Tariff-jumping doesn’t prove that tariffs work 

U.S. Trade Representative Jamieson Greer recently argued that economists underestimate one of tariffs’ biggest benefits: foreign firms might relocate production to avoid them. But tariff-jumping is a mechanism, not a result. And showing that tariffs change corporate behavior is not the same thing as showing that they make Americans better off.

A firm facing a new tariff has several options. It can absorb the cost. It can pass the cost on to consumers. It can redirect its exports elsewhere. Or it can relocate production to the protected market, which economists call tariff-jumping. 

Greer focuses on this last possibility. But relocation, by itself, is not evidence of success. 

Suppose, for example, that a foreign automaker builds a new assembly plant in the U.S. to avoid tariffs. That investment may create jobs. It may increase domestic production. Politicians can point to a ribbon cutting and claim victory.

Yet none of this tells us whether the investment represents a net economic gain for the U.S. The firm may simply be duplicating facilities that already exist elsewhere. Production may occur at greater cost than before. Consumers may face higher prices. Resources may be diverted from more productive activities into less productive ones.  

Nor is tariff-jumping necessarily evidence of industrial revitalization. Sometimes firms relocate because a country offers superior productivity, skilled labor or innovative capacity. That........

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