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Another Open Letter to Trump

3 June 2018

Mr. Donald Trump
1600 Pennsylvania Ave., NW
Washington, DC 20500

Mr. Trump:

Yesterday you tweeted “When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War! The U.S. has been ripped off by other countries for years on Trade, time to get smart!”

Excuse me, sir, but your tweet is incurably incorrect. First, the 2017 U.S. trade deficit in goods to which you refer ignores American exports of services; you’d have been less inaccurate had you used $566 billion rather than $800 billion. Second, the $566 billion that foreigners didn’t spend last year on American exports were dollars invested in America – dollars invested that increase America’s stock of productivity-enhancing capital goods and services, both directly and by reducing the amount of American capital drained away to wasteful uses by Uncle Sam’s profligate deficit spending.

Third and most importantly, each and every one of the transactions that gives rise to the U.S. trade deficit is a transaction to which an American voluntarily agreed. In each of these transactions, an American believed himself or herself to be made better off. How can America in the aggregate be “down” when in each of the hundreds of millions of transactions every American who was party to it found his or her economic welfare go up?

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030