(It’s not your fault you don’t understand what’s going on with tariffs)

I’ve seen a lot of questions out there expressing a lack of understanding about tariffs. Some are people asking to learn what they are, some are asking for explanations of what the administration claims they are. In both cases, we should acknowledge that international relations in the post WWII global economy have very often and very successfully been focused on reducing tariffs and other (non-tariff) barriers to trade. Thus, it’s not your fault you don’t know much about them- we had come close to eradicating them as unnecessary and undesirable barriers to trade. But, like measles and other newly returning ills, this administration is actively pursuing 19th Century policies with many and deep self-inflicted wounds. So rather than a specific poem today (you got two last time!) we’ll call back to the challenges of communication based on culturally-specific allegory shown in Star Trek TNG’s famous Season 5 episode “Darmok.”

“Darmok and Jalad at Tanagra” (1)

The chart below available on Wikipedia shows the long and substantial decline in US tariffs:

As you can see, US tariffs came down through the GATT (general agreement on tariffs and trade) after WWII and have remained low for a long prosperous period of globalization. You can find other country data at WTO, and see global rates are quite low after decades of negotiations and integration of supply chains.

“Temba, his arms wide” (2)

As stated here previously, economists generally favor free trade and the growing of economic activity and benefits from it. Some support limited infant industry arguments for protection, but there is no solid evidence that this works in the long run or that it has any role in an advanced economy like the US. (Too many articles to link to, since these arguments go back at least to Alexander Hamilton, just put ‘infant industry protection’ into google scholar).

“The beast at Tanagra” (3)

Though it is hard to be sure, I believe the administration thinks that the higher protection rates in the late 1800s and early 1900s, which were higher than Britain and France at the time, for example, were responsible for infant industry protection in manufacturing that grew the US economy. But this is pretty poor understanding of economic history. The US in that period invested in massive transformation of abundant natural capital (forests, mineral and hydrocarbon resources, etc) to physical capital and production. Other countries were not yet doing this.

“Kiazi‘s children, their faces wet” (4)

At the same time we had massive inflows of both skilled (human capital) and unskilled labor to mine, drill, and develop resource-dependent industries (in addition to high rates of fertility that increased the population as well). Current administrative policies aim for the opposite for immigration, which will present yet another hurdle to any concrete plans for repatriating production. (And despite all efforts to control reproduction, fertility rates cannot be expected to significantly increase in the US.)

Then, these industries were connected and concentrated across an open and mostly unregulated domestic economy- open due to the interstate commerce clause of the Constitution the administration is busy assaulting, and unregulated in part because of the scaling up of activities that crossed state lines that required shifts in federal approaches to markets.

(Economists don’t mind interfering in markets where free trade in markets can’t meet our objectives for optimal production and consumption. We have spent 100+ years developing regulations and federal investments that improve well-being by addressing market failures (public goods, externalities, market power, imperfect information), to be discussed more at other opportunities.)

“Uzani, when the light came over the mountain” (5)

The long decline in global tariffs rates comes from the understanding that these are taxes on international trade. As such, they work like other taxes – there are two extremes in their effects. They can either change behavior or they can change revenue. As a fundamental corollary of the law of demand, one cannot expect to both raise a lot of revenue AND dramatically change behavior, despite the administration’s claims.

The balance between the two extremes depends on the elasticities of demand for the traded goods. High elasticity of demand means that people respond to shifts in price (that will come from the tariffs, as taxes) with bigger shifts in consumption: they shift away from the taxed good to substitutes, for example.

“Uzani, his army with fists closed” (6)

This is part of what the administration claims they are incentivizing- a shift to domestic trade- but with such broad tariffs across the board, you will either no longer be able to afford to buy as many of the mostly low-elasticity items that simply cannot be produced in the US, at least at scale, like chocolate or coffee or tea or sugar (note these are the very same products we’ve traded internationally for centuries. These are also the very things known to keep us both happy and productive!)

To the extent we keep buying foreign staples and other low-elasticity products— those products where we are not very sensitive to price because e.g. there are few or no substitutes available or because they are very small fractions of our budget – it is possible for tariffs to raise government revenues. But they will not change behaviors, because they cannot.

Thus the more elastic demand, the more behavior might change, but the less revenue can be raised – and vice-versa. At the same time, these taxes create what economists call dead-weight loss — losses in wellbeing that come from prices that are higher than the marginal costs of supplying the outputs.

If the free market is not capturing the true costs of production- through eg subsidies of pollution in an exporting country – then in this case, import tariff/taxes can improve overall well-being by reducing consumption of the polluting goods. This works best for high-elasticity goods though because the tariffs do not incentivize better production standards by the exporters as they will still have to pay the same tariffs. Hence other approaches to reducing these disparities are more advantageous. These can range from mechanisms like Joint Development Agreements (a typical goal of climate change mitigation investments), certification systems like CITES conditions for trade in biological species, or phytosanitary or technological regulations.

“Zima at Anzo” “Zima and Bakor“ (7)

The US administration seems to think that these kinds of actions are strategic non-tariff barriers to trade unfairly impacting costs on the US. Further, they believe somehow that trade deficits are intentionally inflicted, rather than market outcomes reflecting one country wanting or being able to afford more goods/services from a country than that country demands from the first (this is how Lesotho for example ends up with huge tariffs in the awkward accounting). However like tariff barriers, the role such activities play in distorting trade have been central to WTO efforts and significant progress in the 1990s has continued in both multilateral and bilateral trade agreements, further opening particularly agricultural markets relatively safely.

“Kiteo, his eyes closed” (8)

Markets understand the coming implications of tariffs and have responded in kind. The US administration refuses to acknowledge these realities, and is also doubling down on the confusion by both promising this is a permanent new world order but is also an opportunity for bribery/negotiation. Like the impacts of the tariffs themselves, both cannot have the intended outcomes.


“Picard and Dathon at El-Adrel” (9)

Will the widespread impacts on the markets and rebellion from inside the administration’s previous champions usher new and useful cooperation across new coalitions within the US as well as abroad? Let’s hope that there are some Jean-Luc Picards and Dathons out there who can bridge the communication gaps that are resulting in so much power imbalance in the hands of the administration. The market gurus and businessmen are certainly trying, and even some Congressmen. Even the administration’s poster child for destruction Elon Musk is out there saying the tariffs are not ok.

So, tune your translators and amplify the messages.

Current understanding of Tamarian:

* Shaka, when the walls fell – failure

“Darmok and Jalad at Tanagra” (1) – cooperation

“Temba, his arms wide” (2) – signifying a gift

“The beast at Tanagra” (3) – a problem to be overcome

“Kiazi‘s children, their faces wet” (4) – downplaying the severity of a perceived injury

“Uzani, when the light came over the mountain” (5) – could symbolize a moment of clarity, understanding, or an important realization. It could represent the dawn of a new idea or a resolution to a conflict, If Uzani is associated with conflict (like the warrior Uzani referenced in the Darmok), the light might symbolize the end of a battle or a moment of peace and unity

“Uzani, his army with fists closed” (6) – to close rank and attack after luring the enemy

“Zima at Anzo” “Zima and Bakor“ (7) – danger/hostility arising from miscommunication/misunderstanding

“Kiteo, his eyes closed” (8) – refusal to understand

“Picard and Dathon at El-Adrel” (9) – successful first contact between two alien cultures, or to work toward a common goal

Cover image credit: image generated with ChatGPT command: “illustrate failure to communicate”. Used because it is such an uninspired image.