The Problems with Tariffs: Lessons from Friedman, Sowell, and Williams

By Dr. Eric M. Wallace

Introduction
Tariffs have been a contentious economic policy tool throughout American history, with debates about their efficacy stretching from the early 19th century to the Trump administration’s trade wars with China and other nations. While tariffs are intended to protect domestic industries from foreign competition, they often have negative consequences that outweigh their intended benefits.

Prominent free-market economists such as Milton Friedman, Thomas Sowell, and Walter Williams have long argued against the use of tariffs, citing their detrimental effects on economic growth, consumer welfare, and international relations. Furthermore, historical examples like the Smoot–Hawley Tariff Act of 1930 demonstrate how protectionist policies can exacerbate economic downturns rather than alleviate them.

Milton Friedman’s Critique of Tariffs
Milton Friedman, a Nobel Prize-winning economist, was a staunch advocate of free trade. He argued that tariffs are essentially a form of taxation that hurts consumers by increasing the cost of goods and reducing the variety of products available to them. In Capitalism and Freedom, Friedman explains that protectionist policies like tariffs ultimately lead to inefficiencies by encouraging resources to be used in ways that do not maximize economic productivity.¹

Friedman also addressed the issue of trade deficits, noting that they are not inherently harmful. Instead, they reflect differences in savings and investment between countries. In Free to Choose, he famously stated, “The most obvious argument for tariffs or other import restrictions is to protect domestic industries... Yet, such protection is fundamentally a form of welfare dependency.”²

Thomas Sowell on Protectionism
Thomas Sowell has repeatedly criticized tariffs and other protectionist measures as economically destructive. In Basic Economics, he emphasizes that tariffs hurt consumers far more than they help producers because the higher costs imposed on imported goods force consumers to pay artificially inflated prices.³

Sowell also discusses the unintended consequences of protectionism, particularly when it comes to retaliatory tariffs. When one country imposes tariffs, other countries often respond with their own, resulting in a tit-for-tat trade war that reduces overall economic welfare.⁴

Walter Williams on Tariffs and Economic Freedom
Walter Williams, a respected economist and columnist, consistently opposed tariffs, arguing that they are a violation of economic freedom. In Race and Economics, Williams explained that tariffs are nothing more than government-imposed barriers that limit the choices available to consumers.⁵

Williams also highlighted the moral argument against tariffs, noting that individuals should have the right to trade freely with others without government interference. For Williams, tariffs are not just economically harmful but ethically questionable.⁶

The Smoot–Hawley Tariff Act and the Great Depression
One of the most significant historical examples of tariff policy gone wrong was the Smoot–Hawley Tariff Act of 1930. Signed into law by President Herbert Hoover, this act raised tariffs on over 20,000 imported goods to record levels. Economists generally agree that the tariff contributed to a drastic decline in international trade.⁷

The tariff was intended to protect American industries during the onset of the Great Depression but instead led to retaliatory tariffs from other countries, which drastically reduced global trade by more than 60% from 1929 to 1934.⁸ While the Great Depression had many causes, the Smoot–Hawley Act is widely regarded as an aggravating factor that deepened and prolonged the economic crisis.

Milton Friedman and Anna Schwartz, in their seminal work A Monetary History of the United States, argue that monetary factors were the primary cause of the Great Depression, but they also acknowledge the negative impact of Smoot–Hawley on trade and investment.⁹

Conclusion
Milton Friedman, Thomas Sowell, and Walter Williams consistently warned against the dangers of protectionism. Their critiques of tariffs are backed by historical evidence, particularly the disastrous effects of the Smoot–Hawley Tariff Act.

President Trump’s use of tariffs as an economic weapon reflects a fundamental misunderstanding of how trade works. As these great economists demonstrated, free trade is beneficial, while tariffs harm both consumers and producers. The United States would be wise to heed their advice and avoid repeating the mistakes of the past.

Footnotes
1. Friedman, Milton. Capitalism and Freedom. University of Chicago Press, 1962.
2. Friedman, Milton. Free to Choose: A Personal Statement. Harcourt, 1980.
3. Sowell, Thomas. Basic Economics: A Common Sense Guide to the Economy. Basic Books, 2000.
4. Sowell, Thomas. Economic Facts and Fallacies. Basic Books, 2007.
5. Williams, Walter. Race and Economics: How Much Can Be Blamed on Discrimination? Hoover Institution Press, 2011.
6. Williams, Walter. The State Against Blacks. McGraw-Hill, 1982.
7. Irwin, Douglas A. Peddling Protectionism: Smoot-Hawley and the Great Depression. Princeton University Press, 2011.
8. Eichengreen, Barry. Golden Fetters: The Gold Standard and the Great Depression, 1919–1939. Oxford University Press, 1992.
9. Friedman, Milton, and Anna J. Schwartz. A Monetary History of the United States, 1867–1960. Princeton University Press, 1963.