Donald Trump on Thursday urged companies that do not want to pay rising tariffs to move production into the United States.
Trump’s remarks make it clear that his trade policy does not resemble the “protectionism” often maligned by economists. Critics often describe protectionist tariffs as protecting U.S. companies from international competition. Indeed, much of the gains economists expect from trade arise in their theoretical models from competition.
But Trump’s tariffs do not reduce competition. Indeed, they increase competition for labor in the U.S. by incentivizing companies to locate production of goods here. Domestic companies still have to compete with foreign rivals but this takes place while both employ U.S. workers.