Consumers Always Lose Trade Wars

Trade relations between the United States and China had been relatively smooth in recent years. Had is the keyword there. Trump decided to provide some protection to his cronies by implementing a series of tariffs to artificially raise the price of imported goods. He sold these tariffs as job creators. Not surprisingly, China retaliated with its own tariffs. Now Trump is planning to retaliate against China’s retaliation with even more tariffs:

US President Donald Trump has instructed officials to consider a further $100bn (£71.3bn) of tariffs against China, in an escalation of a tense trade stand-off.

These would be in addition to the $50bn worth of US tariffs already proposed on hundreds of Chinese imports.

China’s Ministry of Commerce responded, saying China would “not hesitate to pay any price” to defend its interests.

Tit-for-tat trade moves have unsettled global markets in recent weeks.

Governments and their cronies are the only winners in a trade war. Tariff profits go into government coffers while domestic cronies can increase their prices since goods from their imported competitors are now artificially higher. Meanwhile, consumers are forced to pay artificially higher prices for goods. If, for example, a $100 tariff is put on all imported cell phones, the government pockets an extra $100 and you pay $600 for a cell phone that used to only cost $500.

As this trade war wages, consumers are going to get raked over the coals. The only upside is that in the end this will screw over the United States government as well since it will lose tariff profits when imported goods become so expensive that consumption drops significantly.