One cannot be a free trader if one supports, as the president does, a “Buy American” policy, no matter the ultimate cost to US businesses and consumers. One cannot be a free trader if one prostitutes the concept of national security by invoking it for purely protectionist trade actions against historical allies. One cannot be a free trader, or free market leader, if one compounds protection with outsized subsidies, as the president contemplates with a $12 billion farm bribe.
As this story illustrates, tariffs, once imposed, are devilishly hard to escape. Once our steel and aluminum industries and their workers get used to tariff protections, what President can take them away? Once the Chinese have retaliated with their tariffs, and their industries have grown used to protection, how can they take them away? The whole post WWII order was built around this difficulty — by creating multinational institutions, we slowly help countries to say to their protected industries, “look, it’s going to be hard, but we can’t be part of the world and protect you any more.” The result was the greatest increase in trade, and prosperity, the world has known. If Trump’s bluff fails — or if it was not a bluff to begin with — that accomplishment is lost.
(I pick one nit with Cochrane’s otherwise superb essay – namely, his repetition of the common claim that “as long as the US saves less than we invest, the trade deficit cannot end.” My reason is this:”we” – as in we Americans – don’t do all of the investing in America. Some of of this investing is done by foreigners. These investment opportunities are not out there, exogenous to the economy, with the default mode being that they will be funded with domestic savings. And so even if we Americans were to increase our saving by the same amount as our trade deficit, there’s no reason to believe that the trade deficit will be wiped out. As long as foreigners continue to invest more in America than Americans invest abroad, America will run trade deficits.)
Congratulations to the Kochs. They’re receiving such thermonuclear attention because they’ve decided not to bow to Mr. Trump on trade, immigration and other issues that the brothers and their political network count as crucial to economic liberty. Unlike many Republican candidates for office, they can afford to take a position independent of Mr. Trump. And they have the money and passion to have some influence. This is good for the country and the Republican Party.