Trump barks up wrong tariff tree

The Trump administration has slapped a new tariff on Canadian softwood lumber imports. The president sees this as a matter of fairness, telling The New York Times that the US “can’t let Canada or anybody else take advantage” of us.

It would be logical to conclude, then, that Trump is more interested in scoring political points than making sound economic decisions.

Indeed, the economics of these tariffs will probably do far more damage than good. According to a recent study by the National Association of Home Builders, a 15% tariff on lumber would raise prices of new homes by 4.2% at a cost of 4,666 full-time jobs. That’s a disheartening statistic, especially considering that the Trump tariff would be as high as 24%.

This is one of the many problems with pursuing a protectionist trade strategy. Policies designed to save jobs inevitably cost other jobs. The jobs that are saved are highly visible and elected officials more readily benefit from the gratitude of those who view the policies as politically engineered fairness. The jobs that are lost down the road, however, don’t disappear until long after and are much easier in the short term for politicians to ignore. But even though these opportunity costs are much harder to quantify, the economic devastation they catalyse is no less real.

It’s easy to see the appeal of protectionism. Free markets can seem unremittingly cruel as the constant innovation and disruption make some jobs unnecessary or obsolete. But history is replete with examples of well-intentioned governments that intervene in attempts to shield people from the consequences of a dynamic economy: the results are universally dismal. Even the wisest of leaders who try to plan an economy are incapable of managing the millions of pieces of information the free market effortlessly processes. Salt Lake City, May 1.