There’s getting tariffs wrong then there’s getting tariffs wrong….

As is well known we generally think that the world’s current bandying about of tariffs is a very silly thing indeed. But there’s getting tariffs wrong and there’s getting tariffs wrong:

Donald Trump’s plan to slap 10 per cent tariffs on the UK would leave Britons facing higher prices and less choice on supermarket shelves, a supply chain expert has warned.

Oisín Hanrahan, the co-founder and chief executive of Keychain, which works with major supermarkets to identify high costs in the supply chain, told The Independent that the tariffs “wouldn’t stay confined to trade statistics, it would start showing up in the weekly shop”.

Such tariffs - which, again, we think are a very silly idea - would reduce the amount exported from the UK to the US. This means that more produced in the UK would stay in the UK. More produced in the UK staying in the UK increases UK supply and thus reduces UK prices.

Yes, of course it’s possible to construct theories about second, third and fourth order effects. But none of them are going to be as large as that.

Which brings us to the important point. The reason these tariffs get bandied about as they do - in this very silly manner - is that so few bother to grasp the actual effects of tariffs. They’re a tax on consumers in the countries that apply them.

Tim Worstall