You won’t believe how little economics knowledge you have after reading this!

In the realm of economic policy proposals, tariffs have long been a subject of controversy and debate. Oren Cass’s article sheds light on an often overlooked aspect of tariffs – their benefits. Economists are quick to assess the costs of tariffs but tend to neglect the potential advantages they bring.

1. Acknowledging Benefits of Tariffs
   • Economists typically focus on market failures that necessitate intervention, such as pollution, where individuals do not consider the broader societal costs of their actions. Tariffs, on the other hand, address the externalities associated with domestic production. They aim to preserve the value of producing goods within a country, which goes beyond mere market prices.
   • Whether it’s a corporation deciding to move its factory overseas or a consumer opting for cheaper imports over domestic products, the broader implications of these choices are often disregarded. Tariffs help combat the collective economic, political, and societal harms that arise from such decisions.
2. Effects of Tariffs
   • Tariff policies have direct impacts on various economic indicators and activities. The aftermath of the 2018-20 trade war demonstrated tangible effects on manufacturing, as indicated by changes in employment, hours, production, value added, and capacity utilization.

   ![Figure 1: Manufacturing employment (bold black, left scale), hours (light blue, left scale), production (green, left scale), valued added (red, left scale), all in logs 2018M07=0; and capacity utilization (purple, right scale). Source: BLS, Federal Reserve, BEA via FRED, and author’s calculations.]

3. Assessment of Welfare Impacts
   • To truly evaluate the impact of tariffs on welfare, it is imperative to consider consumer welfare losses, producer welfare gains, and the transfers to the Treasury in both the short and long run. Calculating the value of externalities associated with manufacturing is crucial for a comprehensive analysis.
   • Amidst discussions of economic policies shaping the future, it is essential to scrutinize the potential repercussions of policies like tariffs on various stakeholders and the overall economy.

In conclusion, delving into the complexities and nuances of tariff policies reveals the multifaceted nature of their impacts. As the discourse on economic policies continues, a thorough understanding of the dynamics at play is crucial for informed decision-making and ensuring the welfare of all parties involved.