Raising Wages and Preserving Social Cohesion: President Trump and the Unseen Benefits of Tariffs

Though sometimes dismissed as antiquated economic measures, tariffs have great advantages when seen holistically. Critics point out possible rising consumer prices, but a closer look shows that tariffs not only boost wages but also conserve vital skills, support social stability, and help to offset the negative consequences of unemployment. In a close-call cost-benefit study, tariffs are indispensable even if the consumer cost matches wage gains since their long-term social and economic advantages exceed their negatives.

Strategic use of tariffs allows countries to not only attain economic resilience but also achieve a more equitable distribution of wealth—a concept firmly anchored in the background of American economic policy. Under leaders such as Abraham Lincoln, the Whig Party accepted tariffs as a pillar of national progress. Lincoln’s advocacy of protective tariffs served to finance infrastructure, boost industrial development, and guarantee young, aspirational America’s economic independence—not to mention win the Civil War.

Consumer Costs vs. Worker Gains: A Socio-Economic Calculation

A common argument against tariffs is that they raise prices for consumers, eroding disposable income. While this is partially true, research suggests that the wage increases resulting from tariffs often offset the additional consumer costs. A study in The Review of Economics and Statistics (Autor et al., 2020) found that U.S. manufacturing tariffs implemented between 2018 and 2019 resulted in measurable wage increases for domestic workers, even as they marginally increased consumer prices. Crucially, these wage increases helped stabilize industries that might otherwise have collapsed under foreign competition oftentimes where unions are illegal (Communist China and Communist Vietnam) and these workers in “Worker Soviet States” have tawdry labor rights.

In industries protected by tariffs, workers are more likely to retain and hone their skills, which would otherwise atrophy due to job displacement. The loss of employment in skilled trades leads to a deterioration of the workforce’s capabilities, creating long-term structural weaknesses in the economy. A displaced worker may never regain their previous earning potential, as demonstrated in research published in The Quarterly Journal of Economics (Jacobson, LaLonde, & Sullivan, 1993), which found that displaced workers often experience persistent earnings losses, even after re-employment.

Truth is, tariffs effectively act as a counterbalance to the “race to the bottom” in global labor markets, where corporations exploit cheap overseas labor at the expense of domestic workers. By imposing a cost on imported goods, tariffs incentivize companies to invest locally, fostering a virtuous cycle of job creation and wage increases. This dynamic is particularly critical in sectors like manufacturing, where wages have historically supported middle-class stability.

The Socio-Psychological Costs of Job Loss

A person’s social and psychological well-being might take a serious hit when they lose their job. A meta-analysis published in Psychological Bulletin (Paul & Moser, 2009) found that unemployment is significantly associated with lowered self-esteem, greater divorce rates, and more mental health difficulties. These effects extend beyond the individual, destabilizing families and communities. Tariffs, by preserving jobs and minimizing displacement, serve as a buffer against these cascading social consequences.

A worker’s salary and professional identity are both safeguarded while they stay employed in a tariff-protected industry. Lower rates of substance misuse, less reliance on social welfare programs, and healthier family relationships are just a few of the far-reaching ramifications of preserving dignity and purpose. Although these intangible advantages are more difficult to measure, they are essential to society’s well-being in the long run.

President Trump is following the American Whig Tradition of National Development

Pioneering leaders such as Alexander Hamilton, John Adams, and Abraham Lincoln recognized the transformative potential of tariffs. Rooted in the principles of the American System, advocated by economist Henry Charles Carey, tariffs were not merely revenue tools—they were mechanisms for national development, economic independence, and social stability.

In his Report on Manufactures (1791), Hamilton advocated protective tariffs to support fledgling businesses, therefore insulating them from the overwhelming dominance of British manufacturers. John Adams shared this view, believing that tariffs are necessary to create a strong home economy able to preserve American independence. Later, Abraham Lincoln confirmed tariffs as pillar of American policy, financing canals and railroads, which not only increased trade but also united a split country. These projects funded vital infrastructure.

The contrast with Britain’s approach to free trade is stark. While Britain wielded free trade to cement its dominance, leveraging its industrial prowess to flood global markets with cheap goods, America employed tariffs to climb the economic ladder. Protectionist policies allowed the United States to cultivate industries that could compete on a global scale, transforming the nation by 1913 from an agrarian economy to an industrial powerhouse.

The American System: A Blueprint for Socio-Economic Success

Henry Charles Carey, a leading advocate of the American System, articulated the vision behind tariffs with precision. Carey argued that protectionism was not just about shielding industries; it was about creating an environment where innovation and social mobility could thrive. By fostering domestic industries, tariffs ensured that wealth circulated within the nation, building a resilient middle class and reducing dependence on foreign powers.

Under this system, tariffs created a virtuous cycle:

1. Industrial Growth: Domestic manufacturers, shielded from foreign competition, expanded operations and invested in innovation.
2. Job Creation: The growth of industries provided high-paying jobs, lifting workers out of poverty and into the middle class.
3. Skill Retention: Workers honed specialized skills, which in turn fueled further industrial advancements.
4. Social Stability: Economic opportunities reduced social unrest, fostering a sense of national purpose and cohesion.

Lincoln’s tariffs during the Civil War exemplified this strategy. By protecting Northern industries, tariffs not only funded the war effort but also laid the groundwork for post-war industrial expansion. This policy ensured that America could compete with Britain and other global powers on its own terms, rather than relying on cheap imports that eroded domestic capabilities.

Tariffs vs. Free Trade: Lessons from History

The British Empire’s embrace of free trade reflected its economic dominance in the 19th century. Free trade allowed Britain to exploit its industrial advantage, flooding foreign markets with manufactured goods while importing raw materials at minimal cost. This system enriched Britain but left many of its trading partners economically dependent and unable to develop robust industries of their own.

In contrast, America’s reliance on tariffs enabled it to resist this dependency. By imposing duties on British goods, the U.S. protected its fledgling industries, giving them the time and space to grow. This strategy bore fruit: by the late 19th century, the United States had surpassed Britain as the world’s leading industrial power.

Critics of tariffs often highlight their impact on consumer prices, but this analysis ignores the broader socio-economic benefits. Tariffs not only preserved high-paying jobs but also ensured that the skills required for industrial growth remained within the domestic workforce. As economist Paul Samuelson noted in Foundations of Economic Analysis, the erosion of skills due to job displacement carries long-term costs that far exceed the short-term savings from cheaper imports.

The Broader Societal Impact of Tariffs

Even when consumer price increases from tariffs match wage gains, the broader societal benefits tip the scales in favor of tariffs. Protecting domestic industries mitigates the social costs of unemployment, including the erosion of community cohesion and the rise of socio-economic inequality. Moreover, tariffs provide an opportunity to invest in worker training and technological advancement, ensuring that the workforce remains competitive in a rapidly changing global economy.

Critics sometimes contend that free trade lets nations specialize in their comparative advantages, therefore improving economic efficiency. But this efficiency comes at the expense of hollowing out important sectors and uprooting workers in ways unfettered markets neglect to handle. Applied sensibly, tariffs function as a corrective mechanism, safeguarding the fabric of society and preserving economic dynamism.

Global Impact: Tariffs as a Tool for Equity

The benefits of tariffs extend beyond national borders. In a globalized economy, unchecked free trade often exacerbates inequalities, concentrating wealth in industrialized nations while leaving developing economies dependent on low-wage, exploitative industries. Tariffs, when applied thoughtfully, can disrupt this cycle by encouraging more equitable economic practices.

For instance, Mexico’s recent imposition of tariffs on imported goods, particularly from countries like China, demonstrates how developing nations can protect their domestic industries and workers. By curbing the flood of underpriced imports, these policies help preserve local jobs and encourage investment in domestic production. While such measures may initially raise prices, they ultimately foster economic self-reliance and resilience—a lesson applicable to economies worldwide.

An American Vision for the Near Future: Tariffs as Economic Strategy

The debate over tariffs often hinges on short-term costs versus long-term benefits. While consumers may face modest price increases, the broader economic gains—higher wages, job stability, and reduced dependency on exploitative global markets—far outweigh these challenges. Tariffs, when implemented thoughtfully, offer a path to economic resilience that prioritizes human dignity and equitable growth.

The key lies in embracing tariffs not as punitive measures but as strategic tools for balance and equity. By protecting domestic industries, fostering innovation, and addressing global inequalities, tariffs can become a cornerstone of modern economic policy. The challenge is not whether tariffs work, but whether we have the vision and courage to use them wisely.

Even in scenarios where consumer price increases match wage gains from tariffs, the long-term benefits of protectionism justify their implementation. Tariffs preserve critical industries, maintain the national skill base, and mitigate the socio-psychological costs of unemployment. These factors create a ripple effect that strengthens the broader economy: higher employment rates lead to increased consumer spending, reduced reliance on social welfare programs, and greater social cohesion.

Conclusion: The Shield of Prosperity

The legacy of Abraham Lincoln and the American System illustrates that tariffs, when thoughtfully applied, are more than economic tools—they are mechanisms for national development and social stability. By preserving industries, protecting workers, and fostering innovation, tariffs provide a model for balancing economic efficiency with social well-being. As history shows, tariffs not only elevate wages and sustain skills but also secure the economic independence and dignity of a nation.

Tariffs, far from being relics of the past, remain vital instruments of economic and social policy. They embody the wisdom of Hamilton, Adams, Lincoln, and Carey, who understood that economic independence and social stability are inextricably linked. By protecting industries, fostering innovation, and preserving the dignity of work, tariffs enable nations to chart their own course in an increasingly interconnected world.

The choice is clear: embrace the short-term efficiencies of free trade (as opposed to Fair Trade) and risk long-term decline, or invest in the enduring benefits of protectionism. As history shows, the latter is not merely a strategy for survival—it is a pathway to prosperity. For nations seeking to balance economic growth with social equity, tariffs are not just a policy option; they are a moral imperative.

Let us never forget that in a close-call analysis, tariffs often emerge as a net positive for society. While consumer prices may rise in tandem with wage increases, the qualitative benefits—skill retention, psychological stability, and community resilience—far outweigh the costs. Tariffs serve as a bulwark against the dehumanizing effects of globalization, offering a pathway to economic and social stability.

[Photo by the Trump White House]

The views and opinions expressed in this article are those of the author.