Episode 2589 CWSA 09/06/24 — Scott Adams Philosophy

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NewsReaction Politics as Persuasion

Back to episode — Episode 2589 CWSA 09/06/24

Context —

ow. But it doesn't sound like a real plan. So I'm not going to say oh he's got the good plan. I don't think he's got a plan. But here's my way I would approach it. I would approach health care the way I would approach a number of other topics like transportation for example, insurance. If you were to design a city from scratch with the understanding that only the federal government would have any…

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ire industry in your country. So because the country is behind it, not just the company selling goods, the country is behind it like China. They could subsidize the product until nobody would ever buy an American car because they seem too expensive. So we'd all have Chinese cars and then we would have no car industry and then China would slowly start raising the prices because it's the only place you can buy a car from. So in that case tariffs are not about what you paid extra for the car although it might end up in your price for your car. What it is is a way to keep your entire industry from being destroyed.

Now when people talk about tariffs what is the dumbass thing they say? I'm going to do it with a stupid face so that the next time you hear it you can remember my stupid face. It goes like this. A tariff is a tax on the consumer. A tariff is a tax on the consumer. Is it? What do you think? Is it a tax on the consumer? It can be in the sense that if you raise the cost on a foreign producer they might say well you're still going to have to buy it because you can't get it anywhere else so I guess we'll just raise the price. So it depends whether you had a choice.

So let me give you an example. If China was trying to sell table salt in the United States at 10% of what Americans make table salt for, if America makes it, I don't know, just making this up, then we should put a tariff on them. But would you pay more for salt? No you wouldn't. No, because the tariff would take the foreign price up to about the domestic price or maybe higher. If it's higher than the domestic price you just say oh well just buy Morton salt like I always did. There's no difference in your price. Now you do lose the opportunity to get the lower price but there's nothing to be passed on to you. You're simply not buying Chinese salt because why would you? Same price as the Morton salt and it's Chinese. Well you might as well give it to America.

Now let's say it's a different situation. It's not something like salt that you can get anywhere. Let's say it's a specific component or material that if you didn't get it from China you couldn't even build the thing you want to build with their material. Well in that case if you put a tariff on it you're just paying for it. Yeah because they're going to say all right where else are you going to get this? And you'd say okay good point. There's literally nowhere else I can get it so h

Context —

ow about you pay whatever we charge you I guess I have to. So the first thing you need to know is that it completely depends on what product it is. If you're saying in general it's good or in general it's bad, well you're just stupid. It's not in general good or in general bad. It depends entirely upon the specific thing that's being tariffed. So remember this. The first thing you need to know is…

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Wisdom from this episode

"When people talk about tariffs what is the dumbass thing they say? A tariff is a tax on the consumer. Is it? It can be... So it depends whether you had a choice."

The claim that every tariff is simply a tax on consumers is naive; it only raises what you pay if you have no domestic alternatives to switch to.

"They could subsidize the product until nobody would ever buy an American car because they seem too expensive. So we'd all have Chinese cars and then we would have no car industry and then China would slowly start raising the prices because it's the only place you can buy a car from. In that case tariffs are not about what you paid extra for the car. What it is is a way to keep your entire industry from being destroyed."

Foreign governments can use subsidies to eliminate your domestic industry, then raise prices once they have a monopoly; tariffs defend against that long-term strategic threat rather than just adding immediate consumer cost.

"If China was trying to sell table salt in the United States at 10% of what Americans make table salt for, then we should put a tariff on them. But would you pay more for salt? No you wouldn't, because the tariff would take the foreign price up to about the domestic price. There's no difference in your price. You're simply not buying Chinese salt because why would you? Same price as the Morton salt and it's Chinese. Well you might as well give it to America."

With substitutable goods like salt, a tariff on dumped imports raises the foreign price to match domestic levels so consumers pay the same amount but buy the local product instead.