Tariff Hike Proposition: Enemy to Domestic and Global Markets?

Amidst one of America’s worst financial and economic crises new laws must be passed to repair the damages created.  The number of job losses is staggering, and millions of American families are suffering.  Under the new Obama administration the new push for economic stimulus has thwarted Congress to enact rises in tariff rates.  The tariffs have been proposed to protect domestic industry from more competitive foreign business. This economic isolation is implemented to raise jobs in the United States, but is that the only result?

There is no doubt that job creation is a top priority on our economic agenda, but the tariffs lead to a decrease in global comparative advantage.  Comparative advantage’s main purpose is to allow two different parties to specialize and trade goods at lower opportunity costs.  If country “A” is more efficient at producing apples than country “B”, and “B” is more efficient at producing bananas than “A”.  Than why should they produce the least efficient good?  Trade allows different countries to specialize and exchange at lower costs than producing inefficient goods domestically.  In the end, both parties gain while using less resources.  Tariffs challenge these powerful economic principles.

The problem with the tariff is that it forces domestic industry to work at a more costly slower pace than if we focused on what we produce more cost efficiently.  Instead of creating these jobs in the inefficient industry we can expand the more competitive industries and focus on job growth there.  A very popular example is the ailing steel industry, which under the new tariffs will bring more domestic jobs but at a higher cost.  This higher cost pertains to more than the steel but also to our foreign affairs with trade partners like China. 

In all, boosting the tariffs may be a risky protectionist policy that could result in a non-ease out of our recession and destroy global markets.  With these markets not running smoothly there is a break in global commerce leading to instability in the domestic home front.