This time of year, most inflation-weary Christmas shoppers—and perhaps even the inflation-fighting Fed—would welcome an end to our government’s effort to raise the prices of the goods we buy in high volume. In this year’s third quarter, the federal government collected tariffs on imported goods putting us on track for $104 billion. The import duties are being added to lots of items on our shopping lists, running up the prices of clothes, toys, electronics, and even the solar panels needed to shift America from fossil fuels to renewable energy. The latter are at the heart of a controversy showing, unfortunately, why we shouldn’t expect relief any time soon.
Since 2016, under Republican and Democrat leadership, trade wars have become a governing habit. To add perspective, at the current pace, total retail sales will hit more than $7.3 trillion in 2022. The tariffs equal roughly 1.4 percent of that. That’s a pretty healthy dose of inflation.
Not only that, but in recent years, tariff tax revenues paid mostly by Americans have accelerated sharply. They have climbed from $38.5 billion in 2017, during the Trump administration when the United States began hiking tariffs on China and friendlier countries like Canada and France, to roughly $53.3 billion in 2018, $77.7 billion in 2019, and on to $89.1 billion in 2021.
Donald Trump famously saw himself as gatekeeper to the U.S. economy and happily referred to himself as a “tariff man”—but President Joe Biden has quietly maintained the same stance. Although interrupted by the 2020 pandemic recession, tariff revenues have until quite recently continued to accelerate.
Figuratively speaking, for six years, our government has put rocks in our harbors to keep out foreign-made goods. Now, the tariffs are taking a small bite out of Christmas. Scrooge would be proud. In each instance, the rocks were said to improve the well-being of some Americans or industries, sometimes supplemented by patriotic or even environmental appeals, but at the expense of a lot of other Americans.
While we call the practice “protectionism,” the industries and groups gaining protection are numerically few, highly organized, and politically active. Those picking up the tab are much larger in number, diverse, and less organized, and so most of them—like you and I—quietly pay the cost through higher prices or other means. Put another way, the politics of the matter favor those who know how to play the game.
Protectionism can feel pretty good when you are a U.S.-based solar cell start-up getting a boost. But it doesn’t feel so good when, as a U.S. power generator, you must now pay for more-expensive domestic solar cells and can’t even find enough components to complete a major project.
This gets us to the current controversy, which has its roots in 2018, when Trump imposed tariffs on solar cells produced in and shipped from China. The move was initially embraced by the Biden team, and then temporarily relaxed when U.S. solar installers begged for more supply and as we awaited a government investigation into alleged Chinese maneuvering around the tariffs.
In December, following months of investigation and now in the midst of holiday shopping, the Department of Commerce concluded that Chinese firms rearranged their production so that products could be finalized in Southeast Asia, the source of 80% of U.S. solar cell imports. Putting aside China’s apparent disregard for the spirit of the law, what was the result? U.S. consumers have enjoyed lower-cost solar panels, at least when they could get them. Meanwhile, planet Earth may have become a wee bit less troubled by climate change.
One might think such an outcome would be celebrated by progressives and pro-market politicians alike. But that’s not the world we live in. Instead, unless intervention occurs, the findings will lead to punitive tariffs and more restrictions on the importation of solar cells, an action now opposed by U.S. industries begging for relief so that they can satisfy consumer demand for more solar power.
Wouldn’t it be better just to let Americans buy what they need, whether they’re shopping for loved ones or figuring out how to light all those Christmas trees?
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ABOUT THE WRITER
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business, and a former executive director of the Federal Trade Commission.
