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A Tariff Cut Can Boost U.S. Output

Posted By Bryan Riley On October 4, 2013 @ 11:54 am In Capitol Hill,Economics | Comments Disabled

Newscom [1]

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The Federal Reserve recently cut [2] its forecast for economic growth in the United States. That’s a problem. We need higher growth to create jobs and rebuild a prosperous middle class. However, there’s a simple way the government could combat continued weak growth: eliminate tariffs on inputs used by U.S. producers.

Imports such as steel for carmakers, wood for homebuilders, and sugar for candy manufacturers help these U.S. industries produce affordable, high-quality cars, homes, and food.

Because tariffs increase the cost of many inputs, they make it harder for U.S. companies to compete with foreign companies. In some cases, U.S. businesses have been forced to relocate [3] to other countries where tariffs on inputs are lower. The government’s trade policy should make it easier for companies to operate instead of driving them out of the country.

Our neighbors to the north and south are slashing tariffs on inputs in order to help their companies compete. Canada’s Economic Action Plan [4] is phasing out many tariffs on manufacturing inputs. Mexico’s PROSEC [5] program reduces tariffs on raw materials, parts, and other inputs used by industries including electronics, apparel, and automobiles.

The United States should take a lesson in trade policy from our neighbors and permanently eliminate tariffs on products used by U.S. producers. This positive supply shock [6] would boost U.S. output and put us back on the path to prosperity.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2013/10/04/a-tariff-cut-can-boost-u-s-output/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/cargo_130307.jpg

[2] cut: http://www.industryweek.com/competitiveness/federal-reserve-reduces-2013-2014-us-economic-growth-forecasts

[3] relocate: http://ita.doc.gov/td/ocg/sugar06.pdf

[4] Economic Action Plan: http://www.heritage.org/research/reports/2013/04/tariff-reform-needed-to-boost-the-us-economy

[5] PROSEC: http://www.economia.gob.mx/industry/foreign-trade-instruments/prosec

[6] supply shock: http://www.econport.org/content/handbook/Equilibrium/shocks.html

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