In a 1931 essay, Keynes argued for “import duties of 15 percent on all manufactured and semi-manufactured goods without exception, and of 5 percent on all foodstuffs and certain raw materials, whilst other raw materials would be exempt.”

Keynes also saw no major impact of such a tariff policy on prices or inflation. Regarding his tariff proposal, Keynes states, “I am prepared to maintain that the effect of such duties on the cost of living would be insignificant—no greater than the existing fluctuation between one month and another.”

One of Keynes’ major issues with free trade was the employment assumptions of many advocating for the free trade position. As Keynes states it, “free trade assumes that if you throw men out of work in one direction you re-employ them in another. As soon as that link in the chain is broken the whole of the free trade argument breaks down.”

Another way to put this is that the gains from free trade (in the form of higher income for export sectors) can be dwarfed by losses in employment and income for domestic sectors affected by imbalances.

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