The Economic Dead Weight Costs of Tariffs

In Economics, the notion of Dead Weight costs are a consideration anytime there is increased Government intervention in the marketplace. Tariffs are not immune from this concept. These costs are increased and resources are misplaced due to the intervention of Government regulation, taxes, or the like.

As it relates to tariffs, the dead weight costs take on a myriad of forms. For example, in the case of tariffs against Chinese goods, the domestic firms must deal with the burden of the tax, and deal with filing exclusions in an attempt to avoid paying the tariffs.

Since the costs are not allocated efficiently, the benefactor of this displacement of resources: The US Government and not the marketplace participants.

This article, “Trade War: Thousands of Companies are asking for Tariff Exclusions even as US and China push to sign trade deal” goes into detail regarding the back log for domestic firms filing a tariff exclusion.

Excerpt:

“More than 3,000 companies have filed about 44,000 requests for exclusions from the first three rounds of President Donald Trump’s tariffs on $250 billion of Chinese imports. The overwhelming majority of these requests, about 28,000, are under review as of Nov. 1. About 4,900 requests have been granted, while about 10,970 have been denied.

And more requests for exclusions are likely to flood the administration in the coming months.”

https://www.cnbc.com/2019/11/02/trade-war-companies-ask-for-china-tariff-exclusions-despite-deal-optimism.html

For those who elected Trump to shrink the size of Government, it seems that more Government employees will be hired to deal with the backlog of requests to deal with the avoidance of tariffs. If no new employees are hired to do this work, the backlog will persist, and the US consumers and firms pay the Economic cost for these “dead weight” losses.

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