Michael Brendan Dougherty thinks I gave domestic markets short shrift when I asserted that they cannot bring the price of a good below its pre-tariff level, since unprofitable production at a certain price point may only be made profitable by the higher price that tariffs create. In response, he argues that tariffs can ultimately lower prices by encouraging more investment in domestic industry, generating competition and innovation that help discover new cost efficiencies.
If only that were the case, tariffs would be a catalyst for economic growth that supply-siders have been sleeping on. But theory and empirical evidence say otherwise. Instead of making domestic industries more dynamic and efficient, protectionism makes them flabby and complacent by blocking out foreign competitors.
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