How Much Would an American-Made Toaster Actually Cost?
If you happen to be in need of a new toaster, you could pop over to Home Depot later today and pick one up for less than $30—or less than $50 if you’re looking for a fancier design or the ability to brown more than two slices of bread at once.
That’s great. Cheap, abundant kitchen appliances are one of the truly wonderful things about modern America, and they are possible because we can take advantage of global trade and the efficiencies made possible by outsourcing low-level manufacturing. As a result, most Americans can afford to replace their toaster without a second thought, since $30 is roughly the average wage for an hour of work right now.
Writing in The Atlantic, however, Oren Cass argues that the country would be better off if those markets were a little less efficient. What if a new toaster that was made in America costs $32 instead of $30 for a foreign-made one, he argues. Wouldn’t that make workers better off?
He’s wrong and that $32 toaster won’t exist, but it’s worth walking through the argument to see why.
Start with that $30 toaster made overseas. Now, slap a 10 percent tariff on it, so that consumers must pay $33 to buy it. That means the Treasury Department collects $3 in new revenue, but it also means that domestic toaster-makers can sell their wares for $32 and undercut the imported models.
If tariffs cause consumers to switch to those domestic-made toasters, Cass acknowledges that consumers are out two bucks. This is what economists call a “deadweight loss” and it’s one of the major reasons why tariffs harm the economy.
Cass, the head of American Compass and a prominent proponent of the conservative moment’s shift toward central planning, wants to focus on the benefits of those higher prices. “The share of the $32 purchase price that would once have gone to a Chinese factory and its workers now goes to an American firm and its workers instead,” he argues. “It pays American taxes and supports American families in American communities.”
All of that for just $2 more. Wow, what a great deal!
Unfortunately, Cass is wrong about the math and wrong about the underlying economics.
Tariffs can, of course, be used to make foreign-produced goods (like toasters) more expensive. That doesn’t mean that manufacturing firms will radically redesign their supply chains to produce more toasters in the United States. And if they did do that, those new toasters wouldn’t cost a mere $2 more than the ones available at Home Depot now. Cass is making several wild logical leaps here, and offers no evidence to substantiate this claim of a hypothetical $32 American-made toaster.
How much would that toaster actually cost? More than $250.
That’s the figure offered by Ed Gresser, the former assistant U
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