The Foolishness of Climate Tariffs

Congressional Democrats propose to enact a series of tariffs intended to punish our trading partners if they maintain environmental policies that are different from the ones Alexandria Ocasio-Cortez would prefer. Imagine those Mexicans and Japanese acting as though they had governments of their own, policies of their own, and priorities of their own — the nerve!

The foot soldiers of enviro-imperialism are confident in the righteousness of their cause. But count us skeptical of the idea that placing a heavy sales tax on American businesses and consumers is going to succeed in strong-arming iron-miners in Brazil into changing their business practices. And if these tariffs are likely to prove pointless from an environmental point of view, they are even more likely to prove destructive from an economic point of view.American manufacturers and builders rely on inputs from around the world. That is how complex modern economies work. Taxing those products more than we already do would make it more expensive to manufacture and build in the United States. It would also make it more expensive to transport goods and people, to grow food, and to heat or cool houses and other buildings.

To take one obvious example: The United States is one of the world’s largest petroleum producers and exporters, but it also is one of the largest oil importers (No. 2 after China, in fact), because much of our refining infrastructure is optimized for oil of a different grade than that which we produce. The Democrats’ imposed tariff would tax those oil imports — making it in effect a tax on gasoline — along with natural gas and coal, as well as raw materials for manufacturing and construction such as steel, iron, and cement. The proposal’s sponsors estimate that the tariffs would hit about 12 percent of U.S. imports at an annual cost of up to $16 billion — a figure that we might reasonably expect to see go up, given the Democrats’ customary enthusiasm for raising tax rates.

Representative Scott Peters (D., Calif.) and Senator Chris Coons (D., Del.) have, perhaps unintentionally, given away the game. According to the New York Times, the carbon-tariff brain trust argues that the tariffs will provide a measure of “protection” to U.S. companies “as the Biden administration moved forward with aggressive policies to reduce greenhouse gas emissions caused by the burning of fossil fuels.” Which is to say, the Democrats know that they are about to impose measures that will undermine the competitiveness of the American economy, particularly the energy and manufacturing sectors, and believe that they can avoid the worst effects of this by trying to bully other countries into adopting equally destructive policies.

A slice of the world’s poorest nations would be exempted in the name of social justice, which is excellent news for polluters on the least-developed countries list: copper miners in Uganda, Mauritanian iron producers, oil producers in Angola. Never mind that these are the very countries that tend to have the least effective environmental policies. If the tariffs have any real effect, it may very well be to shift production of certain goods and commodities toward exempted countries with environmental standards that are in some cases inferior to those of the countries targeted. The annals of unintended consequences contain stranger stories.

As the sponsors concede, the point of these tariffs is to protect American businesses from ruinously stupid policies to be implemented by the Biden administration and congressional Democrats. An alternative approach would be to not implement those policies in the first place.