Trump’s Washing Machine Tariffs – Consumers Carry 225% Of The Cost

Donald Trump imposed import tariffs upon washing machines. The cost of this to consumers has been up to 225% of the possible benefit. That is, the net result is a great stonking loss for Americans. Not that this is a surprise, as this is the usual empirical result of all and any import tariffs. Consumers lose very much more than anyone else might potentially gain.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] President Trump’s tariffs on imported washing machines cost U.S. consumers about $1.5 billion a year, according to new research. The paper released Monday found the tariffs raised the price of washing machines by 12%. [/perfectpullquote]

Well, that’s rather the point of the tariffs, to raise washing machine prices. Those dastardly foreigners are making them too cheap, making American consumers too rich. Better stop that! And without the snark, that’s still the point. The misplaced idea that if Americans have to pay a little more, but the jobs are in America, then overall we’re better off.

Which we ain’t:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Research to be released on Monday by the economists Aaron Flaaen, of the Fed, and Ali Hortacsu and Felix Tintelnot, of Chicago, estimates that consumers bore between 125% and 225% of the costs of the washing machine tariffs. The authors calculate that the tariffs brought in $82 million to the United States Treasury, while raising consumer prices by $1.5 billion.[/perfectpullquote]

The tariff revenue is nice to have, sure, but it’s not the point. In fact, a tariff which raises no revenue can be defended. It’s so high that no imports happen, so all the jobs go to Americans. It’s that 225% though which causes the problem. The paper is here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]We analyze several rounds of U.S. import restrictions against washing machines.
Using retail price data, we estimate the price effect of these import restrictions by
comparing the price changes of washers with those of other appliances. We find that
in response to the 2018 tariffs on nearly all source countries, the price of washers
rose by nearly 12 percent; the price of dryers—a complementary good not subject to
tariffs—increased by an equivalent amount.[/perfectpullquote]

For here’s the thing. Imagine, just for a moment, that we had a number of less than 100% here. That would mean that the benefits to producers in the US were perhaps larger than the costs to consumers. But once we go over 100% then it becomes obvious that the entire process is a losing game. The loss to consumers is greater than any possible gain to producers. Thus it’s a loss overall to the domestic economy.

Sure and we knew this all along – import tariffs are a silly thing. But good to have the empirical evidence once again.