President Trump has stated that he would impose tariffs on imports from China ranging from ten to forty-five percent. Can he do it? And will it cause a trade war?
The Effects of Increased Tariffs
In the 18th Century, tariffs were considered a method of generating revenue and protecting domestic industry. The first U.S. customs duties were imposed in 1789, and were considered vital to the economic survival of the young nation. That mercantilist approach has since been overwhelmingly rejected by mainstream economists. Even by the time of the American Revolution, specialization and comparative advantage were being touted (including by Adam Smith, whose Wealth of Nations was published in 1776) as the true route to national prosperity.
Continue Reading Predicting the Unpredictable: Will Tariffs Under President Trump Cause a Trade War With China?