Tariffs Still Raise Prices, Even If They Fall

Michael Brendan Dougherty responded to my claim that raising domestic prices is the point of tariffs, since they aim to increase domestic production of tariffed goods by raising companies’ returns. Although he acknowledges “the price mechanism is the tool of tariffs,” and that tariffs must temporarily increase prices to be effective, Michael disputes that prices will be higher permanently in a responsive market economy such as ours.

He provides this hypothetical example: