What is the difference between an undergraduate international trade economics class and a graduate-level class? The difference is that in an undergraduate economics class they teach you that the ideal level of tariffs for any country is zero. Free trade rules! But in a graduate-level class, they teach you that tariffs can help a nation…
The theory of free trade is so familiar and so often quoted, you might think there is ample evidence proving its accuracy. But there isn’t. In fact, there is scarcely any evidence at all. On the other hand, there is abundant evidence showing the theory is wrong. In an academic article recently published in the…
With consumer price inflation (CPI) running at 6.8% as of November 2021, many importers are trying to use inflation as an excuse for repealing the tariffs enacted by former President Donald Trump and continued by President Joe Biden. This is special interest pleading and bad economics. A close look at the state of the U.S.…
Not All Tariffs Are the Same: A Case to Consider Optimal Tariff Policy By Amanda Mayoral, CPA Economist Summary Points: Despite popular misconception, economic theory has long suggested that tariffs can benefit a country, particularly one like the US. The most advantageous tariffs are optimal tariffs. This is because optimal tariffs balance the…
Summary points: The import price of steel fell in the period following the 2018 imposition of a 25% steel tariff, an indicator that steel tariffs were not passed entirely onto consumers. Steel tariffs did not lead to a proportional rise in consumer prices of steel-intensive goods, such as automobiles. In many instances, firms will internalize…
Long-term economic growth is the single most important objective for any nation. As growth economist and Nobel laureate Paul Romer has said: “For a nation, the choices that determine whether income doubles in one generation or two dwarf all other economic policy concerns.” In the United States, real income per capita grew in the 3%-4%…
The US International Trade Commission (ITC) recently released a comprehensive analysis of the economic impact of all trade agreements the United States has entered into since 1985. Trade agreement negotiation, passage and implementation has been controversial throughout this time period. The ITC report is significant as the first recognition by a federal government trade agency…
By Jeff Ferry, CPA Research Director For decades, economists have taught David Ricardo’s Law of Comparative Advantage as if it is an absolute law. But the tide is turning, as some highly respected economists are now moving away from the doctrinaire position that all free trade is always good everywhere, and they begin to acknowledge…
