Here’s a letter to The Free Press.
Editor:
In “Why Tariffs Are Good” (March 11), Michael Lind, after insisting that protectionists do not ignore basic economics, proceeds to ignore basic economics – as well as basic facts.
On the economics, Lind fails to ask a key question that anyone skilled at ECON 101 instinctively asks: At what cost? Never mentioning that some U.S. industries will shrink if U.S. manufacturing expands, he doesn’t bother to make, and much less to carry, a case that must be made and carried if U.S. tariffs are to be economically justified, namely, that whatever expansion Americans get in manufacturing will be worth the resulting shrinkage in other American industries. Instead, Lind simply presumes that any tariff-induced expansion in American manufacturing will either be costless or worth its cost. But a presumption is not an argument.
On the facts, it’s untrue that Trump’s tariffs are a reaction to the U.S. being “deindustrialized by a flood of low-priced, state subsidized Chinese imports.” Not only is this claim belied by Trump’s imposition of tariffs on goods from Canada, Mexico, and Europe, there is no deindustrialization to begin with. U.S. industrial capacity is today at an all-time high and 12% larger than it was in December 2001, when China joined the WTO. And U.S. industrial output – which is now less than one percentage point below the all-time peak it hit in September 2018 (just as Mr. Trump’s first-term tariffs were taking full effect and likely putting downward pressure on this production) – is today 18% higher than it was when China joined the WTO.
Lind devotes much of his piece to documenting the growth of China’s manufacturing sector relative to that of the U.S. and of other countries. The implication is that China is becoming ever-more specialized in manufacturing at the expense of manufacturing in the rest of the world. But this implication is also false. While from 2004 through 2023 the percentage of world GDP contributed by manufacturing fell by 7%, in China this percentage fell by 18%. As the world becomes richer, demand for services rises relative to demand for manufactured goods. It follows that, contrary to popular myth, the smaller is the share of manufacturing relative to services in a country’s GDP, the better-off economically are the people of that country.
Lind also fails to note that China’s population is more than 300% larger than America’s. And so although China’s total manufacturing output is greater than America’s, per-capita manufacturing output in China is much less than half that in the U.S. The Chinese in 2023 manufactured $3,415 per person while Americans manufactured $8,354 per person.* This impressive U.S. performance is largely due to America being by far the world’s leader in manufacturing value-added per worker. As Colin Grabow reports, the U.S. “ranks number one in real manufacturing value-added per worker by a large margin. With value-added of over $141,000 per worker in 2019, the United States bested second-ranked South Korea by over $44,000. The gap with China was over $120,000 per worker.”
Just as a determined Ptolemyist can, by ignoring the laws and facts of physics, fashion a seemingly powerful case that the earth sits stationary in the center of the solar system, so too can a determined protectionist, by ignoring the laws and facts of economics, fashion a seemingly powerful case that free trade impoverishes the nation.
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* Data on manufacturing output’s contribution to GDP are here. I then (1) divided the value of China’s total manufacturing output ($4.78118 trillion in 2023) by 1.4 billion, and (2) divided the value of the U.S.’s total manufacturing output ($2.84045 trillion in 2023) by 340 million.
