US and Canada Impose Reciprocal Tariffs After Trade Talks Collapse
A Tariff War Between Friends Is a Conspiracy Against Their Own Public
When two neighbouring nations raise 50 percent walls against one another’s goods, they do not defend their people; they tax them for the benefit of a few loud interests and call it patriotism.
The event is simple enough. Negotiations between two great neighbours have failed; one government has imposed a tariff of fifty per cent upon the goods of the other; the second announces it will “match” what the first has done. The language is that of war and retaliation, as if bales and barrels marched like battalions. Yet no army will pay the duty at the frontier. It will be paid, in the first instance, by shopkeepers and manufacturers who import, and in the last resort by the families who buy—by the labouring mechanic furnishing his house, by the mother feeding her children. War is declared, but the battle is fought in their purse.
When I wrote of the pin-maker in the Wealth of Nations, I observed that the astonishing increase of his dexterity depended upon the division of labour, and that this division was in turn limited by the extent of the market. Two such vast countries as these, trading freely, form for one another an immense theatre of employment, where each branch of industry may refine its operations, lower its costs, and suit itself nicely to the wants of the other. To narrow that theatre by a wall of duties is not merely to affront a neighbour; it is to pull down the galleries of one’s own house and then complain that the music sounds thin.
The public is invited to admire the boldness of a fifty per cent impost, as if the rate measured the vigour of the patriotism. But the impartial spectator, considering calmly, inquires instead how it will alter prices, and who, beneath the noise, will bear the burden. A great duty on foreign goods does three things at once: it makes those goods dearer; it gives a licence to domestic rivals to raise their own prices under its shelter; and it discourages the very competition that forces all producers, foreign and domestic together, to serve the consumer diligently. The benefit is concentrated, the injury dispersed; the gainers know their gains, the losers only feel an unexplained hardness in their condition.
In the Wealth of Nations I remarked that people of the same trade seldom meet, even for merriment, without the conversation ending in some contrivance to raise prices. I see no reason to suppose human nature has altered. When a statesman arms himself with a tariff of this magnitude and proclaims that he will match or outmatch his neighbour, I do not picture an abstract lover of his country, but hear in my mind the whispers of those manufacturers and farmers who would gladly enjoy the home market as their own monopoly, and who are never so eloquent about the public interest as when they are promoting a private one. Their petitions deserve, not reverence, but the most suspicious attention.
Some will say that, since one side has begun, the other must retaliate, lest it appear weak and invite further impositions. There is, no doubt, a sort of honour among nations, as among individuals. Yet retaliation in trade is a particular species of honour, which punishes the innocent many for the offence of a few. Because one government has resolved to tax its own consumers heavily upon what they buy from abroad, the other obliges itself to do the same. This is as if, because my neighbour has foolishly set fire to his barn, I should burn my own in order to demonstrate that I am not to be trifled with.
Self-love, under known rules of justice, may be trusted, in ordinary commerce, to arrange the industry of a country more effectually than the most bustling statesman. But when governments undertake to manage trade by threats and counter-threats, they cease to guide and begin to play. They move the pieces on the great chess-board of society according to their project of the moment, while each piece has a principle of motion of its own—each trader, each labourer, each family caring for its daily bread. A tariff war pretends to employ the courage of nations; in truth it toys with the subsistence of clerks, drivers, and shop-girls who never sat at the council table.
If we call to mind that the real wealth of any people is the annual produce of their land and labour, and that the chief object of policy ought to be the welfare of the labouring poor, the justice of this contest appears in a harsh light. The impartial spectator cannot applaud a measure which raises the cost of living, restricts the range of employment, and flatters the vile maxim of the masters of mankind—“all for us, and nothing for other people”—while pretending to fight in the name of the very people it burdens. To dress a tax as a victory is an ingenious art, but hunger and want are very rude critics of ingenious arts.
From the works cited
- An Inquiry into the Nature and Causes of the Wealth of Nations — The division of labour (the pin factory) as the engine of opulence, limited by the extent of the market.
- An Inquiry into the Nature and Causes of the Wealth of Nations — The critique of mercantilism: wealth is not money; policies rigged by merchants and manufacturers sacrifice the consumer to the producer.
- The Theory of Moral Sentiments — Judge conduct by the impartial spectator: what would a well-informed, disinterested observer feel about this action?