Six months into tariffs, businesses have no idea how to price anything

I’d like to lay out an argument about why tariffs are good.

The only businesses that are derailing with tariffs issues are those that import goods to sell. The argument against tariffs is that they make goods more expensive.

Of course, this argument is true. But that’s not the end of the story.

Because prices are higher for imported goods, demand for domestically produced goods increases. This increase in demand leads to increased demand for labor, which can increase wages. Additionally, the money multiplier effect is higher when money is kept domestically vs paid to offshore parties.

Finally, I think it’s ridiculous to expect that this nation can maintain its wealth without producing anything. We act as if the producers of food are fungible cogs that businesses can swap out. But I think we’ll find that management is the fungible part. Anyone can sell a quality good. Knowing how to make it is what’s important. I’m surprised that mindset doesn’t resonate more with software engineers.

How does this argument apply to a good like coffee? We drink a lot of coffee, and it makes us more productive, but we produce very little of it. Maybe we could increase coffee production in Hawaii, but since we can use the land and the labor for more high-value purposes, it would cost a lot more than importing it from Brazil or Colombia. So when we slap a 50% tariff on Brazil, the average American ends up consuming less of something that they enjoy and find valuable, or paying more to consume the same amount. Maybe some land owners and agricultural workers in Hawaii benefit. Doesn't seem like a worthwhile trade-off.

I think there are some categories of goods where protectionism makes sense for national security reasons, but for most goods, I don't really see the value of propping up less productive domestic production and causing increased prices for consumers. Do we need to make underwear in America? Or toys?

And of course tariffs are not one-sided, so retaliatory tariffs hurt the domestic industries where our exports are competitive, which tend to be high-value.