More than two dozen individuals have e-mailed me since Trump was re-elected to express their displeasure with my hostility to Trump’s trade ‘policies.’ I apologize that I’ve not written back personally to many of you. Please accept this letter to the group as my response.
All:
Thanks for your many notes.
I’ll state my conclusion immediately: None of your attempts to justify Trump’s protectionism is credible. It’s obvious that each of you is sincerely, and in a generous spirit, searching to find what you assume to be a deep and ingenious logic to Trump’s tariffs and tariff-threats. Yet you search in vain.
Trump has a four-decades-long record of expressing hostility to free trade, and what he says today differs in no essential respects from what he said in years past. Trump is what he has always been: a cartoonish mercantilist. He believes that the purpose of international trade is to bring as much money into the economy as possible; he’s completely blind to the fact that the ultimate gains from trading with foreigners are the goods and services that we receive from them as our imports rather than money. This false belief of his explains his hostility to U.S. trade deficits with the world.
But this mistaken belief of his is only the start of his confusion. He’s not even consistent. With one breath he bemoans U.S. trade deficits and with the next breath boasts of his efforts to persuade foreigners to invest in America – hilariously unaware that the foreign investments about which he boasts contribute to the trade deficits that he bewails. Why should a person so utterly ignorant of a such a foundational reality be presumed to be the mastermind of a grand strategy that will redound to Americans’ benefit?
It gets even worse. One justification for his announced “reciprocal tariffs” is the fact that the U.S. has trade deficits with several individual countries. It cannot be said too often that in a world of three or more countries, there is absolutely no reason to expect any pair of countries to have ‘balanced’ trade with each other even if no country ran an overall trade deficit or trade surplus. This economic reality isn’t some esoteric theory or unique opinion held only by committed free traders; it’s common sense every bit as understandable as is the fact that your household doesn’t – and shouldn’t – have ‘balanced’ trade with supermarkets, dentists, Amazon, or any other individual entity with whom you trade.
Yet the President of the United States now wants to conduct trade policy in pursuit of the U.S. having balanced trade with every individual country. Forget that a host of practical realities clearly beyond Trump’s ability to comprehend would prevent the achievement of this ridiculous goal. Instead recognize that having this ridiculous goal itself is sufficient to reveal that Trump’s ignorance of trade is vast and beyond question.
There’s no question that tariffs and tariff threats can sometimes be used to pressure foreign governments to bend to the will of the U.S. government. There’s also no question that it’s possible to tell happy stories of how a wise and informed U.S. government might use this power to achieve both economic and non-economic outcomes that redound to the net benefit of Americans. But even under the best of circumstances it’s wise to be cautious about encouraging the use of such discretionary power. In the case of Trump & Co., the case for tolerating such discretionary use of the tariff-imposing power is completely crazy: For the reasons mentioned above and others (for example, his belief that U.S. tariffs aren’t paid by Americans) Trump is a proven ignoramus when it comes to trade. There is no more reason to entrust our trade policy to a man as ignorant as he is about trade than there is to entrust our health to a proud faith healer.
Sincerely,
Don
