President Donald Trump issued his executive order on regulating imports via "reciprocal tariffs" on April 2, which has been paused, substantially amended, or walked back in the two weeks since, wreaking havoc on the global economy. Economist Don Boudreaux, economic historian Phil Magness, and an unnamed group of economists authored the "Trade and Tariffs Declaration: A Statement on the Principles of American Prosperity" to warn Americans about the dire consequences of these protectionist policies.
The authors characterize the president's actions as inverting "the principles of liberty that ushered in an American-led age of human freedom and prosperity." They object to the president's recent executive actions for "misdiagnos[ing] the nature of our nation's economic ills [and] repudiat[ing] long-standing and widely held economic first principles," which are peace, commerce, and honest friendship with all nations, as Thomas Jefferson stated in his first inaugural address. Over one hundred other economic scholars signed the statement before its publication, including Nobel laureates James Heckman, director of the Center for the Economics of Human Development at the University of Chicago, and Vernon Smith, professor of economics and law at Chapman University.
The authors begin by stating that free trade is associated with greater economic growth and higher per-capita income, while erecting tariffs will hamstring domestic production and impoverish American workers. They clarify that the president's tariffs are "reciprocal" in name only, and deny that trade deficits used in their calculation are economically deleterious. The authors enjoin the president not to "repeat the catastrophic errors of the Smoot-Hawley Tariff of 1930," which led to a retaliatory trade war that froze international trade. Finally, they emphasize that the tariffs unilaterally imposed by the president usurp Congress's Article I powers to "lay and collect Taxes, Duties, Imposts and Excises."
Magness tells Reason he was inspired to co-author the statement by his past scholarship on the 19th century tariff system that culminated in the Smoot-Hawley disaster of 1930. Magness says he "watched the 'Liberation Day' announcement in shock, seeing the same fallacies and errors from a century ago being repeated today." Boudreaux says the letter's goal is "to counter the unfathomable economic ignorance that is fueling support for Trump's protectionism."
Magness says the nonpartisan, evidence-based letter is an attempt "to correct the myths and falsehoods that have been promoted by tariff supporters in their misguided cause" that "will impose extraordinary costs on Americans from all walks of life." Boudreaux hopes the letter will move "opinion makers and voters to reconsider their support for these policies that destroy not only our material wealth but also–and more importantly–our liberties."
Only time will tell if Americans heed the economists' clarion call.
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