023.
A new paper from the National Bureau of Economic Research shows that tariffs probably did more harm than good. Using meticulously collected industry-level and state-level data, the paper traces the impact of specific tariff rates more clearly than before. The results are not pretty. The paper also finds that the tariffs of that era raised the prices of products released domestically. That lowers living standards and should give a second Trump administration reason to pause, as he just won an election in which inflation was a major concern. The finding about inflation also counters another major protectionist argument: that tariffs eventually lower domestic prices because they allow U.S. firms to expand and enjoy economies of scale. That is the opposite of what happened.
This raises a broader question about how much any particular economic policy matters. In the 19th century, there were a lot of factors aside from tariffs driving the U.S. toward greater industrial success: a strong rule of law, abundant natural resources, an advanced educational system and a rapidly growing population. The factors differ today, but the U.S. economy remains a talent magnet, with commanding leads in sectors ranging from artificial intelligence to biomedicine to entertainment.
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