The Editorial Board of the Wall Street Journal writes about the new U.S.-U.K. trade agreement. A slice:
The deal as outlined Thursday looks like progress, as far as it goes. Britain is still stuck with Mr. Trump’s new 10% tariff on all imports from all countries. But it will now be spared higher industry-specific tariffs on steel (25%) and cars (27.5%). The car rate will fall to 10% for the first 100,000 vehicles Britain ships to the U.S. each year—a quota that happens to be roughly the number of sales. The U.S. tariff on British metals will fall to zero.
In exchange, Britain will lower its barriers on imports of American ethanol, and its airlines will buy Boeing jets worth $10 billion. The two sides also agreed to expand reciprocal trade in beef products.
Here and again here, my intrepid Mercatus Center colleague, Veronique de Rugy, explains that income-tax cuts won’t save Americans from the ill-consequences of Trump’s tariffs punitive taxes on Americans who choose to spend parts of their incomes on imports and on import-competing products.
“Trump’s tariffs are already raising car prices and hurting automakers.”
Kevin Erdmann busts some myths about so-called “trade deficits.” (HT Scott Sumner) A slice:
The trade deficit and capital flows are mirrors of each other. Cash comes in to buy American assets or to lend to the American government or corporations and we use a lot of that cash to buy extra imports.
If this was about profligacy or if it was unsustainable in any way, then those thin dotted lines in Figure 1 would diverge. Foreigners would increasingly earn greater profits on their growing American investments. Over time, that would cause the dollar to depreciate. And, if that was happening, the trade deficit would naturally decline.
The reason this is sustainable is because Americans make higher returns on our foreign investments than foreigners make on their American investments.
So, this isn’t a story of profligacy or living beyond our means. But, could it still be a story of selling out American workers by moving production abroad? American capitalists move factories to low wage economies and buy imports with their greedy profits while American workers are left high and dry?
No. Again, thinking about what is happening here, this isn’t being driven by off-shoring. American investors are investing less in foreign assets than foreigners are investing in the US. If the trade deficit was being driven by offshoring, wouldn’t the increase in imports be related to more investments into foreign assets rather than more foreign investments into America?
Joel Griffith busts some protectionist myths about NAFTA. A slice:
The auto sector thrived under NAFTA’s integrated supply chains. Tariffs on vehicles and parts dropped to zero, letting companies like Ford, GM, and Chrysler source components from Mexico and Canada at lower costs. This kept US-made cars competitive globally — exports of vehicles to Mexico alone grew from under $1 billion in 1993 to nearly $29 billion in 2024. Plants in Michigan, Ohio, and the Midwest benefited from this cross-border efficiency, even as some assembly shifted south. The American automotive sector exports more than $160 billion annually, nearly doubling in inflation-adjusted terms since 1994. Across the nation, American factories churn out automobiles for export — including BMW’s South Carolina plant which employs 11,000 Americans. Motor vehicles are among the top three exports in 14 states, including Missouri, Michigan, Ohio, and Tennessee.
Arnold Kling shares a list of popular economics books to read – and ones to avoid. Two slices:
Everyone should understand how markets work and why they are important. This is called microeconomics or price theory. An enjoyable way to approach this subject is to read The Price of Everything, a didactic novel by Russ Roberts.
For an overview, I recommend Hidden Order: The Economics of Everyday Life, by David Friedman. He shows how to think like an economist. His description of growing automobiles by growing wheat, putting it on ships to Japan, and having the ships return with automobiles, is clever and powerful. As a runner-up, consider Basic Economics, by Thomas Sowell.
…..
On the topic of income distribution, Thomas Piketty’s Capital in the 21st Century tops the list of books to avoid. It has been subject to some devastating criticism, both in theory and in data. For example, much of the decrease in the share of income going to labor that Piketty ascribes to an increase in capital income was shown to be due to an increase in rental income from real estate. Piketty has been praised as a prose stylist, and yet the book sits unread on many a bookshelf.
Abigail Slater, assistant attorney general for the Department of Justice’s Antitrust Division, recently delivered her “America First Antitrust” speech, which outlined a populist agenda that punishes firms for being large. Days later, Mark Meador, commissioner of the Federal Trade Commission, published his “Antitrust Policy for the Conservative” essay, which evinces prejudice against big companies.
“Big is bad,” says Meador, who calls on conservatives to “reaffirm that concentrated economic power is just as dangerous as concentrated political power.” Meador does not explain how market power is morally analogous to political power and the use of coercion but challenges conservatives to oppose bigness in private business the way they do in government. But there’s good reason to be against one and not the other.
Increasing the size and scope of government entails a commensurate reduction of the private sphere and personal liberty; Microsoft, Walmart, and Häagen-Dazs increasing their market shares does not. Meador disagrees, describing antitrust law as the means to prevent “anarchistic private tyranny” and encourages conservatives to “reject a laissez-faire or libertarian approach to antitrust law.”
Virginia Postrel reviews Ezra Klein’s and Derek Thompson’s Abundance.
