April 3, 2025
President Trump is determining equivalent reciprocal tariffs, considering remedies, and estimating fiscal impacts on the national government and information-collection costs to the public.
Fast, extensive change, even change that's initially for the worse, works out best for freedom. Even so, tariff increases have done serious harm and have persisted for decades.
It's worth discussing constitutionality, harms, dynamics, and options.
Constitutionality
Tariffs unconstitutionally deprive each person of a different proportion of his liberty, as do all revenue sources other than fully flat taxes on labor income.
Setting tariffs is archetypal legislative power. Tariffs raise revenue, so they must originate in the current house of representatives.
Tariff agreements, though, are treaties. Treaties are law, and remote collaboration is practical now. All treaties should be drafted by the current senate and the other nations' authorities, passed if they'd be helpful, and signed by the current president if they're advisable and enforceable.
Harms When Unfree
People build up skills as they work together. People can live in their homes but provide their skilled work to people elsewhere by selling products to others, through trade.
When the scarcest resource, people's time, is put to more-valued uses by people by performing more-skilled work that they can sell to customers, both the producers and the customers benefit.
Tariffs get in the way.
Tariffs make marginal producers unprofitable, so tariffs reduce supplies, which increases prices. Increased prices must get paid, by producers who buy intermediate products and by customers.
Government people take a bigger cut, making us less free.
Investment returns get unknowable, so producers forgo investment. America's Great Depression was prolonged by similar regime uncertainty.
Domestic producers grow increasingly uncompetitive and end up losing business and cutting jobs.
Harms When Unbalanced
People who export more than they import need to invest their accumulating foreign money. These people-including China's government people-invest in their customers' assets.
Customers can become more productive and earn more. Investors earn returns.
But these investments are driven by excesses of foreign money more than by opportunities, and excess money bids up prices. For example, prices get higher for family farms, and this makes returns lower and riskier.
Also, compared to engaged local investors, passive foreign investors can't add as much value.
Strengthening a Major Enemy Government
China's government people have long been taking unconventional-warfare actions against the USA's people. If the USA's people would keep helping the Chinese people build up more resources that China's government people could take for war, this wouldn't help the USA's people or China's people.
USA government people could block the USA's people trade with China's people until China's government people stop their warfare actions against the USA's people. As this continued, freer nations' people would increasingly outproduce China's more-coerced people. When freer governments' people have significantly outproduced the more-coercive governments' people, major wars haven't started.
Dynamics
With tariff reciprocity, the USA government people would change their tariffs to match other government people's tariffs. Helpfully, this strategy would be intuitive to the USA people and to other nations' people.
The USA government people currently have lower tariffs than many other government people have, so the USA government people's first move to match tariffs would raise many tariffs.
When one nation's government people have raised their tariffs, usually other nations' government people have raised their tariffs still higher. The political consensus that had previously pushed tariffs high has just pushed tariffs higher.
In the Great Depression era Smoot-Hawley tariffs, USA legislators pushed tariff duties up by a typical proportion, 20%.
Meanwhile, some people were going bankrupt. Other people's bank deposits weren't backed fully by reserves, so these people tried to withdraw their money, and banks failed, destroying the unbacked money. Very quickly, customers had far-less money to buy products, and producers had to significantly lower prices.
Two-thirds of the Smoot-Hawley tariffs were assessed at fixed dollar rates per unit of product. At the new lower prices, these fixed tariffs became much-higher percentages of the products' values. Legislators didn't lower these fixed tariffs to return to the original percentages. As a result, the legislators' Fed-executed boom and bust, together with the legislators' failures to adjust these fixed tariffs, ended up pushing up the resulting percentage tariffs by an additional 30%.
Raising the tariffs from 40% to 59% took 2 years. Lowering the tariffs from 59% to 12% took 22 years.
During these 22 years, the legislators' Fed-executed money inflation raised nominal prices. The legislators had passed most tariffs as fixed dollar rates per unit of product, so these tariffs became lower percentages of the products' values. This produced most of the tariff-rate reduction, 71%. Negotiations only produced the remaining much-smaller reduction, 29%.
Nowadays most tariffs are set as percentages. Inflation won't reduce these tariffs at all.
Trade negotiations have a strong track record of producing favors to cronies, but a weak track record of producing free trade.
Unilateral Repeals
In our roles as customers for final products, and as workers for producers that use intermediate products, the USA people would gain the most from getting USA tariffs unilaterally repealed.
In our roles as workers for producers that export products, the USA people would gain the most from helping get other governments' tariffs fully repealed.
Moving towards trade reciprocity could initiate valuable change.
Still, politics and history strongly suggest that other nations' governments might not reduce tariffs, or might not reduce tariffs much. It would be sensible to equally lean towards freedom.
To lean towards freedom, initially set USA government tariffs at 1/2 of other governments' tariffs, category-by-category. Subsequently match other governments' moves, whether higher or lower, to maintain this lean towards freedom. Applying this same generous factor to each tariff from each government that isn't a major enemy would be forceful, but simultaneously would beckon towards freedom.
In the bigger picture, success breeds success. Minimize spending and regulation, and the resulting enviable freedom and success will be the best incentives for everybody.