Do Tariffs Really Raise Prices? Examining the Arguments
When it comes to the impact of tariffs on imported goods prices, there is a common argument that parallels the effect of gasoline taxes on fuel prices. While some may argue that a tariff could theoretically not raise prices if the seller absorbs the tax, the likelihood of this scenario occurring in the real world, especially for tariffs that apply universally, is extremely low.
A recent tweet by Matt Yglesias sparked a discussion on the level of disagreement among economists regarding the effects of tariffs. Yglesias pointed to a study showing only a 5% disagreement among economists on the impact of tariffs on “general economic welfare.” However, I believe that the actual degree of disagreement is likely far less than 1%.
While a minority of economists may support tariffs as a means to potentially boost welfare, it’s essential to recognize that this stance is not based on the assumption that tariffs will not raise prices. Those in favor of protectionism believe that tariffs will indeed raise prices and protect domestic industries from cheaper imports, thereby safeguarding jobs in import-competing sectors.
It’s crucial not to overstate the significance of a strong majority opinion among economists on a particular issue. While polling economists provides valuable insights into expert beliefs, it does not serve as a definitive indicator of the correctness of a position.
As an example, I belong to a small percentage of economists who believe that the Federal Reserve’s tight money policy caused the 2008 recession. Even if a poll shows that 99% of economists disagree with this view, it does not mean there is a 99% chance of being incorrect. Expert consensus should be considered, but it should not be viewed as conclusive.
In summary, while the majority opinion of economists holds weight, it’s essential to approach expert consensus with a critical eye and not rely solely on numbers to determine the validity of a particular viewpoint.
Conclusion
As demonstrated by the ongoing debate over the impact of tariffs on prices, expert opinions can vary even within the field of economics. While consensus plays a role in shaping our understanding of complex issues, it’s important to acknowledge the nuances and potential for dissenting views within the profession.
