Here’s a sentence from Scott Bessent’s recent Wall Street Journal essay titled “Markets Hail Trump’s Economics“:
Mr. Trump’s election drove the largest single-day increase in the U.S. dollar in more than two years, and third largest in the last decade.
I’m confident that, if Trump reads Bessent’s line – which is meant to be laudatory – he (Trump) will feel proud and boastful, agreeing with Bessent that his election is already bestowing economic blessings on the United States. Trump will not understand that a stronger dollar encourages and enables Americans to buy more imports and discourages foreigners from buying American exports.
A strong U.S. dollar is truly wonderful for Americans. But Trump’s signature economic issue, protectionism, directly works against the benefits of a strong dollar. Indeed, Trump will undoubtedly soon complain about how the dollar is overvalued against foreign currencies. He will demand that foreign governments increase the values of their currencies relative to the dollar – meaning, effectively, that foreign governments devalue the dollar on foreign-exchange markets.
Strong, growing economies have strong currencies – and the citizens of a country should applaud the strengthening of its currency on foreign-exchange markets no less than individuals should applaud the increased purchasing power of the money in their bank accounts, wallets, purses, and piggy banks. Yet Trump and other protectionists bewail the increased purchasing power of the dollar on foreign-exchange markets, correctly understanding that the stronger the dollar, the more Americans import. Protectionists, of course, incorrectly believe that Americans are impoverished by getting more stuff, or stuff less expensively, from non-Americans.
Protectionism continues to be idiocy on stilts.
