Taxes distort economies. For example, income taxes discourage productive work; gas taxes reduce travel; and tariffs inhibit international trade. Economists often oppose individual taxes, because they imagine an ideal economy with no distortions, and see these taxes as departures from the ideal.

President Trump’s proposed tariffs would introduce new market distortions, as taxes always do. But other market imperfections are already present. Suppose China offers a tractor that is equal in quality to U.S.-made tractors, and is 1 percent cheaper after shipping costs. With no tariff, U.S. tractor factories will close, causing workers to lose their jobs. Some of these workers will receive government assistance, such as unemployment insurance payments, welfare payments, Section 8 housing vouchers and various social services. This assistance will be paid for with taxation, which will cause economic distortion.

The relevant question is not whether a tariff on Chinese tractors will cause economic distortions; it will. The question is whether those distortions are bigger than the distortions caused by the higher income taxes needed to support unemployed workers.

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