Customs have been again en Vogue since Trump’s taking office. Economists actually agree that free trade promotes prosperity – or are there also good arguments for tariffs?
What are tariffs?
Customs are taxes or taxes on goods that are traded across borders. A distinction is made between import duties that are collected into the country at the entrance of goods, and export tariffs that are due when goods are brought abroad. Customs are paid to the state and can have two functions: “Financial tariffs” serve primarily to procure income for the state, while “protection duties” are collected to protect the domestic economy.
What is free trade?
Free trade is a form of trade policy – and the clear counterpart to protectorism. Free trade dispenses with tariffs and so -called non -tariffs such as national standards, import rates or contingents, i.e. quantity restrictions. The aim is to promote the cross -border exchange of goods between the states.
Since when has free trade?
All over the world, tariffs have been the rule for centuries. At the end of the 18th century, a goods were checked 80 times during the transport from Cologne to Königsberg and occupied with tariffs. It was not until the beginning of the 19th century that a different principle gradually began to assert itself: free trade.
Who are the heads behind the idea of free trade?
Economists like Adam Smith and David Ricardo were pioneering. The Scot Adam Smith came to the conclusion in his work “Promotion of the Nations” in 1776: Each country should only produce the goods that can offer it cheaper or faster than the rest of the world. If trade barriers such as tariffs fall away, the prosperity of all countries increases.
The British economist David Ricardo had a similar idea at the beginning of the 19th century with his “theory of comparative cost advantages”. Accordingly, the trade between two countries is worthwhile as soon as they produce their goods at different costs. This international division of labor promotes the prosperity of everyone. To date, Ricardo’s model is the theoretical basis for the worldwide exchange of goods.
What are the advantages of free trade?
Free trade increases the prosperity of all nations involved by enabling consumers to buy more and qualitatively better products at lower costs. The import of cheaper raw materials or preliminary products also lowers the production costs for companies in Germany. The domestic industry becomes more competitive, which promotes more efficient resource distribution and thus economic growth. The import of cheaper products from abroad also dampens inflation in Germany.
It was not for nothing that Trump had recently attuned the Americans to the “painful” consequences of the tariffs he arranged. Economists expect an increase in consumer prices and falling growth rates in the USA and worldwide if the largest economy in the world should increase taxes to imports.
What are the disadvantages of free trade?
Probably the biggest disadvantage of free trade is that it can lead to strong dependencies, as certain products are only obtained from abroad. This can be used as a political means of pressure to enforce national interests.
So quite a few experts warn that Germany made itself too dependent on China, had become “blackmailed”. In fact, the Federal Republic imports about two thirds of the rare earths from China – critical raw materials that are indispensable for the energy and traffic transition. Many sensitive goods such as (preliminary products for) medicines are also one -sided from China.
Does the free trade destroy jobs?
Often it also means that free trade promotes the relocation of jobs abroad. In fact, free trade can lead to jobs to be broken down in inefficient industries. However, he also releases resources to create jobs in more efficient industries. The bottom line is that this increases the entire wages and improves the standard of living.
In contrast, protectionist measures for the “rescue” of jobs are often associated with enormous costs that must be trained by the state, i.e. the taxpayers. In Germany, coal mining was supported by billions of state for decades. This protects jobs that the market could not maintain – and ultimately at the expense of innovative industries.
Are there also good arguments for tariffs?
The world trade organization (WTO) expressly allows protection tariffs if they are necessary for national security. Specifically in these three cases: if security -relevant information is in danger. When international conflicts threaten. When it comes to defending your own security interests, for example in arms trade.
In addition, the WTO allows “just counter-tariffs”: If a country with unfair trading practices violates the WTO rules, the damaged country can protect its market with targeted tariffs as a countermeasure.
And what about the protection of young industries?
Some experts emphasize that all of the industrialized nations developed today have once grew up behind thick customs protection walls. For example, Japan has protected his domestic auto industry with high tariffs from the competition for decades. Today Toyota is the world’s largest car company – in 2024 the Japanese sold 10.8 million vehicles.
For raw material -rich developing countries, export tariffs are also an opportunity to promote processing in their own country. However, according to economists, such measures to protect young industries should be limited – otherwise there is no incentives to increase efficiency and international competitiveness.
