Here’s a letter to Fortune:
Editor:
Two short passages in your report today on Trump’s trade negotiations with the Chinese reveal volumes about Trump’s ignorance of the facts and of the nature of trade.
First is this accurate description of a presidential misconception: “Trump routinely points to the large U.S. trade deficit, the difference between imports and exports, as a symbol of a declining manufacturing base and the loss of American might.”
He’s mistaken. In reality, American industrial capacity is now at an all-time high. Today it’s 15 percent higher than it was when China joined the World Trade WTO in 2001, and 66 percent higher than when NAFTA was launched in 1994. Unsurprisingly, therefore real U.S. manufacturing output is today near the all-time high that it hit in 2007, just before the Great Recession, and it continues to rise. American manufacturers today produce 11 percent more output than they produced when China joined the WTO and 45 percent more than when NAFTA took effect.
Second is this correct report on Trump’s goals: “He aims to reduce the goods-and-services gap with China, which totaled $566 billion in 2017, by both browbeating and enticing U.S. companies to import less and export more.”
A slight rewording changes none of the meaning but exposes the crackpot essence of Trump’s goal: “He aims to reduce the goods-and-services gap with China, which totaled $566 billion in 2017, by arranging for Americans to send more goods and services to the Chinese and to receive in exchange fewer goods and services.”
How we Americans will be enriched by our president artfully bargaining to reduce the prices that we receive for what we sell to the Chinese remains a palace mystery.
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
