Here’s a letter to a life-long and much-respected friend who commented at my Facebook page.
P__:
In a Facebook comment on my sharing, at Café Hayek, the attached cartoon, you write,
I’m only too happy to pay considerably more for items like prescription drugs to buy American and not be held hostage to the whims of a tyrannical dictatorship. And how many pairs of cheap Chinese jeans do you really need?
Two things.
First, while you understandably don’t wish to “be held hostage to the whims of a tyrannical dictatorship” for medicines, in reality that would not occur. The top three sources, measured in dollars, of U.S. pharmaceutical imports are Ireland, Germany, and Switzerland. China is seventh, after India, the Netherlands, and Italy. Rounding out the top ten are the U.K., Canada, and Denmark. The amount of pharmaceutical products that we annually import from Ireland alone is approximately five times more than we import from China. If Beijing were to attempt to withhold Chinese pharmaceutical products from America, producers in Ireland, Germany, and other free countries certainly have the skill, capacity, and interest to supply to our lucrative market what the Chinese would so stupidly refuse to supply. My confidence in this prediction is only strengthened by the further fact that the bulk of the pharmaceutical products that America imports from China are very low valued ones, as is implied by the table in the article linked above.
This reality lends no credence to the suggestion that we Americans are today so reliant on dictatorial countries for pharmaceutical products that we must endorse Trump’s trade war in order to ensure our supply of medicines.
Second, with respect, your economic logic is flawed. If, as you imply, the chief benefit Americans get from trade is “cheap Chinese jeans” and similar frivolous items, then the trade restrictions that you support will result in significant increases in American production, not of the likes of pharmaceutical products, but of jeans and similar frivolous items. The American economy will not be enriched by arranging for American workers to shift to producing more of these lower-valued outputs. After all, the American workers and other resources that tariffs would direct into the likes of textile factories must come from somewhere – and that ‘somewhere’ is workplaces in which those workers and other resources produce outputs more valuable than jeans and similar frivolous items.
Trump’s tariffs – like all protectionist trade restrictions – will inevitably reduce American workers’ productivity and, in turn, their real wages. No amount of tough talk on trade by Trump can compensate for his utter ignorance of the subject.
Sincerely,
Don
