I’m incompetent to discuss whether or not this statute, despite making no mention of tariffs, nevertheless authorizes the president to impose tariffs. Some celebrated legal scholars insist that it does not so authorize; others insist that it does. I want instead to emphasize just how — to describe the matter as clinically as possible — preposterous is the alleged “emergency” that Mr. Trump declared as justification of his “Liberation Day” tariffs. According to the April 2 Executive Order, the emergency that justifies these tariffs are persistent American trade deficits. But not just persistent trade deficits; persistent “goods trade deficits.” But further, not just persistent “goods trade deficits”; persistent “goods trade deficits” with individual countries.
According to Mr. Trump, America now confronts an emergency in the form of bilateral “goods trade deficits” with many of the different individual countries with which it trades. The implication is that this emergency will end only if and when the following outcome is achieved: the value of goods — tangible things — that we Americans export each year to Algeria is at least as great as is the value of goods that we import each year from Algeria, and the value of goods that we Americans export each year to Angola is at least as great as is the value of goods that we import each year from Angola, and the value of goods that we Americans export each year to Bangladesh is at least as great as is the value of goods that we import each year from Bangladesh, and so on for every individual country, down to Zimbabwe, with which we Americans conduct trade.
This allegation of “national emergency” is nonsense, not on mere stilts, but atop a rocket taller than Everest and blasting off at Mach 13,000 for the deepest regions of outer space.
The concept of trade deficits is economically meaningful only when it encompasses trade in both goods and services, and then only for trade with the rest of the world. Neither “goods trade deficits” nor one country’s trade deficit with another country has any economic meaning. And meaning isn’t miraculously imparted to these concepts by pairing them with each other. Instead, this pairing — which Mr. Trump does — only multiplies the nonsense.
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First, there’s nothing economically special about goods production. A dollar’s worth of services such as medical care, software engineering, education, or retailing has the same economic value as does a dollar’s worth of goods such as steel, soybeans, lumber, or automobiles. And because nearly 80 percent of American production today is of services — meaning, most Americans today have a comparative advantage at producing services — it would be bizarre if we Americans did not regularly import more goods than we export.
Put differently, the concept of a “goods trade deficit” makes no more sense than does the concept of a “red-things trade deficit.” A dollar’s worth of roses, beef, merlot, and other red things is the same value as a dollar’s worth of aluminum, maize, chardonnay, and other non-red things. If you understand the absurdity of fretting about a red-things trade deficit, you should understand the equal absurdity of fretting about a tangible-things trade deficit.
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