Schansberg: Tariffs on Santa Claus?
by Eric Schansberg, Ph.D.
Following in the footsteps of President Donald Trump, I have a modest policy proposal that is extravagant in style and would hurt the economy — a petition to eliminate competition from Santa Claus through tariffs and other trade barriers. From a Trumpian perspective, Santa’s enterprise is clearly an unfair and harmful intrusion by a low-cost, high-quality foreign producer.
Other policy analysts have reasonably focused on the Scrooge-like implications of tariffs for gift-giving at Christmas. Tariffs are on a tax on foreign goods, so they increase prices, as sellers pass along their higher costs to buyers. And tariffs are expressly designed to reduce competition from foreigners. It doesn’t take a Ph.D in economics to know that greater monopoly power is good for producers and bad for consumers, resulting in higher prices, decreased selection, lower quality, and less pressure to please customers.
Whatever the stated reasons for tariffs, we know that producers are eager to restrict trade and reduce competition. In this, they engage in trade with politicians who create concentrated benefits for them, while imposing diffuse and subtle costs on the general public through higher taxes, more debt, or higher prices. Maybe it’d be better to put a tax on these trades between interest groups and politicians!
More broadly, economists are quick to note that tariffs, quotas, and other trade restrictions necessarily harm an economy. Reducing voluntarily mutually beneficial trade. Decreasing competition. Relying less on producers specializing in their comparative advantages. Inviting trade policy retaliation by other countries. And so on. While trade restrictions are good for the protected producers and their politicians, none of this can reasonably be expected to foster economic growth.
Of course, there may be other (non-economic) reasons to embrace tariffs in certain cases. For example, we wouldn’t want to depend too much on foreign countries for weapons or computer chips. Or out of moral concern, we might decide not to buy things made in China by Uyghur slaves. Or we might impose sanctions on Iran or boycott oil from Russia to punish them. But such restrictions are never good for our economy. In such cases, we impose costs on ourselves, so that we can impose costs on others. We embrace these tools, despite the sacrifices, to address other policy concerns.
Likewise, one could invoke these other arguments to make a case for protectionism against Santa Claus. Is he paying his elves well enough — or at all? Is he observing appropriate safety regulations and DEI quotas? Is he contributing to “climate change”? Or following Trump, we could claim a “national emergency” for toy manufacturers and retailers in America. But how great is the emergency and is the sacrifice worth it?
Until recently, trade restrictions were usually more popular in Congress, where special interest groups have greater sway with representatives of particular states and districts, given their narrower economic interests. But with the last three presidential administrations, we’ve seen a marked increase in protectionist views. Trump I made increased tariffs a priority. Biden continued the same policies. And Trump II has noisily extended this approach. Biden treaded water on trade restrictions, but Trump is a true believer.
Trump often talks about “improving” the trade deficit. But his policies haven’t changed it—and it’s not really a problem anyway. Our trade deficit means that we import more than we export. But this is necessarily matched by an “investment surplus” — as foreigners use those extra dollars to invest more in us than we invest in them. This is the bulk of what economists call “the balance of payments”.
As such, fewer imports necessarily balance with reduced exports and decreased foreign investment in our economy. Again, none of this is good for economic growth. Short-term, it’s not surprising that a trade deficit won’t be fixed by protectionism — even if it was a problem. And long-term, it’s difficult to imagine how crutches and subsidies could lead to anything other than cultivating weakness, less exceptionalism, more cronyism, and greater dependence on government.
But using Trumpian logic, Santa is obviously taking advantage of us, undermining American industry, and harming our economy. We’ve existed peacefully with Santa for years, despite the insidious impact of his inexpensive products. Those days need to end if we’re going to make America great again.
D. Eric Schansberg is Professor of Economics at Indiana University Southeast, the author of “Poor Policy: How Government Harms the Poor,” and an adjunct scholar of the Indiana Policy Review.
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