Tariffs, Trade, and the Path to Prosperity: A Conversation with Thomas DiLorenzo

Tom DiLorenzo joins Don Ma to discuss the economic impact of President Trump's sweeping tariffs. DiLorenzo critiques the policy as a form of taxation that raises consumer prices and disrupts industries, while examining the potential for free trade agreements with the European Union and other nations. He also challenges the significance of trade balances and offers alternative solutions for revitalizing American manufacturing. The conversation offers a clear, principled look at tariffs, protectionism, and the future of global trade policy.Don Ma: Joining us now to discuss President Trump's sweeping tariffs is Thomas J. DiLorenzo, president of the Mises Institute. So good morning, Thomas. Let's talk about the impact of these tariffs. The bottom line is that somebody has to pay the levies, and that's either the companies eat the cost or pass it on to consumers. Can we assume that we're going to see some combination of cost-cutting measures from businesses, whether that's layoffs or otherwise, other measures? As well in addition to that, we're going to see some form of increases and prices for consumers in the short term. Should we expect that?Tom DiLorenzo: Oh, sure. For sure. A tariff is a tax, and so you're raising taxes on people. Automobile parts, for example, the U.S. imports a lot of automobile parts from Canada, and we're putting new tariffs on those parts and on steel and aluminum, so cars will be more expensive, and the American car industry will therefore be less competitive in international markets. It may threaten jobs in the car industry. It'll benefit at least temporarily people in the steel industry and the aluminum industry, but it's a big chaotic mess because there's so many examples like this. If I did a little research, I could probably give you a hundred examples just like this of winners and losers created by this whole system that the president is going down.DM: But in the long term, are we going to see a resurgence of U.S. manufacturing? That was one of the points of the tariffs.TD: Well, as you know, the European Union has counter-offered and said, "We will go to zero tariffs on American imports to Europe if you go to zero tariffs on European imports into the U.S." And President Trump made that exact same deal to the Europeans, the European heads of state, during his first term. He said, "We'll go to zero if you go to zero." They didn't accept it at that time, but now they've made the same offer to him. That would be the best of all worlds if that's what happened is we went towards zero. I think Vietnam has done the same thing. South Korea has made a similar offer. And so we'll see. The great negotiator, Donald Trump, has a golden opportunity to move the world toward free trade here, and that would be the road to prosperity. And it's disappointing to me that he has bragged about how much government tax revenue will be taken in by the tariffs, and that means more money out of the pockets of American consumers and into the federal bureaucracy. And that's a flat-out contradiction of everything he campaigned on.DM: Okay, so what if a country, for example, China, doesn't want to back down on tariffs? Like, China talking about responding to the tariffs, not backing down, saying that it'll fight to the end. What happens in that scenario where tariffs remain elevated?TD: Well, they'll be the outliers, and if China wants to put big tariffs on American imports and it makes all these things more expensive, they're harming their own people. And if we were to retaliate and say, "Oh, we're going to do the same thing. We're going to have big tariffs on Chinese imports," well, our government will be saying, "Okay, China, you want to harm your people with higher taxes? We can show you we can harm our people just as much with higher taxes, tariff taxes." And that's a bad road to go down. We need to go in the opposite direction. And I don't know if the Chinese government will follow what the Europeans are doing, but that's the way we need to go, the way the Europeans are proposing to go, zero tariffs for everybody.DM: So President Trump has talked about the U.S. trade balance. How do tariffs affect the U.S. trade balance?TD: Well, first of all, the balance of trade is sort of a meaningless statistical artifact. There's no reason we should expect Americans to buy as much from Liechtenstein as people in Liechtenstein buy from Americans, or from Californians to spend as much money in Rhode Island, tiny state, Rhode Island, as people in Rhode Island spend in California. It's just a statistical artifact, the balance of trade. When you look at all the countries of the world we trade with, it all balances out eventually in total. But the president is focusing on just this one statistic to justify putting protectionist tariffs on these countries. And it is true that they have the hyperprotectionist tariffs on a lot of American goods. But hopefully what he