Tariffs — a tax or customs duty imposed by a country at its border on goods imported from another country — are wildly misunderstood and have come into the lexicon since their use by the Trump admin and during this presidential election campaign.
They are not wildly understood, sort of like calculus, differential equations, and how doorbells work. Let us reason together, dear reader.
Traditional reasons to impose tariffs
Tariffs have been traditionally used (and taught in business schools) in the following situations:
1. Tariffs are used to protect strategic industries — industries with national security implications — such as high tech, steel, or aviation.
2. Tariffs are used to protect fledgling, startup businesses during their period of incubation and infancy, again, often technology related.
3. Tariffs are used to punish bad actors such as China for its theft of technology, its use of slave/prison/child labor to manufacture goods, and to offset low environmental standards.
Pretty straightforward stuff, no? But, there’s more. Continue reading →