In recent days, the discourse surrounding President Trump’s latest tariffs has reached a fever pitch. While many have eloquently articulated their critiques—far more skillfully than I could—I believe it’s worth introducing a fresh angle to this ongoing debate.
Leonard Read’s classic essay, I, Pencil, offers a fascinating lens through which to view the intricate web of global trade. Narrated from the perspective of a humble pencil, Read’s work reveals the astonishing complexity involved in the creation of even the simplest products. The pencil, composed of just a handful of elements—wood, lacquer, printed labels, graphite, metal, and an eraser—has a rich lineage that stretches far beyond our immediate comprehension. For instance, the wood must originate from straight-grained cedar found in Northern California and Oregon, necessitating a whole set of tools, including saws and trucks, not to mention the logistics of harvesting.
The process of obtaining a single tree branches out into an endless series of pathways—each fork presenting its own labyrinth of components, skills, and labor. To produce those saws and trucks, one must consider the entire supply chain: the extraction of ore, the metallurgical processes transforming it into steel, the cultivation and processing of hemp for ropes, and the myriad facilities housing the workers who bring all this together.
Tracing the origins of the materials needed to fell one tree reveals an intricate system akin to a fractal, where every step leads to further subdivisions of complexity. Once the logs reach the mill in San Leandro, California, an entirely new set of connections emerges, involving railroads, flat cars, and the entire communication systems that keep them operational. Each of these elements, too, has its own vast array of inputs and contributors.
Attempting to grasp the full scope of knowledge, resources, and labor required to produce a single pencil is a task so monumental that even a thousand lifetimes wouldn’t suffice. And if we shift our focus to something more complicated, like a basic toaster, the complexity multiplies exponentially. Thomas Thwaites once noted his astonishment at discovering that a toaster he purchased for just £3.94 contained over 400 distinct components made from more than a hundred different materials.
Don Boudreaux recently highlighted data from Mark Perry indicating that over 60% of U.S. imports comprise materials and capital goods intended as production inputs. Each of these imports also boasts its own convoluted genealogy, drawing on resources and labor from multiple countries. Imposing tariffs, therefore, increases the costs associated with every border-crossing step in this intricate supply chain, ultimately cascading these heightened expenses throughout the economy.
Consider the multitude of tools necessary to transform a cedar tree into pencil-grade wood. How many of these were imported? Of those that weren’t, how many were manufactured using raw materials that originated abroad? How many of these tools were created with machinery that itself was imported, either wholly or partially? The implications of tariffs extend far beyond the immediate transaction; they ripple through the entire production cycle, raising costs at every juncture. Is it prudent to artificially inflate the costs of these interconnected steps in hopes of creating domestic employment in manufacturing sectors such as toasters or smartphones?
True prosperity doesn’t stem from making consumer goods more expensive; it doesn’t arise from constraining purchasing power. When governments wish to penalize nations they deem hostile, they typically resort to economic sanctions that inhibit those countries’ ability to trade internationally. A tariff, paradoxically, functions as a self-imposed sanction against one’s own citizens.
