alt Hacker NewsThe studies I’ve seen seem to indicate that tariffs can work but are like running with scissors.
The artificially reduced competition will spur buying domestic products, but can also make domestic producers complacent. They don’t develop new features because they have an almost captive audience, until foreign producers advance enough that people will pay the tariff premium for better foreign products.
Then it’s a catch-22. Domestic producers are behind on technology so killing the tariffs will bankrupt them, but raising the tariffs only leans into their complacency.
There are better ways than tariffs. For instance, you can increase VAT and use the proceeds to decrease taxes on work, or cut taxes for specific sectors. This way your economy is more competitive internationally, while avoiding the distorsions of tariffs.
Tariffs can also be footguns as they increase costs on imports for upstream supplies, making downstream local producers less competitive. VAT is much better for this as it is refunded when you export.