Here’s a letter to the Financial Times.
Editor:
Heaps of fallacies – factual and logical – infect the protectionist Oren Cass’s column titled “Tariffs are a bet on the free market rather than free trade” (May 12). An example is this attempt to drum up support in America for U.S. protectionist policies: “The US trade balance in advanced technology products fell from a nearly $100bn surplus (in 2025 dollars) at the end of the cold war to a $300bn deficit last year trade.” To unsuspecting readers this ‘fact’ seems ominous. But knowledgeable readers know better – on which point I can do no better than to quote this 2023 paper by the eminent trade scholars Daniel Griswold and Andreas Freytag:
According to the Commerce Department’s definition of ATP, in 2021 the United States ran a deficit in the sector of $196 billion, with exports of $357 billion and imports of $553 billion. But this broad indicator fails to capture the leading role of the United States in research and development and production in a range of higher-end technology sectors. Within ATP, the United States runs surpluses in aerospace, life sciences, and electronics. The biggest deficit by far is in information and communications, which at $206 billion exceeds the overall deficit in ATP. This category includes smartphones, a ubiquitous consumer technology often assembled in China—a low-skilled activity—but containing a large share of U.S. proprietary technology and value-added. When actual value-added is considered, deficits in such advanced technology products shrink significantly. And, of course, American companies, such as Apple, derive massive revenues from sales of these same imported products, which they use to employ tens of thousands of Americans in engineering, management, design, marketing, and other high-skilled services. Thus, the ATP trade balance says essentially nothing about the United States’ actual place in the global technology ecosystem.
Mr Cass’s superficial treatment of the alleged U.S. trade ‘deficit’ in advanced technology products speaks volumes about the (utter lack of) soundness of the case for protectionism.
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
