When the second Trump Administration’s tariff threats dominate the news, a reviving discussion has emerged on whether tariffs are beneficial or harmful. This discussion is not simply a standpoint of free market advocates. In fact, most economists agree that tariffs do not bring economic prosperity, as proven by “decades of research.”
In the broader economic sense, however, it’s known that all economic interventions influence economic actors’ decision-making and, thus, outcomes. Or, as the free-market economist Thomas Sowell says, “there are no solutions. There are only trade-offs.”
No matter how strongly one believes that intervention solves an obvious problem, it can also create unintended consequences, sometimes even more harmful than the problem it was intended to address.
Government Intervention and the Substitution of Sugar
Consequently, most economic interventions lead to an intervention spiral, in which politicians seek to solve the unintended consequences of the prior intervention. An apparent example is American healthcare policies.
Trump’s new Secretary of Health and Human Services, Robert F. Kennedy Jr., ran his presidential campaign in 2024 under the slogan “Make America Healthy Again.” Among his various proposals to improve the health of the American people, Kennedy especially criticized the use of high-fructose corn syrup (HFCS) in soft drinks and processed foods. Scientific research suggests that high consumption of HFCS leads to obesity.
Indeed, consumption of high-fructose corn syrup in the US is much higher than in other parts of the world, and hence, proponents of a ban point out, plays an outsized role in America’s high obesity rates. But there are reasons why the consumption of high-fructose corn syrup is higher in the US. American soda companies use HFCS instead of sugar as a sweetener in their drinks. In contrast, many soft drinks in Europe are still sweetened with sugar.
For example, in 1985, the so-called “New Coke marketing disaster” occurred. Coca-Cola introduced its “New Coke,” where it changed its Coke formula for the first time in 99 years. Coca-Cola had first, unnoticed, changed its formula five years earlier, in 1980, simultaneously with its competitors.
The reasons for that switch resulted from government intervention, specifically corn subsidies and the implementation of sugar tariffs.
Corn-Subsidies and Sugar Tariffs
The 1970s are known as the decade of extraordinarily high inflation and desperate attempts by politicians to contain it through government intervention. Corn subsidies had already been in place for US farmers since the 1930s. In the early 1970s, the Soviet Union suddenly bought vast crops on the world market. That drove corn prices higher — from about $1.5 to $5/bushel — which led farmers to increase their production. As masses of corn flooded the market, prices dropped back.
In the meantime, sugar-user lobbying groups in Washington extensively lobbied to end the Sugar Act of 1934, which officially expired in 1974. They assumed that the end of the Sugar Act would lead to cheaper access to sugar. Unfortunately, the exact opposite happened: sugar prices soared as demand for sugar skyrocketed globally. Similar to corn prices, they collapsed soon after. The result was that US producers weren’t competitive on the world market. So they lobbied again to get protection.
President Reagan took office in 1980. He re-implemented sugar tariffs and increased corn subsidies. The situation turned out to be a double-whammy for corn producers and refiners. HCFS became significantly cheaper than sugar, and corn farmers found a willing finder for their government-subsidized excessive supply. Additionally, corn’s price volatility was lower than sugar’s, making a switch to corn even more attractive to lower uncertainty. They were more than happy to switch to HFCS instead of sugar.
Throughout the years, the combination of sugar tariffs and corn subsidies held steady. The use of HFCS is about one-third of the cost compared to sugar. These government interventions have enriched the producers at the expense of everybody else. Beyond that, it’s also very likely that they led to severe health consequences in the American people.
More Intervention?
Based on its adverse health consequences, it’s understandable that politicians like Robert F. Kennedy want to ban HFCS to “Make America Healthy Again.” But the proposal has several problems. First, it puts the cart before the horse. A ban on HCFS doesn’t necessarily mean that processed food and soda producers will automatically choose a healthier alternative. The ban could have unintended consequences and inefficiencies, leading to a negative result that invites further market intervention.
Second, the ban will raise consumer prices, as all alternatives to HFCS are more expensive. Prices will rise even if US producers switch back to using sugar instead. When consumers face higher prices but don’t want to cut back on their consumption, they either spend less money on other things or buy products of lower quality. In foods, cheaper often means less healthy. Hence, it’s not guaranteed that Americans’ health will improve.
Summed up, a ban on high-fructose corn syrup can lead to several market disruptions that create an even less favorable scenario than before, leading to politicians pushing for further market intervention. It’s unlikely that the ban will end of the intervention spiral that’s been in motion for decades.
Ending Sugar-Tariffs
Instead of engaging in another market intervention that leads to unintended consequences, the better solution is to eliminate sugar tariffs and corn subsidies. Ending corn-producing subsidies will lower production quantities, resulting in higher prices. Ending sugar tariffs will reduce the prices for sugar users, such as processed food and soda drink producers.
These two measures alone will make it attractive to switch back to using sugar as a sweetener instead of HFCS, as sugar is relatively cheaper. Additionally, as public perception of the potential benefits of sugar compared to high-fructose corn syrup increases, the demand for products that use sugar instead of high-fructose corn syrup for sweetening will increase, incentivizing producers to switch.
Obviously, the benefitting industries will oppose ending sugar tariffs and warn of disastrous consequences and job losses. While it’s expected that the sectors will shrink, it’s far from certain that the results would be catastrophic. After all, these opponents would also have to argue how the Canadian sugar industry can survive without any support measures for its domestic sugar industry.
Therefore, instead of trying to fix a problem that directly results from regulatory policies, the better way to solve it might be to end the interventionist policies that caused the problem in the first place. If Robert F. Kennedy Jr. pursued the end of corn subsidies and sugar tariffs instead, the outcome would be healthier foods and soda drinks for Americans and a freer market that improves consumer satisfaction.
