Are there any examples of tariffs working?

Question

Nations have imposed tariffs on goods for many reasons throughout the ages. Are there any examples of a tariff actually succeeding at its intended goals?

When I research tariffs, I find countless arguments that they never one have worked, and I find a lot of current events documents arguing why particular tariffs wont work, but I'm having it hard finding any economist pointing to a tariff that worked as intended.

Bonus points if the tariff worked as intended and was not considered to be a net loss for the country that imposed it.

Answer 1

I interpret your question more broadly as one about whether protectionism has ever "worked". Two economists that think it has are Chang Ha-Joon and Dani Rodrik. You can therefore look up their work.

Two arguments they use are:

1. The infant industry argument.

In a 2007 article, Chang gives various examples of protectionism "working", including the US in the 19th century:

the US shifted to protectionism after the Anglo-American War of 1812. By the 1830s, its industrial tariff rate, at 40-50 per cent, was the highest in the world, and remained so until the Second World War.

The other oft-cited examples are East Asian economies like Japan, Korea, and Taiwan in the postwar era.

2. The second-best argument.

The world is a second-best place and so movements towards seemingly-freer trade may not always be a good thing. Classic example as told by Rodrik (2015):

imagine that beef is supplied by the United States to Germany at a price of \$100. Assume that Germany imposes a tariff of 20 percent, raising the consumer price of US beef in the German market to \$120. France, meanwhile, can supply beef of equivalent quality only at a price of \$119. Prior to the preferential agreement between France and Germany, French suppliers, facing the same tariff rate as US producers, were outcompeted. Now consider what happens when Germany eliminates its tariffs on imports from France but keeps in place those on the United States. French-supplied beef suddenly becomes cheaper in Germany (\$119 versus \$120), and imports from the United States collapse. German consumers are better off by \$1, but the German government forfeits \$20 of tariff revenue previously collected on US beef (which could have been handed back to consumers or used to reduce other taxes in Germany). On balance, Germany gets a raw deal.

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Two footnotes.

1. Evaluating whether something has ever "worked" is fiendishly difficult in economics.

First we have to decide what the goals of the policies were and what would count as "working". Then we have to do the empirical analysis and evaluate quantitatively the degree to which the policies "worked".

So while Chang and Rodrik might give examples of protectionism "working" (19th-century US, Japan, Korea, Taiwan), other economists might disagree that protectionism really "worked" in these cases. Indeed, I am not aware that Chang or Rodrik has actually conducted any empirical analyses on this matter.

2. Chang and Rodrik merely try to argue against the extreme position that free trade is always a good thing for everybody and in favor of the modest position that protectionism has sometimes "worked".

Most (all?) economists, including Chang and Rodrik, would agree with the following statements:

• Free trade is generally a good thing for most people.
• Tariffs are generally a bad thing for most people.

In contrast, a significant portion of the general public would disagree.

Answer 2

While overall effects to the economy may be argued as negative, in cases where there is limited state capacity to collect income taxes or sales taxes, border tariffs on both imports and exports may be an effective means of financing necessary expenditures of the state. For example, in such a situation, border tariffs may help to finance a basic military to deter invasion, to build roads, to operate a basic education system, or to expend resources on longer-term development of capacity.

Such situations where tariffs are basically necessary to ensure the basic functioning of the state are extremely different from the present situation in the USA where diverse attempts are being made to defend proposals of paranoia-inducing tariffs on steel and aluminum, both of which are used as inputs in producing tanks and jets in a country which already has the largest military in the history of the planet.

For the case of Canadian dairy, there is a tariff on some dairy products. Since many Canadian consumers prefer not to be exposed to inferior production conditions in the USA, many consider this to be an overall gain. However, others would prefer access to those same US products, and also cheaper access to high quality artisan imports such as in cheeses.

Answer 3

I think Germany is good example but not perfect, they have a strong system of trade and has high regulation when it comes to tariffs but still they are the 3rd largest exporting economy in the world. https://atlas.media.mit.edu/en/profile/country/deu/ https://2016.export.gov/germany/marketresearchongermany/countrycommercialguide/traderegulationsandstandards/index.asp