# Are there any examples of tariffs working?

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.

• Could you clarify what you mean by "intended goals"? Tariffs do increase state revenue, so the goal of the state imposing the tariff is met there. – Giskard Mar 3 '18 at 15:52
• @denesp when I was writing the question, I was thinking from a protectionist pov, but I think your comment does point to an answer that was outside of the box I was thinking of. – Cort Ammon Mar 3 '18 at 19:06
• Traditionally, the principle reason for tariffs was to collect tax money. It's much easier to inspect arriving boats and collect a tariff on the goods being imported than it is, say, to send a tax collector out on horseback to a farmer's house and force him to disclose all the "income" he's earned in the past year from selling eggs door-to-door. – Hot Licks Mar 4 '18 at 13:44

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:

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.

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.

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.

1. 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.

• Could you elaborate a bit more on "The second best argument". As is I understand that the 20% tariff is bad for germany and moving towards a tariff below 19% will be benificial to germany as its consumers are able to buy cheaper and the governement begins to earn tariff revenue (which it does not at 20% since all buy french). Seems to me like this is an example of protectionism "not working". – stollenm Mar 4 '18 at 10:17
• @stollenm The idea of the "second best" argument is that while the protectionism schemes that are currently in place may be worse than a utopian world, that doesn't mean that they are worse that what policies actually would be enacted if we tried to "reform" the system. So, in the example given, Germany getting rid of all tariffs might be good, but getting rid of the tariff on French goods but keeping the tariff on US goods may be worse than keeping both tariffs. Simply coming up with some policy that is better than the current one is not necessarily an argument against the status quo. – Acccumulation Mar 4 '18 at 22:36
• @stollenm: You can think of Germany's elimination of its 20% tariff (on France) as a movement away from protectionism and towards freer trade. So the fact that this is "bad" for Germany is one argument in favor of maintaining the status quo levels of protection (and against freer trade). – Kenny LJ Mar 5 '18 at 6:58

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.

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

• As Germany is a part of the EU, it does not set its own tariffs. And most of its trading partners are other EU countries, so most of its trade is free. – Giskard Mar 4 '18 at 1:07
• In addition to what denesp has written, Greece, the UK and Spain all share those deals on tariffs and trade with Germany - they all trade under identical conditions - but have very different outcomes trade.ec.europa.eu/doclib/docs/2013/december/tradoc_151969.pdf – EnergyNumbers Mar 4 '18 at 7:10