Tweet [1]
Kevin Williamson clears away much of the confusion over the so-called “trade deficit. [2]” A slice:
Not only are trade deficits not driven mainly by trade policy, they are not really driven by consumer behavior, either. It’s true that many Americans prefer German cars and French wines — and cheap electronics and T-shirts made in China — but trade deficits mostly are the result of several other causes: macroeconomic factors such as tax policies and savings rates, the strength of a country’s currency, and, most important, its attractiveness to investors. Ironically, the corporate tax reform that President Trump is rightly proud of may contribute to higher trade deficits by making the United States a more attractive place to invest. Money invested in businesses and factories is not available for the purchase of consumer goods.
Trade deficits are not a sign of economic trouble, and trade surpluses are not necessarily a sign of economic health. The last time the U.S. ran a trade surplus with the world was 1975, when our economy was in a shambles.
Dan Mitchell is correct: two protectionist wrongs do not make a right [3].
Norman Van Cott explains that to tax imports is to discourage exports [4].
Eric Boehm decries the cronyism that is inherent in Trump’s trade ‘policies. [6]‘
Jeffrey Tucker celebrates yet another addition to the prosperity pool [7].
Mike Munger explores the atavism that is at the heart of the bias against capitalism [8].