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Tariffs and welfare: A common, invalid anti-tariff argument

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Sweeney R. J.

Economics and Business Review

2023

vol. 9

issue 1

5-25

President Trump imposed tarisf in 2017 on several of China's exports, notably steel. Many papers opposed these tarisf by using a common, invalid argument: rather than arguing these tarisf reduced U.S. welfare, they argue U.S. consumers and businesses pay the tarisf, a diefrent, rhe torical issue. Their main evidence of harm is increases in imported goods' aeftr-tarif U.S. prices, especially relative to other goods' U.S. prices. In a standard, small general equilibrium model (two countries, two goods, two factors), this price evidence is wholly ambiguous-it is even consistent with the view that Trump's tarif was optimal, increasing U.S. welfare. Even sophisctiated papers are simi larly ambiguous. All fail because they neglect how government uses tarif revenue. Relying on fallacious arguments makes the free-trade position look weak and encourages protectionism.

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1 Economics and Business Review

1 Sweeney R. J.

1 2023

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Tariffs and welfare: A common, invalid anti-tariff argument