Suppose people in your country can buy a certain product at $100 per unit, and they do so from a local company. They buy 10 units per month and therefore spend $1,000 per month on that product.

Now imagine a foreign company starts selling that same product at half the price, so $50 per unit. Now, people in your country can spend $500 per month on that and get the same benefit. That means they now have $500 to spare and ready to deploy in other places of the economy.

But it isn't as simple as that, is it? At least, that's what the protectionists would have us believe. Let us examine their arguments one by one, and see if they hold water.

Argument 1: Tariffs Level the Playing Field

"Foreign countries don't play by our rules," the protectionists cry. "They subsidize their industries, they exploit their workers, they pollute their environment. We must impose tariffs to level the playing field!"

This argument has a certain emotional appeal. After all, who doesn't want fairness? But let us consider what actually happens when a foreign country sells us goods at artificially low prices.

If China decides to subsidize its steel industry and sell steel to Americans at below-market prices, who benefits? The Chinese government? No, they're spending money on subsidies. The Chinese steel workers? Perhaps in the short term, but at the cost of more productive employment elsewhere in their economy. The American steel industry? Certainly not.

The primary beneficiaries are American consumers and businesses that use steel. They get steel at lower prices, which means cheaper cars, appliances, buildings, and infrastructure. This frees up resources to be deployed elsewhere in the economy, creating new jobs and opportunities.

If a foreign government wishes to tax its citizens to subsidize our consumption, should we complain? Should we punish ourselves with tariffs to prevent this transfer of wealth from them to us? That would be like finding a $100 bill on the sidewalk and refusing to pick it up because you didn't earn it.

Argument 2: Imports Reduce Domestic Production

"But what about our factories?" the protectionists ask. "What about our jobs? If we import everything, we'll produce nothing!"

This argument suffers from a fundamental misunderstanding of trade. Trade is not a zero-sum game where one side wins and the other loses. Trade is a positive-sum game where both sides benefit.

Consider a simple fact: to import, we must export. Foreign countries do not accept our IOUs indefinitely (and when they do, that's another benefit to us). They want something in return for their goods. That something is either our goods, our services, or ownership of our assets.

This brings us to David Ricardo's principle of comparative advantage. Even if one country is more efficient at producing everything than another country, both countries still benefit from trade by specializing in what they do relatively better and trading for the rest.

Imagine a world-class surgeon who is also an excellent typist. Should this surgeon spend time typing their own reports, or should they hire a typist (who may be slower than the surgeon at typing) and spend more time performing surgery? The answer is obvious: the surgeon should specialize in surgery, where their comparative advantage is greatest.

Similarly, countries benefit by specializing in what they do relatively better. The United States might be better at producing both software and soybeans than Brazil, but if its advantage in software is greater, it makes sense for the U.S. to focus more on software and import more soybeans.

When tariffs force production to remain in industries where a country has no comparative advantage, they reduce overall productivity and wealth. They protect some jobs at the expense of creating other, more productive jobs.

Argument 3: National Security Requires Tariffs

"But what about national security?" the protectionists ask. "We can't depend on potential adversaries for critical goods!"

Here, at last, we find an argument with some merit. There are indeed certain industries that are vital to national security, and it may be prudent to ensure domestic production capacity in these areas, even at some economic cost.

Military equipment, critical infrastructure components, essential medicines, and energy production could all fall into this category. No nation wants to be at the mercy of a potential adversary for goods essential to its defense or basic functioning.

However, this argument is often stretched beyond reason. Not every industry can claim national security importance. Steel may be used in military equipment, but that doesn't mean all steel production is vital to national security. The same goes for aluminum, semiconductors, and countless other goods.

Moreover, even when national security concerns are legitimate, tariffs may not be the most efficient solution. Direct subsidies to critical industries, strategic reserves of essential materials, or diversification of supply chains might achieve the same security goals with less economic distortion.

The national security argument, while valid in principle, requires careful scrutiny in practice to prevent it from becoming a catch-all justification for protectionism.

The Unseen Costs of Tariffs

What the protectionists consistently fail to acknowledge are the unseen costs of their policies. When tariffs raise the price of imported goods, they not only hurt consumers directly but also harm businesses that use those goods as inputs.

Consider steel tariffs. They may protect jobs in the steel industry, but they raise costs for every industry that uses steel: automotive, construction, appliances, and countless others. These industries employ far more workers than the steel industry itself. By raising their costs, tariffs make them less competitive globally and domestically, potentially leading to job losses that far exceed the jobs saved in the protected industry.

This is what Bastiat called "the seen and the unseen." The jobs saved by tariffs are visible and concentrated, making for good politics. The jobs lost or never created due to higher costs are invisible and diffuse, making them easy to ignore politically, despite their greater total impact.

Tariffs also invite retaliation. When one country imposes tariffs, others typically respond in kind, harming exporters in the first country. This tit-for-tat escalation can lead to trade wars where everyone loses.

Conclusion: The Case for Free Trade

The case for free trade is not based on blind faith or abstract theory. It is based on a simple principle: voluntary exchange benefits both parties. When individuals are free to buy from and sell to whomever they choose, they naturally gravitate toward arrangements that create the most value.

This principle doesn't change when the buyers and sellers are in different countries. International trade is just voluntary exchange on a larger scale. It allows each nation to focus on what it does best, expanding the economic pie for everyone.

Are there losers from free trade? Yes, in the short term. Some industries and workers will face painful adjustments as comparative advantages shift. But the solution is not to block trade; it's to help those affected transition to new opportunities. This might include job training, relocation assistance, or temporary income support.

The long history of economic development shows that open economies grow faster and achieve higher living standards than closed ones. From Britain in the 19th century to the Asian Tigers in the late 20th, embracing international trade has been a key ingredient in economic success.

So the next time you hear calls for tariffs to "protect" the economy, remember: they protect some at the expense of many, and they make the nation as a whole poorer, not richer. As Bastiat might say, breaking windows doesn't create prosperity, and neither does breaking trade links.