U.S. Consumers Are Being Taken to the Cleaners

In May, I posted about tariffs on hangers from China, enacted to protect the only remaining domestic supply of hangers, M&B Hangers in Leeds, Alabama, and to "punish" Chinese manufacturers for "dumping."

Economist Frank Stephenson now reports in The Freeman that hanger tariffs are responsible for doubling the price of hangers from $28 to $56 per box over the last year, which will cost each dry cleaner $4,000 or more per year.

Bottom Line: If you thought your dry cleaning bills were high in the past, well "hang on," because as surely as night follows day, higher hanger prices will be passed on to U.S. consumers in the form of higher dry cleaning prices. Tariffs, which are simply taxes on Americans buying imported goods, ultimately "punish" U.S. consumers and firms with higher prices more than they "punish" China.

Further, Stephenson cites this analysis that divides the total cost of the hanger tariff to U.S. dry cleaners ($4,000 x 30,000 dry cleaners = $120 million year), by the number of potential domestic jobs saved (564 jobs) in the U.S. hanger industry, indicating that each American job saved costs us about $212,765 per year. Since the typical full-time worker in this sector earns about $30,000 per year, it would be cheaper for the U.S. to eliminate the tariff, purchase cheaper hangers from China, let the domestic industry die, and pay each American hanger worker $30,000 per year to retire.

Like thousands of other examples, trade protection of inefficient American producers always imposes much higher costs to the country (measured in higher prices and jobs lost) than it generates in benefits (measured in jobs saved). And it's usually not even close, it's typically $2 in cost per $1 of benefits, or 2 lost jobs per job saved, when Americans are "punished" with trade protection.