Picking Winners and Losers

Anytime the government intervenes in economic affairs, it is picking winners and losers. Consider the tariffs recently imposed by the Trump Administration as an example.

Those in certain industries, such as steel and aluminum, have been picked to win. The tariffs give domestic companies a competitive advantage over foreign companies. That advantage was achieved, not by superior production, but by government fiat.

The users of steel and aluminum, including consumers, have been picked to lose. They will pay higher prices, not because of market demands, but because of government dictates.

The winners will be visible and easy to identify. Steel and aluminum workers will keep their jobs, and their companies might even expand. The losers will be hidden and less easy to identify. Some manufacturers will have to raise their prices and no longer be able to compete. They will lay off workers, and some may close their business.

And, when other countries retaliate with their own tariffs, as has started to happen, those in export businesses will be negatively impacted. Trade wars are just as destructive as military wars.

At their core, tariffs violate property rights. If an individual or business chooses to purchase steel or aluminum from a willing seller, each has a moral right to engage in the trade on terms that they find mutually acceptable. Tariffs interfere with voluntary trade, forcing the buyer to pay arbitrarily inflated prices.

Trade does not occur between nations. It occurs between individuals (or businesses). If two individuals wish to trade, government has no moral authority to intervene. Indeed, government’s proper purpose is to protect the freedom of individuals to engage in voluntary interactions with others.

Rather than pick winners and losers, government should protect our freedom to win or lose based on our own efforts and actions.