Don't take this as support for tariffs, my inner economist is strongly opposed to tariffs on economic efficiency grounds, but my inner hillbilly is slightly happy that an EU tariff on American whiskey is likely to lower U.S. whiskey prices (at least in the short run). Life can't be all beer...
Jack Daniel’s Tennessee Whiskey prices will rise in the European Union (EU) due to the member countries’ new 25 percent tariff on imported U.S. whiskey.
Brown-Forman Corp. spokesman Phil Lynch told The Associated Press that the price of Jack Daniel’s in the EU will likely rise by about 10 percent, a change which will go into effect over the next couple of months.
For those not familiar with the economics of tariffs, when a tariff is placed on an imported good, the price of that good rises in the importing country. So let's say for some odd reason, the President of the United States decides to place a tariff on all imported, oh, I don't know, let's say steel imported into the U.S. (I know, that's far fetched, but go with me here). The result of the price increase on imported steel is an increase in the price of ALL steel in the U.S.--steel we import, and steel we produce domestically. The impact on the rest of the world is an increase in the supply of steel on the world market, causing prices for the rest of the world to fall.
Who benefits? Domestic steel manufacturers benefit from the tariff on imported steel, because they can now sell their U.S. produced steel at higher prices. But that comes at an expense--U.S. consumers of steel lose because they have to pay more for steel. But here's the kicker--the losses to U.S. consumers are GREATER than the gains to U.S. producers.
All of this of course ignores the effects on the rest of the world. What happens there?
The manufacturers in the tariffed country (the country producing the good being imported) will lose because they are forced to lower their prices to sell all of the stuff they used to export to the tariffing country. So when the U.S. puts a tariff on imported steel, manufacturers of steel in the rest of the world are penalized...but consumers of steel in the rest of the world gain from lower priced steel. But here's the second part of the kicker--the losses to steel manufacturers in the rest of the world are GREATER than the gains to consumers in the rest of the world.
That means that a 'hypothetical' tariff on an imported steel in the U.S. will benefit U.S. steel producers, and steel consumers in the rest of the world. U.S. steel consumers and steel manufacturers in the rest of the world will take a loss. And the total losses will ALWAYS be greater than the total gains.
So I guess you could say that if the U.S. were to impose a tariff on imported steel, it would be a signal that the U.S. likes foreign consumers more than domestic consumers, likes domestic manufacturers more than foreign manufacturers, and likes creating economic losses.
But that's just hypothetical of course. Let's get back to the more import issue at hand--whiskey.
An EU tariff on imported U.S. whiskeys will raise whiskey prices to EU whiskey consumers, create an economic gain for EU whiskey producers, create an economic loss for U.S. whiskey producers (probably the whole point), and create an economic gain for U.S. whiskey consumers.
And the total losses will be GREATER than the total gains.
But who cares?
I get cheaper whiskey.
And that's all that matters.
Right?
