Cheap foreign imports are the bane of U.S. producers of all types of goods. And no wonder. The cheaper version sells because it saves the consumer money and allows him to satisfy one desire, and still have money left over to fulfill other desires as well.
As always, consumers want the lowest possible price to apply to the things they buy and the highest possible price to apply to the things they sell, including their own labor and their own products. In this constant seesaw between buyers and sellers, markets settle themselves by reaching a temporary balancing point, people exchange, and then everybody moves on. Unless there are legal restrictions in place, nobody gets to tip the balance constantly in their favor. Tariffs are a trade policy that attempts to tip the balance perpetually in favor of the domestic producer, but the benefits are often quite costly.
Tariffs are legal trade restrictions that are designed to benefit the domestic seller of a product at the expense of the seller of the imported version. A tariff adds to the cost of importing a good by imposing a tax on the import. If the importer pays the added tax, as is usually the case, the cost of bringing in a foreign item goes up, the price of the import goes up, and consumers begin to switch to the domestic version of the product instead.
That’s what U.S. shrimp fishermen are hoping will happen as new U.S. tariffs on shrimp from Thailand, Brazil, Ecuador, Vietnam, and China take effect. American shrimpers, who catch their shrimp, have not been able to compete with the low-cost foreign product, which is largely farm-raised.
American shrimp producers also charge that the foreign farm-raised shrimp are being “dumped” in U.S. markets at “unfairly low” prices, driving them out of business. “Dumping” refers to the practice of selling below cost, presumably to drive the competition under.
Dumping is a disputed concept in any case, but if true, it is clear that American consumers benefit from low-priced products from abroad. Americans can consume shrimp far cheaper than otherwise if they take advantage of cheap sources. And the less they spend on shrimp, the more they can spend on other products.
What consumers don’t realize is that, with a tariff in place, the price of the domestic product will go up, too. This occurs because demand for the American product rises as consumers try to avoid increasingly expensive imports. Since domestic shrimp are no more plentiful than before, U.S. producers will see an increase in the market price of shrimp caught in U.S. waters. In the end, all shrimp prices are higher, and the consumer loses.
If less competitive, less efficient, and higher priced American shrimp producers cannot become more efficient and competitive, the market solution would be to find a seafood or other product in which they can freely compete for consumer dollars. “Saving” American jobs in the shrimp or any other industry makes no sense, as Walter Williams points out in a timely piece. The great strength of the market is one of its greatest challenges: the ability to be responsive to changes in consumer demand, and the need to be adaptive to those changes on the production side.