Here’s a letter to The Free Press.
Editor:
Despite rightly decrying the chaotic nature of Trump’s trade ‘policy,’ Christopher Caldwell attempts to show that “Trump has a point on trade” (March 16th). That attempt fails. It’s flawed both on basic facts and economics.
Start with Caldwell’s confusing the $36 trillion of debt that has been accumulated by the U.S. government with U.S. trade deficits. This error is egregious; it reflects appalling carelessness with concepts. Unlike budget-deficit financing by the U.S. government, U.S. trade deficits do not necessarily increase Americans’ indebtedness. When, for example, foreigners spend dollars to build factories in America the U.S. trade deficit rises but there’s no resulting increase in Americans’ indebtedness. But even if, contrary to fact, every dollar of U.S. trade deficits were debt, the total inflation-adjusted value of America’s annual trade deficits over the past 50 years – when our string of annual trade deficits began – is (in 2024 dollars) $20.7 trillion,* not $36 trillion. That a journalist of Caldwell’s stature suffers such an elementary confusion is dismaying.
Equally dismaying is Caldwell’s repetition of the claim that “the United States lost its industrial base.” No it hasn’t. U.S. industrial capacity is today at an all-time high and 146 percent larger than it was in 1975, the year when by most measurements America last ran an annual trade surplus.
And then there’s this doozy: Caldwell hopes that “a gradually introduced tariff on Mexico might (whether one approves of the policy or not) incentivize the world’s investors to favor American factories over Mexican ones.” Indeed it might. But if so, the result would be a rise in the U.S. trade deficits that Caldwell, like Trump, believes are harmful and unsustainable. The economist’s head is hurt by encountering in an essay that warns of U.S. trade deficits an expression of hope for more foreign investment in the U.S.
The quality of most of today’s journalism regarding international trade is truly in the ditch.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* I took the 2017-dollar-value sum of U.S. net exports (available here) – which exports are negative whenever the U.S. runs a trade deficit – and converted these 2017 dollars into 2024 dollars using this GDP deflator calculator.
