This letter is to the half-dozen or so people who e-mailed me during the past 24 hours to insist that we Americans will eventually (as one correspondent put it) “win big from the tough bargaining of the President”:
Mr. & Ms. ____:
You argue that because the Chinese people stand to lose more than do we Americans from a trade war that Trump is right to wage this war.
Each government that wages a trade war attempts to inflict damage on foreigners by first inflicting damage on its own citizens. And the greater the damage sought to be inflicted on foreigners, the greater the damage that a government must first inflict on its own citizens.
What each government essentially tells the other in a trade war is this; “I’ll further reduce the standard of living of my people unless and until you stop reducing the standard of living of your people.” (I often amuse myself by imagining how Trump would react if his ignorance didn’t prevent him from understanding that in waging this trade war with Beijing he in effect acts as a faithful agent, not of the American people, but of the Chinese people.)
The fact that in a trade war the absolute amount of damage suffered by foreigners might exceed that suffered by fellow citizens is ethically and economically irrelevant: even from a purely nationalistic stance, no government has any business inflicting harm on the bulk of its citizens in the hope of securing advantages for a handful of its citizens. And further: in what sense would we Americans benefit if the reduction in Chinese living standards turns out to be greater than is the reduction in our living standards?
It won’t do to reply that the goal of waging a trade war is to pry open global markets so that fellow citizens will all become more prosperous in the future. Forget that history suggests that this tactic will likely backfire. The actual goal of real-world trade wars isn’t to raise consumers’ living standards by making global trade freer; it is instead to gratify politically powerful producers by expanding their export markets while lessening the competition these producers face at home.
Although economists spin stories of how the gains from prying open foreign markets might exceed the costs of today’s tariffs, no real-world trade war is fought to promote the interests of domestic consumers. All such wars are fought to promote the interests of politically salient domestic producers. That is, trade wars are fought, not to increase all citizens’ opportunities to get more consumption goods, but to increase and protect a subset of existing producers’ opportunities to ship more of their outputs abroad while facing less competition.
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