President Donald Trumps defenders often frame his trade policies as prioritizing economic development over the free market.
In their telling, America has an interest in manufacturing valuable goods domestically, even if producing such wares in the US is not maximally profitable right now. Our nation might not currently make semiconductors as well as Taiwan or electric vehicles as well as China. But if we protect our nascent chip and EV industries, they might eventually become globally competitive. And that could make America wealthier, as the international market for such technologies will be large and opportunities for productivity gains in those industries are significant.
This is a reasonable argument for the utility of tariffs in some contexts. But it doesnt amount to a case for Donald Trumps tariffs.
On August 7, Trump imposed a 15 percent minimum tariff on all goods from most foreign nations, and much stiffer rates on some countries. These include 40 percent tariffs on low-income nations like Myanmar, which specializes in garment production and runs a trade surplus with the United States primarily because its people are too poor to buy many US-made goods.
Traditionally, countries use tariffs and industrial policy to climb the international value chain to go from producing simple goods (like T-shirts) or basic commodities (like lumber) to making complex products that are more valuable.
But Trumps trade policies would move the United States down the value chain.
