Tariffs: A Definition

When you buy, you seek the best price that suits the budget you are disposing of, without ignoring quality. Normally people do not care where the good comes from or who made it, they just want something functional that supplies their needs and/or desires perfectly or almost perfectly. In normal market conditions, where there are no taxes being imposed and there is no government with vested interests, transactions are made with virtually no problem at all. However, today we have many problems in understanding an economy and even more in leaving it alone. One of the greatest problems is the economic relations between two nations and the taxes imposed on imported and exported goods, known as tariffs. Whether we believe it or understand it or not, the economy is tremendously influenced by these phenomenons.

As it was mentioned in “Crony Capitalism”, exchange is a concept that defines two sides of a transaction; it affects both the buyer and the seller. These two parties have a considerable amount of responsibility upon each’s shoulders to supply the needs and longings of their trading partner. If one fails to comply, both of them will be damaged in the present, affecting future exchanges. It is as simple as a man buying a television of some local brand with a malfunction. The man will be uncertain if he ever wants to buy a television of such brand in the future. If the man and his buddies never buy again, the local television producers will lose money and will not be able to prevail in business. Any person with an average amount of intelligence is able to comprehend this economic logic. However, when political rationale is mixed in with economic logic, the former ends up defeating the latter.

This is clearly seen in tariffs. Tariffs, even though they involve money, our freedom to do whatever we desire with it, and exchange, are not an economic battlefield, but a political one. The arguments favoring tariffs are confused with immigration and have a slight taste of patriotism mixed with discrimination. After all a nation must protect itself from any foreign enterprise that is more productive and competitive in a market, capable of reducing costs and prices causing a greater consumer satisfaction. The government is obligated to subside ineffective native producers by raising or establishing tariffs upon imported goods that they may defend from better foreign products and have less competition, ultimately meaning that these native companies have become potential monopolies; monopolies that have no idea how to be successful in catering consumer demand effectively.

Do you see the problem? If a product from a bordering nation is cheaper and better than a native nation, which would rather you buy? When you buy the foreign good, the native producer will be hurt economically and convince the government to save jobs by raising tariffs on the foreign producers’ goods. Although, this will eliminate jobs on the foreign country and reduce their wealth to buy goods coming from your nation, finally meaning that jobs will reduce in your nation, as well. Yet, that is not the worst part of the problem, how your number of choices will be shortened is. Consumers will not be able to have a broad range of prices to choose from, but instead face native monopolies with high prices and decreasing quality. It is either that, or pay a tariff. Whatever the case, individual consumers lose wealth and liberty on both sides of the border.

Now, why does this occur? Because people, namely voters, confuse people with goods, and prosperity with disguised taxes (tariffs). They accept arguments saying that importing goods will change a nations culture, and its decisions will be negatively impacted. However, a good does not have a mind of its own, a culture, and even better, doesn’t vote. A foreign good brought to a national market increases competition, in this way raising quality and reducing prices. In better words, our national industries become better competitors in international markets.

With tariffs, customers lose authority to choose freely and the state gains more authority to allocate resources. Economic allocation moves from the market to the ballot box and there is an obvious reduced wealth for everyone (except the government) in the name of protection. The greed of the government and the false sensation of patriotism are the propellers of tariffs. They not only impact negatively a bordering nation, but also your own nation. Remember that.