I come from a country that tried the high tariff route (Australia).
> What about when tariffs are placed on US items, demand will drop with US made things.
Maybe that will happen, but over long term that isn't the dominant effect. The main effect is the tariff protected industries raise prices because the don't have to complete with international suppliers any more. They soon price themselves out of the international market. It doesn't take very long - a couple of years usually.
That's how it starts. It is usually tolerated because the jobs at the expense of higher local employment was the goal. Then it flows outward as industries that aren't tariff protected are forced to buy local stuff at more expensive prices than their overseas competitors. "Stuff" here includes labour, because these tariff protected industries can afford to pay their employees more. (That was one of the attractions of the tariff idea, right?) The solution is obvious - tariffs for those industries too. Your exports go through the floor.
Eventually it becomes obvious even to Joe Citizen in the street. Locally produced stuff can cost multiples of what the overseas producers can make it for. (Literally, multiples. People start to yearn for the time an electric drill could cost $20.) The quality goes down as well.
The time for change arrives. I still remember our treasurer calling Australia cowering behind tariff walls a "banana republic" [0]; NZ had the same moment without such theatrics. The tariff band aid was eventually ripped off in both countries.
The pain was immense. Protected industries go rapidly broke, unemployment sky rockets. It takes years for the new internationally competitively industries to develop. But here we are, 30 years later, the last 20 without a recession and now with a GDP bigger than Russia's.
Still if the tariff plan is implemented, the next few years will be very nice for USA citizens. I guess the even frog in the pot enjoys the warmer water for a while. Enjoy it while it lasts.
> What about when tariffs are placed on US items, demand will drop with US made things.
Maybe that will happen, but over long term that isn't the dominant effect. The main effect is the tariff protected industries raise prices because the don't have to complete with international suppliers any more. They soon price themselves out of the international market. It doesn't take very long - a couple of years usually.
That's how it starts. It is usually tolerated because the jobs at the expense of higher local employment was the goal. Then it flows outward as industries that aren't tariff protected are forced to buy local stuff at more expensive prices than their overseas competitors. "Stuff" here includes labour, because these tariff protected industries can afford to pay their employees more. (That was one of the attractions of the tariff idea, right?) The solution is obvious - tariffs for those industries too. Your exports go through the floor.
Eventually it becomes obvious even to Joe Citizen in the street. Locally produced stuff can cost multiples of what the overseas producers can make it for. (Literally, multiples. People start to yearn for the time an electric drill could cost $20.) The quality goes down as well.
The time for change arrives. I still remember our treasurer calling Australia cowering behind tariff walls a "banana republic" [0]; NZ had the same moment without such theatrics. The tariff band aid was eventually ripped off in both countries.
The pain was immense. Protected industries go rapidly broke, unemployment sky rockets. It takes years for the new internationally competitively industries to develop. But here we are, 30 years later, the last 20 without a recession and now with a GDP bigger than Russia's.
Still if the tariff plan is implemented, the next few years will be very nice for USA citizens. I guess the even frog in the pot enjoys the warmer water for a while. Enjoy it while it lasts.
[0] https://theconversation.com/revisiting-the-banana-republic-a...