When I wrote Make Whirlpool Great Again back in December 2016, I made the request for someone to study the full cost for each job saved by enacting the tariff. In April 2019, Aaron Flaaen, Ali Hortaçsu, and Felix Tintelnot unknowingly answered my call with their recent paper, The Production, Relocation, and Price Effects of US Trade Policy: The Case of Washing Machines . Their analysis estimates that the tariff on washing machines created 1,800 new washing machine manufacturing jobs at the price of $1.47 billion dollars or $817,000/job. This $1.47B was paid by the American consumer via a 12% price increase in both washers and dryers.
Critics of the paper will correctly point out that cost analysis includes a 12% increase in dryer prices when the tariff applied only to washing machines. My rebuttal is that washers and dryers are complimentary goods since they are often sold in pairs. I would also argue that the paper’s findings further demonstrates the pervasive impact that tariffs have on prices of other goods that are not direct targets of the tariff. I wonder if somebody will be able to measure impact of tariff on prices on laundry mats or apartment rents that provide washer and dryers to tenants.
For those of you less inclined to read the paper, Mark Perry has written an op-ed about the above paper over at American Enterprise Institute where he summarizes and opines on the paper’s finding.
While I think paper is a great start, I am left with the same thoughts from my original post which I have included below.
While it will be relatively easy to compare the average price of a washing machine before and after the tariff takes effect, it will be impossible to calculate the potential impact of those additional dollars if they had been spent on higher and better uses. I'd like to think we would all be better off if we spent the same amount of energy and resources creating new jobs and industries as we did protecting the old ones.
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