What economists think about import taxes

Chelsea Vail | Oct 05, 2016

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As voters consider the merits of the Trans-Pacific Partnership (TPP) and Europe awaits Britain’s exit from the European Union, international trade is a fixture in the news and a frequent topic among politicians. Among his trade-related policy prescriptions, for example, US presidential nominee Donald Trump has floated a 35 percent import tax on cars made by US companies in foreign countries—a response to Ford Motor Company’s plan to move its small-car production to Mexico.  

What do economists think about such protectionist policies? Chicago Booth’s Initiative on Global Markets asked its expert panel whether establishing import taxes on cars, among other items, would be a “good idea.” Some called it bad economics; others said it’d be a violation of World Trade Organization agreements. None of them thought it would be a “good idea.”

David Autor, MIT
“Taxing consumers to subsidize domestic production is bad economics and a violation of the WTO agreement.”
Response: Strongly disagree

Caroline Hoxby, Stanford
“What a ‘good idea’ is I do not know, but such tariffs would make the average American worse off.”
Response: Strongly disagree

Kenneth Judd, Stanford
“Consumers would lose. A few would gain, but there are more efficient ways to transfer income to people.”
Response: Strongly disagree

Richard Schmalensee, MIT
“A terrible idea, for many reasons.”
Response: Strongly disagree

Christopher Udry, Yale
“No. Just no. The example products were chosen to make this easy. The rare cases in which protectionism might be justified are excluded.”
Response: Strongly disagree