But there is a more constructive way to look at a trade deficit. The $918.4 billion deficit reflects an equal $918.4 billion capital surplus. In other words, foreigners are buying $918.4 billion more in U.S. assets—such as stocks, bonds and real estate—than U.S. citizens are buying in foreign assets. This demand for U.S. assets boosted the value of American stocks and bonds and helped fund the country’s growing budget deficit. That explains why the market has declined in response to Mr. Trump’s restrictions on trade.
Ramesh Ponnuru asks a question the answer to which is “nowhere”: “Where’s the economic sense behind Trump’s tariffs?” Three slices:
If you think tariffs are painful, try watching President Donald Trump’s aides and supporters attempt to defend them. Whenever they come up with a rationale for his policies, however dubious, he immediately says or does something to contradict it. They say Trump’s trade strategy is all about containing China — then he slaps tariffs on the allies we would need to do so. They explain that the law lets him impose tariffs on Canada to protect our national security, only for him to let slip that he’s mad about Canadian dairy policies.
The truth is that Trump just likes tariffs and people who tell him they make sense. His trade adviser, Peter Navarro, thinks imports harm the economy because he doesn’t understand how gross domestic product data is calculated. The administration has no grand trade strategy.
But the demand for sophistry in defense of Trump’s tariffs is apparently inexhaustible.
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Trade balances don’t indicate which economies are succeeding and which are failing. The United States ran a trade deficit for most of the 19th century while rising as an industrial power. Nor is it true that trade surpluses can keep a country from losing manufacturing jobs. Every developed country — including Germany, which has a trade surplus — has seen the same downward trend.
Tariffs are not a reliable means of increasing domestic production, either. That’s partly because they tend to cause the currency to appreciate. [Scott] Bessent himself has told us so: During his confirmation hearings, he tried to allay fears that tariffs would raise prices by saying that a rising dollar would soften the blow. But a stronger dollar also reduces demand for U.S. exports — which is the very reason Bessent complains about currency manipulation.
Tariffs also tend to raise the price of goods that U.S. manufacturers use, which makes it harder for them to make and sell their own products.
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What Bessent’s case for tariffs has in common with all the other rationalizations is that the president has given no indication he believes it. If Trump believed it, he would want a weaker dollar and an end to its status as a global reserve currency. He doesn’t; he has talked about punishing countries that try to displace the dollar.
The purpose of these theories is not to cohere. It’s to sound just plausible enough to distract from the unsettling truth: The president has an obsession with tariffs, and it is impervious to facts and logic.
Steven Greenhut is correct: “Tariffs raise prices, spark conflicts, and make everyone poorer.” A slice:
Back when conservatives championed ideas rather than outsourced their thinking to their leader, they touted a simple saying: “Ideas have consequences.” Conservatives also understood that while people should always be free to make their own choices based on those ideas, they should be responsible for the consequences of their decisions.
By all means, follow the advice of that YouTube quack who argues that vaccines include microchips that control the population. But when your kid is hospitalized with measles, that’s on you. Unfortunately, in a democratic society, the population must endure the brunt of ludicrous ideas imposed by elected officials. (Check out my columns about the awful ones in California.)
We’re now at the “good and hard” part of H.L. Mencken’s definition about democracy being “the theory that the common people know what they want and deserve to get it.” That’s certainly the case with economic policy. If you occasionally check your retirement accounts and did so after the last two times President Donald Trump imposed 25-percent tariffs on Canada and Mexico, you will have noticed that they dropped precipitously.
The markets understand the basic truth about tariffs, which are taxes consumers in our country pay for imported goods. They raise prices, reduce our access to foreign goods and spark reciprocal tariffs that then punish our country’s farmers and manufacturers. They lead to less growth and more unemployment. They increase bureaucracy by requiring officials to calculate duties and enforce them. They create hostilities and have led to actual war.
As economist Robert Higgs explains, “Fiscally, protectionism is a poor source of government revenue that dries up completely as tariffs are increased so much that they reduce trade flows to zero. Morally, protectionism is vicious because it coercively substitutes the ill-informed and ill-directed judgment of government officials for the judgment of people making deals with their own private property.”
Wall Street Journal columnist William Galston rightly criticizes Trump’s lunatic trade ‘policy.’ A slice:
The American people smell a rat. In a recent poll by the Economist/YouGov, 68% said that higher tariffs mean higher prices and that consumers will bear a large share of the burden.
They’re right. Tariffs are import taxes paid in the importing nation. Canada, Mexico, China and the European Union won’t be pouring billions of dollars into U.S. coffers. The Trump administration will be taxing American importers, who won’t be able to absorb fully the increased costs and must shift some of the burden to consumers by increasing prices. Despite his professed business acumen, it has never been clear that Mr. Trump understands this.
It becomes much harder to achieve the American dream if prices rise more quickly than wages. The administration has given Americans no compelling reason to believe that their wage increases will match, let alone beat, the price increases that the America-first tariff plan would guarantee.
By a recent dereliction of duty, the Supreme Court has demonstrated that sometimes the proper regret about judicial activism is that there is too little of it. The court refused to hear a case that would have allowed it to clarify a doctrine that has become an impediment to remedies for even gross government violations of individuals’ constitutionally guaranteed rights.
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Qualified immunity was originally intended to protect endangered police making split-second decisions in, for example, high-speed chases or shootouts with armed suspects. But courts have granted qualified immunity to officers who stole more than $225,000 in cash and rare coins while executing a search warrant. To a deputy sheriff who, while trying to shoot an unthreatening pet dog, wounded a 10-year-old child. To state investigators who, without a warrant, entered a doctor’s office and searched the medical records of patients. Even to some university bureaucrats because their flagrant denial of some students’ First Amendment rights did not violate “clearly established law.”
Qualified immunity properly shields from personal liability the overwhelming majority of competent police officers who might make honest misjudgments in high-pressure situations. But as a federal appellate judge has said, qualified immunity has begun to look like unqualified impunity for misbehaving public officials. The Supreme Court should have corrected this with some dutiful activism, using Kodi’s case to end confusion among lesser courts.
In a February 22 post on X, DOGE announced that it held a preliminary meeting with the Defense Department and that it looks forward to “working together to safely save taxpayer dollars and eliminate waste, fraud and abuse.” Heaven knows the DOD needs such supervision. Since Congress began requiring annual audits in 2018, it has neverpassed a single full audit.
As of late 2024, it had failed for the seventh year in a row, unable to fully account for an $824 billion annual budget. Pause and think about that: Much of the nation’s single largest chunk of discretionary spending can’t be completely tracked. Let’s hope the DOD is better at protecting us from foreign enemies than tracking its own expenses.
One Pentagon official dryly noted that “things are showing progress, but it’s not enough” and a “clean” audit is still years away. Imagine a taxpayer offering this answer to an IRS auditor.
On the debt side, it’s pretty clear what happened: there was an orgy of deficits, accumulating a total debt that is nothing short of staggering. Expressed as a percent of US GDP, to account for scale, public debt went from less than 60 percent of GDP in 2000 to more than 120 percent of GDP in 2024.
