Ask Fear & Greed: Are there any good reasons for tariffs?

Are there any good reasons for tariffs?

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Episode Transcript

Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Adam Lang
and here to give the actual answers is Sean Aylmer.

Speaker 2 (00:14):
Hello, Sean, Hopefully give the answers.

Speaker 1 (00:18):
Today's question, Sean, it's a doozy. Are there any good
reasons for tariffs?

Speaker 2 (00:24):
Well, he's a great question because we talk about Donald
Trump's tariffs and what it has asked that they are.

Speaker 1 (00:29):
But maybe there is there something in it.

Speaker 2 (00:31):
Not all tariffs are bad in a perfect world. In
a perfect world, countries would produce goods and services in
which they have a competitive advantage in they'd be free
trade flows everyone benefits. Theoretically, that ain't going to ever happen, though,
let's face it, countries, including Australia, have all sorts of
protectionist policies or trade barriers, and that's what a tariff is.

(00:57):
I think before we start blasting the US, So don't
get me wrong, I'm happy to blast the US, we
kind of have to look at home first. There are
a few really good examples of protectionist policies in Australia,
which is unfair on foreign manufacturer. So the PBS the
Pharmaceutical Benefit scheme. Yes, governments judge that subsidizing drugs is

(01:17):
a good thing for Australians. Therefore they reduce the pharmaceuticals
companies or ability, the pharmaceutical company's ability to maximize profit.
Now where I stand, I think cheaper medicines for people
in Australia's is a good thing, so I have no
argument with that. But it is a protectionist policy, and
it reduces the ability of pharmaceutical companies to make money.

Speaker 1 (01:38):
And it's selectively applied. Right, there's about a thousand on
the list.

Speaker 2 (01:41):
Yeah, yeah, I don't know the number, but yeah, selectively applied.
Open skies is another one. There's only seven nations in
which we allow unlimited commercial flights, so China, Japan, India
and New Zealand, Singapore, US and UK. And remember we
had the big hu ha. There's a word who ha
about Qatar Airways from Dalhart wanting to fly more into.

Speaker 1 (02:05):
For example.

Speaker 2 (02:06):
That's because we don't have an open sky's policy. That's protectionists.
That hurts. So therefore, you know, look at our own,
our own backyard. First, we actually impose tariffs, albeit small,
on many many goods, particular countries where we don't have
a free trade agreement. But the big one is actually
the GST that's effectively a tariff because the good comes

(02:29):
into Australia, we wack on an extra ten percent, so
off we go. So you know, we're complaining about these tariffs.
The JEST is effectively a tariff.

Speaker 1 (02:38):
That's a good point.

Speaker 2 (02:40):
You can argue that many of these examples are good
reasons to have protectionist policies or a tariff. So JST
case raises money for the government.

Speaker 1 (02:52):
Tax sorry UK does. America has state sales taxes, so all.

Speaker 2 (02:57):
Those things are to build infrastructure, and you know, and
it means that we don't have to pay as much
income tax, not as much as corporate tax. You can
argue that's a good reason. A bunch of other reasons
that tariffs might be arguing. They might be needed to
protect industries deemed to be in the national interest, and
normally that's defense or critical infrastructure. Do we want country

(03:20):
operators from overseas coming into Australia and building our defense? Therefore,
put tariffs on that sorts of things. They might be
necessary to offset the effects of unfair trade practices. So,
and this is often used in the aviation industry and
overseas government subsidized as a good of service that's then

(03:40):
sold into Australia. But unfair on the Australian manufacturers, isn't it.
We don't get government support, so it's an unfair playing field.
Then maybe we need a tariff on that retaliation. What
if another country puts tariffs on our goods, well we'll
just whack them straight back. So you can argue that
there are actually a lot of good reasons than tariff's.

Speaker 1 (04:00):
Yeah.

Speaker 2 (04:01):
What the world has done really well in the last
thirty or forty years, though, is to work towards reducing
tariffs across the board. And we had all these multilateral
trade arrangements, so we had bilateral trade arrangements that became
multilateral trade arrangements, and you know, the European Union is
a great example of that. Countries have done a really

(04:23):
good job of breaking down trade barriers that reduces the
damaging economic consequences of them. Unfortunately, Donald Trump has tipped
that on its head, so he has said We're just
going to have willing neary tariffs on all sorts of
countries and will negotiate them. But they were talking fifteen
twenty twenty five percent on a bunch of countries, and

(04:44):
that really undoes a lot of the hard work that's
been done over the last thirty or forty years without
and all in mind, I don't think tariff's a good idea,
but sometimes there are really good reasons to have them.

Speaker 1 (04:57):
Well played, Sean, Thank you, Adam. So if you've got
a question about business, investing, economics, politics or anything to
do with business, please go to our website, send it
in and we'll answer it or put it on our
social media channels, and we'd love to have you featured
on an episode of Ask Fear and Greed. I'm Adam
Lang and that was as Fear and Greed