Tariffs

Peter Pan Tariffs for Companies That Never Grow Up

Against the argument for "infant industry" protectionism

Phillip W. Magness and David Hebert | 10.22.2026 4:57 PM

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(Illustration: Patrick Bryk/Dreamstime./Midjourney)

Of all the arguments for protectionism, the infant industry argument probably has the strongest theoretical appeal. By protecting a new industry from its more developed foreign competition, the story goes, tariffs give domestic producers the time to grow, learn, and become efficient enough to stand on their own. Domestic consumers feel the short-term pains of higher prices, but they enjoy the long-term gains of job growth and lower prices as the new industry blossoms.

It's no secret that tariffs have driven significant price increases over the last year and a half. A study from the New York Federal Reserve finds that tariffs "contributed 2.9 percentage points to goods price inflation" and that without tariffs those prices would have slightly declined. Tariff defenders, looking for a new reason to claim these higher prices are only temporary, have reimagined the infant industry argument. Now it's being used to support trade barriers in industries that are over a century old, but the promise is exactly the same: Domestic firms need the protection so they can compete, innovate, and cut costs until prices come back down even further than they were before the tariffs.

Michael Brendan Dougherty recently made such an argument in National Review, arguing that "tariffs can, over time, bring prices below where they started." When economist Don Boudreaux called the argument "bizarre," Dougherty replied that critics had failed to acknowledge the dynamic process by which markets respond to tariffs "by adapting and cutting costs." Although he is light on specific details, he posits that the changed incentives of a "paradigm shift" in tariff policy will spur domestic competition, leading to the theorized price reduction. Of course, firms would still respond to the dynamic processes of domestic competition without a tariff wall, but the point stands.

From there, the reworked infant industry argument becomes the standard version advanced more than two centuries ago by Alexander Hamilton and his disciple Friedrich List. When Hamilton made this claim in 1791,........

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