Economists are quite unanimous in their view that tariffs hinder economic growth and overall welfare. They also agree that free trade and the removal of trade barriers boost economic growth.
These views stem from the fact that free trade lowers the prices of goods and services for both producers and consumers. Moreover, tariffs partly translate into higher prices, which negatively affect importers, exporters, and consumers alike.
This holds true even when tariffs are intended to protect a specific industry, as they inevitably increase production input costs and trigger retaliatory tariffs. Import tariffs can also harm domestic exporters by disrupting supply chains and raising their input costs.
In the long run, an even more harmful effect of tariffs is that they reduce competition between companies. As a result, businesses operating in tariff-protected markets become inefficient and less innovative, ultimately leading to difficulties—especially if the tariff barriers are later removed.
All of this seems to be entirely unknown to U.S. President Donald Trump, who is set to announce import tariffs on "all" trade partners today. This is despite the fact that the tariffs he imposed during his first term had a negative impact on American employment, as noted by Jyrki Ali-Yrkkö, Director of the Research Institute of the Finnish Economy.
Unfortunately, potential U.S. tariffs would have equally negative effects on America's trade partners. As a result, it won’t be just Americans who "enjoy" economic decline, but almost all nations across the world.
