It wasn't supposed to happen that way. Tariffs, protectionists tell us, help the domestic economy, or at least certain industries. The truth is that restrictions on imports almost always backfire. By suppressing competition, they make domestic industries less efficient; they raise prices both on imports and the competing domestic products; they don't spur us to fix our own problems or products but instead, they make us sloppy; and they hurt consumers who face higher prices and often fewer choices.

With so many people calling for tariffs or quotas or other protectionist restrictions on trade these days, perhaps we're overdue to re-learn some important lessons.

The Importance of Trade

Why trade at all? If we really wanted to, we could behave like a national Robinson Crusoe—keeping foreign goods out and making everything ourselves. But people trade because they want to acquire things that are cheaper or better or even unavailable at home. The fundamental principle of trade is that both sides to the transaction benefit or they wouldn't have traded in the first place.