Here’s a letter to a new correspondent.
Mr. H__:
Thanks for your email.
You write, in response to this post of mine, that I am “too quick at second guessing the president and his administration on its determination of the trade behaviors of other countries.” You say that I “owe the administration the benefit of the doubt.”
With respect, I disagree, and for reasons too many to spell out here. But let me mention one of these reasons: the internal inconsistency of the administration’s assertions about trade.
The Trump administration insists, on the one hand, that foreign countries produce and sell too much to us. In the words of the office of the U.S. Trade Representative, “across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically. This overproduction displaces existing U.S. domestic production.”
Yet on the other hand, this same administration asserts proudly that the tariffs are paid, not by Americans, but by foreigners.
It’s impossible for both of these claims to be correct (although both can be – and likely are – incorrect). If the tariffs impose virtually no costs on Americans, foreigners must be reducing the prices they charge for their exports by almost the full amount of the tariffs without reducing these exports. So when Mr. Trump boasts that his tariffs are paid overwhelmingly by foreigners, with little or no costs borne by Americans, he’s boasting that his policies do next to nothing to ‘protect’ the American market from foreign countries’ alleged overproduction. Put differently, he is boasting that his policies force foreign exporters to further lower the already excessively low prices they charge in the U.S. market.
If the president understands what he’s talking about – and you implore me not to second-guess him – then he fundamentally disagrees with his Trade Representative, who justifies the tariffs as a means of protecting America from foreign-countries’ “overproduction” (and, presumably, the too-low prices that such overproduction implies).
There’s no reason to give the benefit of the doubt to a group of people who truck in such blatant contradictions.
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
