Now, if we raise tariffs, everyone will have to pay $150 for a TV, and some of those jobs might return to the U.S. over time—the key words being some, might, and over time. In return, China and other countries will immediately and certainly raise tariffs on U.S. products, which will definitely cost jobs in U.S. export industries. A tariff increase would raise consumer costs and cut U.S. jobs, in exchange for the possibility of recovering some jobs.
That is exactly what happened in the 1930s. Rather than bringing jobs back, protectionism destroyed jobs across the board.
No matter what, a big risk
None of this is to deny the very real costs of trade to the U.S. economy and to workers. The message from the presidential race is that the damage has reached a breaking point for a critical proportion of the electorate, and that something has to be done no matter who wins. We have enjoyed the benefits of free trade; now we have to pay the costs.
Either way, if we restrict trade or simply address its effects, it will cost the U.S. economy. In terms of economic risks, this is a very big one—and all the more dangerous because we haven’t faced it in the U.S. for decades.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.