New CEI report outlines the major reasons why tariffs don’t work
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Today, the Competitive Enterprise Institute (CEI) released a new report by CEI Senior Economist Ryan Young entitled “Three Reasons Tariffs Don’t Work” that outlines the major problems with tariffs and provides effective policy solutions.
Tariffs create financial havoc for industries and consumers, benefiting a few while hurting many. It is impossible for humans to reliably predict how tariffs might interact with specific industries or the market, resulting in unintended financial consequences for the broader economy. For example, the current administration’s steel tariffs may benefit domestic producers by allowing them to charge higher prices, but steel-dependent industries must absorb those added costs, creating long term financial strain for many American companies.
Tariffs give politicians another way to reward friends and punish enemies. They also give companies an incentive to invest in political connections, rather than better products, lower prices, or better customer service.
To get trade policy back on track, the report suggests:
- Congress reclaims its taxing authority, as originally established by the US Constitution;
- The courts continue to review and strike down any tariff actions found unconstitutional;
- The executive’s unilateral trade authority be removed and;
- Make free trade the long term goal for US trade policy.
“Until Congress and the courts restore a proper separation of powers, the door is open for future administrations to cause similar damage,” report author Ryan Young says. “It is well past time to close that door and prevent future chief executives from acting unilaterally on trade.”