Tariffs make sense in a world of predatory mercantilism
From our US edition
The classical defense of free trade, the one found in Econ 101 textbooks and Ricardo’s comparative advantage model, goes something like this: countries should specialize in what they can produce most efficiently, export the surplus and import the rest. Trade allows global output to increase, everyone gets richer and any government interference – like tariffs or subsidies – just gums up the works. But that’s not the world we live in. David Ricardo, the early 19th-century British economist who developed the theory of comparative advantage, illustrated it with a now-famous example: even though Portugal could produce both wine and cloth more efficiently than England, both countries would benefit if Portugal specialized in wine and England in cloth, then traded.
