If Tariffs Are Bad, Then Why Does China Have Them?

Dr. Victor Davis Hanson posted a video in which he asked the viewer “If tariffs are so destructive to a nation’s economy, then why are countries with high tariffs like China booming economically?” My question to Dr. Hanson is “if trade barriers are so beneficial, why did countries like China and India experience rapid economic growth after they significantly reduced their trade barriers?” The economist Douglas Irwin writes that during the reign of Chairman Mao Zedong, China was almost completely closed off from international trade until 1979. They had a centrally-planned economy and they reduced their reliance on imports by producing most everything themselves. While this policy built up their manufacturing capacity, the Chinese people remained in poverty, having a per capita income on the level of Burma and Mozambique in the 1980s. When Deng Xiaoping rose to power in China, the country slowly began to decentralize its economy, increase trade, and allow foreign investment. China’s rapid growth is correlated with a decrease in their trade barriers. Irwin states that “In 1992, the weighted average tariff on manufactured goods [in China] was over 45 percent. Since China joined the WTO in 2001, the country’s average tariff has fallen to less than 7%” (p. 217). China has achieved its most significant per capita GDP growth since the 2000s. Of course, not all of China’s success is due to more open trade, but it was “a vital component of its broader reforms and [has] played a critical role in its economic success” (p. 218).

Reference

Douglas A. Irwin, (2020). Free Trade Under Fire (5th edition). Princeton University Press. pg. 217-218.