Every time Victor Davis Hanson comments on the economics of international trade he displays his utter ignorance of the most basic facts and theories of that topic.
Editor, Real Clear Politics
Editor:
Victor Davis Hanson’s declaration of victory for Trump’s tariffs is premature and confused (“The Decline and Fall of Our So-Called Degreed Experts,” July 4).
First, no serious economist predicted that the tariffs would cause a “surge in inflation.” When buyers spend more for the outputs of producers who benefit most from protection, they must spend less for the outputs of other producers; the falling prices of the latter outputs must be set against the rising prices of the former outputs. In an economy as large and dynamic as that of the U.S. – and given that many of Trump’s tariffs have yet to be implemented (and might never be) – any net effect on the price level due to these tariffs has been, and might well remain, too small to detect.
Second, any respectable assessment of the economic effects of tariffs must be done over a time span longer than the three months that have elapsed since Trump announced his “Liberation Day” tariffs. Indeed, because much of the relevant data for assessing the effects of tariffs, such as real GDP, are reported on a quarterly basis – and because the quarter in which these tariffs were announced ended only six days ago – we do not yet have the data that are most appropriate for assessing the tariffs’ economic consequences.
Third and relatedly, the economic case against tariffs is that these taxes make the people of the country poorer than they would be without the tariffs. Again, the U.S. economy is large and dynamic, and trade policy is only one of many policies that affect economic performance. To empirically isolate the net effect of tariffs requires careful analysis of a time span long enough for businesses and consumers to adjust to the tariffs. Hanson is sophomoric (to put it mildly) to crow that 250 years of economic analysis of protectionism has been disproven by the events of the past three months.
It’s worth noting that Hanson exposes not only impatience for proper scientific method, but also a comical ignorance of the economics that he takes unwarranted pride in mocking. In the same essay in which he applauds Trump’s desire to reduce U.S. trade deficits, Hanson praises Trump’s protectionism for leading “to several trillion dollars in promised foreign investment and at least some plans to relocate manufacturing and assembly back to the United States.” A person, such as Hanson, who is unaware that increased foreign investment in the U.S. tends to increase, rather than decrease, U.S. trade deficits is not a person whose economic commentary should be taken seriously.
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
