Here’s a letter to City Journal.
Editor:
Milton Ezrati sees a silver lining around Trumpian protectionism only because he is blinded by economic illogic and factual fallacies (“The Silver Lining in Trump’s Tariff Chaos,” April 18).
Consider this line about post-war U.S. policy: “To support industrial recovery abroad, Washington also allowed goods from Europe and Japan to enter the U.S. market with minimal restrictions, while permitting those nations to maintain tariffs and other protections for their fragile domestic industries.” In Mr. Ezrati’s telling, this policy enriched foreigners at Americans’ expense.
But how, pray tell, are we Americans impoverished – and foreigners enriched – by foreigners consistently supplying us with lots of goods and services while their own governments obstruct their ability to receive goods and services in exchange from us? Presumably Mr. Ezrati understands that he, Mr. Ezrati, is enriched if he gets more goods and services in exchange for any given amount of his work effort. Presumably he also understands that his neighbor Jones would be made poorer if a street gang obstructed Jones’s freedom to shop at the neighborhood supermarket. Yet change “Mr. Ezrati” to “Americans,” and “Jones” to “foreigners,” and Mr. Ezrati’s presumed understanding dissolves.
Mr. Ezrati will attempt to salvage his argument by asserting – as he does – that, “by discouraging domestic production and encouraging consumption, [post-war U.S. trade policy] pushed the U.S. toward a persistent imbalance – consuming more than it produced.” But the salvage attempt fails, not least because empirically it’s a howler.
First, there’s no evidence that domestic production has been discouraged: Inflation-adjusted per-capita Gross Domestic Product is today 355% higher than it was in 1947 and 146% higher than in 1975, the year when America last ran an annual trade surplus. Further, Americans today produce 650% more industrial output than our grandparents did in 1947 and 154% more than in 1975. And U.S. industrial capacity is today at an all-time high.
Second, if we really have been consuming more than we produced lo these many decades, our inflation-adjusted net worth would reflect this calamity; indeed, we’d likely be paupers. But the opposite is the case. In 2024, the inflation-adjusted net worth of the average American household was, at more than $1.2M (in 2024 dollars), 359% higher than it was in 1952 (the earliest year for which I can find good data) and 232% higher than in 1975.
The “silver lining” that Mr. Ezrati sees around Trump’s tariffs is a hallucination. The reality is only deep-dark, ominous clouds that portend a destructive storm.
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
