Here’s a letter to the Washington Examiner:
Jason Orestes’s brief in support of Trump’s tariffs reads like a term paper from a sophomore who, having ignored the assignment until the last minute, cuts and pastes into the final document various assertions hastily found on the Internet (“Trump reinvented tariffs and it worked,” January 29). To get a flavor of Orestes’s ignorance of his assigned topic, consider this paragraph:
“Trump’s simplistic-yet-correct sentiment that leverage in a trade war essentially resides with the party who incurs the trade deficit should no longer be condescendingly dismissed by economy wonks who denigrate any policy that isn’t globalist goodthink. China relies far more on exporting to the United States than we do purchasing those same cheaply made imports: a straightforward notion that tariffs exposed.”
Forget the juvenile name-calling. Also, overlook Orestes’s implied criticism of the decision-making capacity of Americans who choose to buy from China what he calls “cheaply made imports.” (Trumpian populists apparently are as contemptuous as are elites of the economic choices made by ordinary Americans.) Instead, focus on Orestes’s misunderstanding of trade deficits.
Even if we follow Orestes and discount – which we should not – the value to us Americans of the goods we import, Orestes’s assertion that “leverage in a trade war essentially resides with the party who incurs the trade deficit” remains comically mistaken. The reason is that a U.S. trade deficit means that foreigners are investing more in America than Americans are investing abroad. Orestes would be correct only if investments by foreigners in America are of little or no value to Americans. Only if American jobs in foreign-built factories here are of no consequence – only if that part of the value of Americans’ 401(k)s created by foreign demand for shares of U.S. corporations is irrelevant – only if the R&D in America that is financed by foreign savings has no positive impact on U.S. economic growth would Orestes even begin to be correct to assert that U.S. trade deficits mean that we Americans have less to lose from a trade war than do our trading partners. But of course foreign investment in America is of enormous benefit and value to us Americans. It’s a shame that Orestes is unaware of this basic reality.
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
My intrepid Mercatus Center colleague Veronique de Rugy observed in conversation that this Orestes piece reads like something from The Onion. She’s correct. It’s too bad that the editor of the Washington Examiner is less observant.