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The Bizarro World of Trade Wars

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Here’s a letter to my frequent correspondent Nolan McKinney:

Mr. McKinney:

Like you, I applaud the current truce in the U.S.-China trade war. Unlike you, I give Trump no credit for “potentially putting things right [with] our trade with China.” His end-game is for Americans to transfer as much net wealth as possible to the Chinese.

During truces in shoot-‘em-up wars, each side agrees to temporarily stop inflicting damage on the other side. And in the subsequent negotiations, each side bargains for a peace in which it gets as much wealth as possible from the other side and gives up as little wealth as possible to the other side.

Truces in trade wars are entirely different. During truces in trade wars, each side agrees to temporarily stop inflicting damage on itself. And in the subsequent negotiations, each side bargains for a peace in which it gets as little wealth as possible from the other side and gives up as much wealth as possible to the other side.

Trade-war negotiations are ones that the people of each belligerent country should ardently hope their government loses.

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

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