ECONOMY/TARIFFS/TRADE WAR/TRUMP AS PRESIDENT: “Who’s the biggest loser when tariffs are imposed on imports? The surprising answer: exporters. Though completely counterintuitive, theory and evidence show that taxes on imports act just like a tax on exports. Though it’s early, the Trump administration’s recent round of tariffs is already rippling out to exporters: Soybean farmers face plunging prices as China raises tariffs, Harley-Davidson will move production of motorcycles destined for the European Union out of the U.S., and BMW says foreign retaliation may hit exports from its South Carolina plant. Economists credit Abba Lerner, then a graduate student at the London School of Economics, for proving theoretically in 1936 that an import tariff was equivalent to a tax on exports. The Lerner Symmetry Theorem is considered a key principle of trade economics, like 19th century economist David Ricardo’s theory of comparative advantage. The practical link was obvious to protectionists and free traders alike as far back as the 1600s, says Douglas A. Irwin, an economist and trade historian at Dartmouth College. They understood that a country that shuts out imports deprives its trading partners of money to buy exports.”
-Greg Ip, “U.S. Exporters Will Be a Surprise Loser From Tariff Fight,” The Wall Street Journal, July 9, 2018 5:45 am