There’s been a lot of commentary over the last several days about the madness of President Trump’s most recent tariffs, much of it well said by smarter men and women than me. Still, I thought I’d toss another perspective onto the heap.
Leonard Read famously wrote I, Pencil, a story told from the first-person perspective of a pencil describing the vast arrangement of knowledge needed to lead to its creation. One of the most important lessons of that essay is that the few seemingly modest components used to make a simple pencil – the “wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser” – each have a family tree of their own that extends out beyond all imagination and understanding. The wood requires “cedar of straight grain that grows in Northern California and Oregon,” which must be harvested using “saws and trucks and rope and the countless other gear.”
To get the tree, you need all this gear to be brought to use. But each of these tools used creates a new branch that itself has its own immensely complex family tree. For the saws and trucks and other tools, we need to consider for each of them “all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods.”
Just attempting to find all the inputs needed to bring down a single tree splits into ten thousand different paths – and each of those paths splits down ten thousand paths of their own, and so on down the line. And this is just what’s required for felling trees. Once you consider that the “logs are shipped to a mill in San Leandro, California” you have new paths splitting off to account for the “individuals who make flat cars and rails and railroad engines and who construct and install the communication systems” for all this to work. And each of those inputs splits down just as much.
If you had a thousand lifetimes, you could never fully track down and account for the full breadth of each and every job, resource, and form of knowledge needed all the way down this ever expanding fractal. And as I’ve mentioned in a previous post, if you get to something more complex than a pencil, such as the most basic and inexpensive toaster, things get even more complex. While the pencil is made of only a few components, Thomas Thwaites was dismayed to “discover that inside this object I’d bought for just three pounds ninety four, there were four hundred different bits made out of a hundred plus different materials.”
Don Boudreaux recently pointed to data from Mark Perry showing that over 60% of what the US imports are materials and capital goods to be used as inputs for production. And each of these materials and capital goods have their own near-infinitely complex family tree behind them, using materials, capital, and labor from numerous countries. Every time governments employ tariffs, they make each and every step where a good crosses a national border along this immeasurably complex web more expensive than it otherwise would be, and those increased costs filter down the whole chain.
Of the incomprehensibly vast number of tools needed to make a cedar tree into wood suitable for a pencil, how many of those tools were imported? Of the tools that weren’t imported, how many were crafted from raw materials that were, using machines that were imported (in whole or in part), created in factories built at least in part with imported materials, and so on down the line? How many of those steps involve something crossing a national border? Is it really wise to artificially raise the cost of each and every one of these steps, in the hope that Americans can make a career working the floor in a toaster factory, or spend their days twisting screws into a phone casing?
Prosperity does not come from making the things people buy more expensive. Living standards are not raised by lowering the amount people can afford to consume. When governments want to harm countries they see as hostile, do so using economic sanctions to make it more costly for those countries to engage in international trade. A tariff is just a country imposing economic sanctions on its own citizens.
