Tariffs increase domestic production. They’re still bad for the economy.

by Derrill Watson

Why do tariffs make us poorer? There are two main reasons for creating what economists call “deadweight loss.” The first is that we get less of the thing being tariffed. By blocking foreign imports, there is stuff no longer on the shelves that we can’t buy. Fewer solar panels, fewer semiconductors, and fewer batteries. Yes, we are producing more of each of them; but at a higher cost so that there are consumers and firms who can’t purchase those goods any longer. Noah ignores those costs.

The second reason is another principles term: opportunity cost. We’re moving workers and resources out of other industries in order to boost the industries being tariffed. At a time when the US is enjoying lower than average unemployment, those opportunity costs will bite more than usual. Again, Noah ignores those costs.

Read the rest, and this is from the Spring 2025 issue (3.1).

Dr Watson and I have been collaborating since the good ol’ days of the NOL group blog. I am grateful for his voice in the public square.