For a nation with roots in a rambunctious 1773 Boston Tea Party protesting British tariffs, it’s odd to see both major-party White House contenders trying to outdo each other with promises of tariffs.
We’ve come a long way from the first Independence Day, which was sparked by a fundamental notion that a representative democracy would enable Americans to plot their own destiny, economic and otherwise.
Eager Boston patriots, we know, had something much bigger than the price of tea in mind: taxation without representation. The resulting revolution delivered a new order under heaven – a democracy – promising life, liberty and the pursuit of happiness. And democracy, despite being one of humankind’s prized inventions, does leave open the opportunity for special interests to gain at the expense of other, less adept, members of the body politic.
The latest proposed tariffs – import taxes, in truth, that we pay – will put even more limits on the flow of computer chips, batteries, solar panels and steel. They also prevent Americans from accessing $10,000 electric vehicles and hybrids capable of traveling more than 1,000 miles on a full tank and charge.
Yes, these vehicles are produced in China, but they’re on the road and heading out of factories. Just not here. Of course, China is in many respects an adversary and tariffs are viewed as a geopolitical tool. But if it’s that simple, why target EVs and chips? Chinese imports are everywhere; why not hit a much broader range and really sock it to them?
Mancur Olson’s 1965 seminal work, “The Logic of Collective Action,” offers clarity. Political efforts to pass out pork tend to be most successful when the largesse goes to members of relatively small, highly organized interest groups and the costs are spread across a vast number of consumers.
The unorganized consumers – making livings, raising families, focused on top-line political concerns – are “rationally ignorant” about much of what their government is doing. That means they’re mostly unaware that life is more expensive because tariffs are imposed on imports or tax dollars are doled to those who control money, votes or lobbyists.
Look again at the Chinese electric vehicles. The new $10,000 model, produced by the firm BYD, has not yet been sold in America, and thus, the proposed 100% tariff doesn’t really affect what we think of as the price of vehicles.
“They’re very carefully targeted at sectors that we’re supporting through legislation that President Biden passed with Congress, the clean energy sector, semiconductors, sectors where we consider it critical to create good jobs,” Treasury Secretary Janet Yellen explained.
Put another way, U.S. automakers and unions should love the targeted tariffs, and consumers won’t know what’s happening.
Does that mean functionally blocking a product that consumers might love to access has no effect? Of course not; it’s just harder to see on paper. Currently, the Congressional Budget Office is required to assess the effects of most of Congress’ new laws. The Joint Committee on Taxation analyzes tax changes. Shouldn’t a president be required to provide the public with a full economic assessment for tariffs?
That might help give us a fair ledger. One side would show how Joe Biden and Donald Trump’s love affair with selecting and blocking competitive products from abroad benefits organized interests. These might include the United Auto Workers (380,000 members strong in 2023) and the “Big Three” automakers (which produced 10 million vehicles). It may also include portions of the U.S. auto and steel industries who have joined hands with UAW to put pressure on Canada to duplicate U.S. tariffs on China.
The other side of the ledger would show how all these new, targeted tariffs affect a far-larger collection of people who, by and large, don’t know what they’re missing.
Of course, we ordinary, unorganized Americans will learn to pursue happiness inside the tariff walls, while politicians and special interest groups smile as they gain office and go to the bank. But if the Founders were around to see this, I suspect they’d suggest some ways to require accountability to We The People.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson University College of Business & Behavioral Science, and a former executive director of the Federal Trade Commission. ©2024 Tribune Content Agency, LLC.
