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Nobel-laureate economist James Heckman and his co-author Hanming Fang busts myths about the “China Shock.” Two slices:

There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.

By analyzing supply chains, researchers have found that the China shock slightly increased total U.S. employment from 2000 to 2007. Cheaper imports reduced costs for businesses and consumers, which stimulated demand and job growth in other sectors. On average there was a net employment gain of 1.27% in each region exposed to Chinese trade, alongside wage gains, when accounting for broader effects. Remarkably, even in some communities hit hardest by import competition, the overall employment effect was positive once new service jobs are counted.

…..

Another often-cited analysis found that about 88% of the manufacturing jobs lost in the 2000s were eliminated by productivity growth including that from automation. Whether a task is done by a machine in Ohio or by a low-wage worker in Beijing, fewer Americans are needed to produce the same output.

The danger of blaming Chinese trade is that the U.S. is misdiagnosing the problem and pursuing the wrong solutions. While tariffs on Chinese goods might bring back a few factory jobs, they will raise prices for everyone and hurt U.S. businesses that rely on imports. Current attempts to turn back the clock by introducing tariffs are a costly remedy for a poorly understood ailment.

Eric Boehm reports that “the Trump administration is finally getting out of the way of Nippon Steel’s acquisition of U.S. Steel—but in a way that seems to ensure more federal meddling in the future.” A slice:

The details of the deal remain cloudy, but it seems like Nippon will invest $14 billion to take over U.S. Steel, with a few caveats. On Sunday, Trump told reporters that the deal is “an investment and it’s a partial ownership, but it’ll be controlled by the U.S.A,” according to the Associated Press.

On Tuesday morning, Sen. Dave McCormick (R–Pa.) told CNBC that the deal ensures an American CEO will continue to run U.S. Steel (presumably as a subsidiary to Nippon Steel) and that the federal government will get a “golden share” in the company. That would “essentially require U.S. government approval of a number of the board members. And that will allow the United States to ensure that production levels aren’t cut,” McCormick said.

If true—none of this has been disclosed officially yet—then the federal government would effectively hold a majority stake in what remains of U.S. Steel after the Nippon acquisition is completed. In short, Trump would have converted Biden’s meddling in the affairs of a private company into an official, permanent place for the federal government on the board of U.S. Steel—which is, I stress once again, a private company.

Pierre Lemieux asks: What if Mississippi became a sovereign country? A slice:

Mississippi would be a poor country relative to the United States. The average hourly wage in Mississippi is $23.91, compared to $38.41 in California (Bureau of Labor Statistics, data for May 2024). On average, wages are thus 38% lower in Mississippi than in California. For the whole (current) USA, the average wage is $32.66, which means that Mississippian wages are on average (about) 27% lower than in the rest of the United States. As a newly sovereign country, Mississippi would be much poorer than the US, although still wealthier than, say, Vietnam or China.

Voices would be raised in the (remaining) United States to claim that American businesses cannot compete against their Mississippian counterparts given the latter’s “unfair” wage advantage. “We need fair trade, an equal playing field, with Mississippi,” American lobbyists and politicians would proclaim.

After the first national-account system in Mississippi is set up and its customs authorities have become effective enough at measuring trade flows, the new data would lead to further conflict. By virtue of a frontier having been drawn on the map, the trade deficit would suddenly become a politically contentious issue. It is likely that Mississippi currently has a trade deficit with the rest of the US, although it cannot be measured in the absence of border surveillance and control. After independence, many Mississippian lobbyists and politicians would get all pumped up about the trade deficit.

From a liberal-individualist viewpoint, nothing would have really changed: it would still be individual Mississippians and their private organizations trading with Americans and the latter’s private organizations. Many variables, including a few new ones, would adjust between the poorer traders in Mississippi and the richer traders in the US: the terms of trade and (if Mississippi had its own currency) currency exchange rates and the terms of trade; interest rates; foreign investment flows; public policy and government, etc.

Bruce Yandle makes clear that the Americans ostensibly meant to benefit from Trump’s tariffs punitive taxes on Americans who buy imports and import-competing products will be hurt by these punitive taxes. A slice:

Through the bully pulpit or by some other means, the president hopes to avoid the political nightmare of rising inflation while preserving his much-loved tariffs. But even if he were to persuade reluctant Walmart shareholders to eat every bite of the tariffs, it would merely hide part of the cost. It’s still there.

For example, such an outcome might mean fewer Walmart stores built and fewer people hired to run registers, operate pharmacies or stock shelves.

Iain Murray, Kent Lassman, and GMU Econ alum Ryan Young offer a positive vision for trade. A slice:

Another reason for humility in trade policy is that in a democracy, the other side holds power about half of the time. A cardinal, yet little-observed, rule in public policy is not to give yourself powers you wouldn’t want your opponents to have. That means building institution-level safeguards against mission creep to limit abuses. This is why Congress should be in the driver’s seat on trade policy. Congress must reach a hard-won consensus on trade before passing legislation, whereas a president can make multi-billion dollar policy changes on a whim with a late-night tweet.

On June 9th, Phil Gramm will talk about his and my new book, The Triumph of Economic Freedom.

Jack Nicastro is correct that the Trump administration’s potential meddling in the market for concert tickets is economically misguided.

James Bovard warns of “the deadly perils of predatory idealism.” A slice:

Nowadays, idealism is often positive thinking about growing servitude. Idealism encourages citizens to view politics as a faith-based activity, transforming politicians from hucksters to saviors. The issue is not what government did in the past — the issue is how we must do better in the future. Politicians’ pious piffle is supposed to radically reduce the risk of subsequent perfidy.

Idealistic appeals permit politicians to stack the deck in listeners’ minds. To believe an idealistic speech is to “do good” — akin to displaying a “Support our Troops” decal on one’s automobile. Idealism is the most dangerous species of political lie. The idealistic draping confers an obligation to believe, or at least to defer. The moral bonus a politician receives for invoking ideals usually exceeds any demerits for lying. Thus, lying about ideals is a guaranteed win for politicians.

Self-government cannot survive people idealizing their rulers. Telling citizens to glorify contemporary politicians is like urging battered wives to idealize their husbands. Why should we expect political idealism to be more honest than politics? It is time to cease being idealistic about idealism.

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Quotation of the Day…

is from Wall Street Journal columnist Matthew Hennessey’s May 27th, 2025, piece titled “JD Vance Is Wrong: The Market Isn’t a ‘Tool’”:

Markets, whether for cheap consumer goods or government bonds, can’t be bullied into compliance with a political agenda. They aren’t governed by the philosophies and desires of men like Mr. Vance. They are governed by the laws of economics the way the physical world is governed by the laws of gravity. You can moan about them all you want, you can lament the trade-offs they demand and the constraints they impose, but you can’t ignore or wish them away. No amount of political will or spilled ink can overrule them. Supply and demand are undefeated.

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Some Links

In his latest essay, Wall Street Journal columnist Matthew Hennessey accurately describes JD Vance as “economically illiterate as any leftist Democrat.” Two slices:

And then we have the MAGA types, who take delight in insisting that traditional conservatives worship the market as a god. By this, of course, they intend to leave the impression that Reagan-style Republicans, with their libertarian-inflected assumption that it’s better to be rich than poor, don’t care much about ordinary people. The reason is obvious, or should be: Greed.

The idea that markets exploit the weak and release corrosive social forces has always been popular on the left. In 1998, Robert Kuttner blamed “the utopian worship of free markets” for a host of cultural and economic ills. The embrace of this view by the right is a more recent development. The postliberal political theorist Patrick Deneen has described “free market orthodoxies and mantras” as a “broadly Protestant belief system.”

The lawyer Oren Cass is perhaps the foremost practitioner of the market-as-religion smear technique. The American right’s “blind faith” in free markets stands as a political impediment to his dream of a revived industrial economy that is planned and directed by enlightened tinkerers for the common good. Vice President JD Vance’s rapid rise in conservative politics was driven in part by his hearty embrace of the dirigiste economics of Messrs. Cass and Deneen.

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The market isn’t a proper noun, and it also isn’t a tool. The market simply is. Nobody controls it. Nobody worships it, but only a fool ignores it.

Long before recorded history, long before people settled in cities and started building fruit stands, before Adam Smith, before Wall Street, before dating apps, before crypto—before all that there was trade: I give you this, you give me that. Simple exchange is what makes a market. Not faith, not mantras, not brick and mortar. Wherever people come together to trade is a market.

The where doesn’t matter so much as the what. Markets harness supply and demand to coordinate economic transactions between people and firms. They facilitate the free exchange of goods and services. They are mechanisms for shared prosperity based on freedom from coercion. They don’t enslave us, they liberate us.

Reason‘s Eric Boehm adds his clear voice to those who point out that “the trade war is eroding America’s soft power.” A slice:

The direct cost of President Donald Trump’s trade war will be borne by American consumers and businesses—of that, there should no longer be much debate.

But trade wars also come with indirect costs and unforeseen consequences. Some of those show up on balance sheets in the form of lower profits, losses in the stock market, or stagnating wages. Some are best counted under the Christmas tree, where higher prices might mean fewer toys (as the president now admits) and other goodies that make life a little more joyful, as tariffs squeeze wallets and reduce discretionary income.

Others are trickier to sum up, but that doesn’t mean they don’t exist.

“The administration’s trade policy sends a message to the world: America is an unreliable ally that sees you only as a source of wealth; and if you don’t have wealth, you’ll pay for it,” writes Iain Murray, senior fellow at the Competitive Enterprise Institute, in an essay recently published in The Daily Economy, a blog run by the American Institute for Economic Research.

Allison Schrager warns Americans – ‘progressives’ and MAGA-types – against policies that would make the American economy more like the sclerotic one that is Europe’s. (HT Arnold Kling) A slice:

The New Right may be the future of conservatism, but sometimes it seems like they’re just left-wingers trying to remake the American economy into… well, Europe. People like JD Vance and Josh Hawley and their ilk like to complain about Europe and even bully them from time to time (sometimes for valid reasons), but if you look at the policies of the New Right—and sometimes the President—it seems like they really want us to be Europe. Maybe that’s why JD is so obsessed with talking about them, and why at times it seems we’ve left policymaking to a left-wing college student one month into their junior year abroad.

Think about it. They want us to consume less and buy more high-quality domestic goods. They want a bigger welfare state that covers the middle class. They want antitrust to take down big tech. And they want a smaller, slower-growing economy to benefit a small group of people who represent the past. All so European! Even MAHA feels a little Euro with their obsession with artificial food. What’s next? Tethered bottle caps?

I hope they’re prepared to accept lower growth in exchange.

Aiden Grogan wonders at the nostalgia for dark Satanic mills. A slice:

The dark, satanic mills were engines of economic progress, but wistful longing for manual labor in factories overlooks how these economic conditions undermined traditional social structures and uprooted men and women from an environment conducive to child-rearing. For whatever growing pains the American heartland must suffer during the transition from manufacturing to services, the emergent “knowledge economy” offers tremendous opportunities to restore the bonds of kith and kin stifled by the industrial and sexual revolutions.

By emphasizing automation, education, and expanded telework, the industrial economy may at last complete a full circle and empower men and women to remain where they are—in the home, the nucleus of pre-industrial economic life. The twenty-first century’s digital economy may ironically enable a true “return to tradition” that conservatives, in particular, should welcome.

But such an epochal transformation necessitates the cultivation of a new post-populist elite—one with a more refined, conservative outlook, a renewed embrace of free markets, and a willingness to set and maintain a high moral standard.

GMU Econ alum Paul Mueller continues to expose DEI as the con that it is.

A little price theory goes a long way.”

Ramesh Ponnuru is right that Trump is right that “those student loans need to be repaid.” A slice:

Forgiving much or all of the debt, an idea popular among progressives and the borrowers themselves, is an alternative to reviving loan payments. But the extended pause on student loans has already cost taxpayers more than $238 billion. That number would rise even more if the government forgave more of the debt — and though progressives say that collecting on loans amounts to “punishing the working poor,” the best evidence suggests that student loan forgiveness tends to benefit people who are doing better than other Americans.

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Quotation of the Day…

… is from page 122 of the 1969 Arlington House edition of Ludwig von Mises’s 1944 Yale University Press book, Omnipotent Government: The Rise of the Total State and Total War (available free-of-charge on-line here):

Social coöperation and division of labor are man’s foremost tools in his struggle for survival. The intensification of this mutuality in the direction of a world-embracing system of exchange has considerably improved the conditions of mankind. The maintenance of this system requires lasting peace. The abolition of war is therefore an important item in man’s struggle for survival.

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Free to Choose to “Buy American”

Here’s a letter to the Wall Street Journal.

Editor:

Without explicitly saying so, your report on Americans who go to great lengths to “buy American” reveals one of the many benefits of free trade – namely, freedom to choose (“Buying 100% Made in America Is Really, Really Hard. These People Are Trying.” May 25). While we free traders believe that “Buy American” enthusiasts are economically misinformed – their efforts to “buy American” do not, contrary to their conviction, make the American economy stronger – we, unlike protectionists, have no wish to restrict fellow citizens’ freedom to spend their money as they choose.

We free traders rely on persuasion and not the protectionists’ preferred tool, coercion. We free traders are content to inform “Buy American” enthusiasts that any American production that might be increased as a result of their efforts is offset by American production that is decreased as a result of their efforts. Americans cannot produce, say, more cheese graters and dress shirts without producing fewer, say, machine tools and medicines.

We free traders also note that the “Made in” labels that “Buy American” devotees use to guide their purchases do not mean what these devotees think these labels mean. In today’s global economy, the great majority of manufactured goods consists of parts and ideas from around the world, including the U.S.. A “Made in” label on some good reveals only where that good’s final assembly occurred. Bath towels labeled “Made in Turkey” might well be made of cotton grown in Texas, dyed with pigments from Germany, woven on a loom made in India, and shipped to the U.S. on a freighter made in Korea and in a shipping container manufactured in Denmark. That label would be more accurate if it instead read “Final Processing Done in Turkey” – or, more accurate still, “Made on Earth.”

And yet, regardless of the poor economic understanding of these “Buy American” enthusiasts, I and other free traders – unlike protectionists – respect and defend the right of each and every one of our fellow Americans to spend his or her money in whatever peaceful ways he or she chooses.

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

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Some Links

Adam White masterfully lays out what’s at stake in – and what led to – Trump v. CASA – the U.S. Supreme Court case dealing with the lawfulness of nationwide injunctions issued by lower courts. A slice:

That is the real problem underlying all of this. Congress has delegated virtually its entire legislative power to the executive branch, over the course of the last century and a half. Congress spent a century encouraging presidents to act as the nation’s lawmaker-in-chief, and now presidents routinely make executive-branch laws affecting thousands or millions of Americans in one fell swoop. And when those instant edicts spur instant litigation, federal trial judges are left to decide whether a ruling against the administration’s seemingly unlawful action should bind the president completely, or only as to the plaintiffs at hand.

This creates problems for government, and judges exacerbate the problem when they make incorrect decisions. But judges did not create the problem. Presidents created this problem through unrestrained assertions of power. More fundamentally, Congress created this problem by largely freeing presidents from legislative restraints.

GMU Econ alum Dominic Pino, writing in the Washington Post, explains what shouldn’t – but, alas, what today nevertheless does – need explaining, namely, automobile racing should not be given special tax treatment. A slice:

Politicians have a habit of channeling their constituents’ fandom into taxpayer-funded goodies — just look at the current talks over a new football stadium in D.C. The bipartisanship of motorsports favors extends beyond Young and Warner’s bill. North Carolina, under Democratic Gov. Roy Cooper, used money from Joe Biden’s American Rescue Plan Act to help refurbish North Wilkesboro Speedway. A law supposedly about covid recovery was used to fund improvements to a track that had been vacant since 1996, for the use of NASCAR, which has plenty of money of its own.

Some reasons to oppose this latest racing bill are specific to the sport. Most racetracks are small operations that don’t generate extraordinary amounts of economic activity, and the large tracks that do host premier racing series only create significant economic impact one or two weekends per year. Eleven out of 12 months are not “the month of May,” and aside from one weekend hosting NASCAR, Indianapolis Motor Speedway is little more than a museum, gift shop and landmark for most of the year.

Jacob Sullum is correct: “Trump’s mass cancellation of student visas illustrates the lawlessness of his immigration crackdown.” A slice:

The SEVIS terminations “reflect an instinct that has become prevalent in our society to effectuate change: move fast and break things,” writes U.S. District Judge Jeffrey White, a George W. Bush appointee who is considering several lawsuits by foreign students in the Northern District of California. “That instinct must be checked when it conflicts with established principles of law.”

White’s preliminary injunction bars the government from “arresting and incarcerating any of the named Plaintiffs in these cases and similarly situated individuals nationwide pending resolution of these proceedings.” The injunction also says the government may not transfer any of those individuals “outside the jurisdiction of their residence,” impose “any adverse legal effect” based on the SEVIS terminations, or “revers[e] the reinstatement” of the records.

Explaining the rationale for a nationwide injunction, White says the plaintiffs “have met their burden to show a likelihood of irreparable harm.” He “sees no rational distinction between the harms inflicted on the [named plaintiffs] and the harms inflicted on similarly situated individuals across the United States.” He notes that “these cases and the litigation around the United States” stem from “a uniform policy that uniformly wreaked havoc not only on the lives of Plaintiffs here but on similarly situated F-1 nonimmigrants across the United States and continues do so.”

David Brooks doesn’t get every last detail in this piece correct, but most of it is spot-on and relevant. Three slices:

There’s a story haunting American politics. It’s a story told by right-wing populists like Donald Trump and JD Vance and left-wing populists like Bernie Sanders. The story goes something like this: There once was an America, in the 1950s and 1960s, that made stuff. People could go off to work in factories and earn a decent middle-class wage. Then came globalization and the era of market-worshiping neoliberalism. During the 1990s and early 2000s, America signed free trade deals like NAFTA. China entered the World Trade Organization in 2001. Jobs were shipped overseas. Factories shut down. The rich prospered while members of the working class got pummeled and ended up voting for Trump.

The problem with this story is that it’s 75 percent bonkers — historically inaccurate on nearly every front.

In the first place, there never was a market-worshiping era of pure globalization. As the economics writer Noah Smith has noted, top marginal tax rates were significantly higher in 2016 than in 1992. Federal spending on social programs went up, not down. Government policy became more progressive (favoring those down the income scale), not less. Much of the economy grew more regulated, not less. U.S. tariff rates were basically stagnant.

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The third problem with the story is that it exaggerates how much foreign competition has hurt American workers. Yes, the China shock was real. In a landmark 2013 paper, David Autor, David Dorn and Gordon Hanson found that America lost an average of 90,000 jobs per year between 1990 and 2007 because of imports from China. But put that in perspective. According to [Michael] Strain, five million Americans currently separate from their employers per month. Plus, in a 2019 paper, Robert C. Feenstra, Hong Ma and Yuan Xu found that the China shock job losses were largely offset by job gains, owing to higher exports.

American manufacturing jobs have declined mostly for the same reason American farming jobs have declined. We’re more productive, able to make more stuff with fewer workers. That’s not primarily a story about neoliberalism or globalization; it’s progress.

If manufacturing jobs are moving, it’s often from the American Midwest to the American South. As Gary Winslett pointed out in The Washington Post, in 1970 the Rust Belt was responsible for nearly half of U.S. manufacturing exports, and the South was responsible for only a quarter. Today the South is responsible for half of U.S. manufacturing exports, and the Rust Belt is responsible for only a quarter. The Southern states lured manufacturing investments with right-to-work laws, cheap energy, affordable housing, low-cost land and fast permitting. Now the No. 1 auto-exporting state is Alabama. It’s really hard to argue that America’s problem is a lack of manufacturing jobs when nearly half a million manufacturing job openings are unfilled.

The so-called era of neoliberal globalism has not produced the American carnage that Trump imagines. According to the political scientist Yascha Mounk, in the 1990s and early 2000s, America and Europe were similarly affluent. Today the American economy has left the other rich economies in the dust. American G.D.P. per capita is around $83,000, while Germany’s is around $54,000, France’s is around $45,000, and Italy’s is around $39,000.

As The Economist recently noted, “On a per person basis, American economic output is now about 40 percent higher than in Western Europe and Canada and 60 percent higher than in Japan — roughly twice as large as the gaps between them in 1990. Average wages in America’s poorest state, Mississippi, are higher than the averages in Britain, Canada and Germany.”

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These statistics are not abstractions that don’t touch regular people’s lives. According to the Organization for Economic Cooperation and Development, in 2023 American households had $63,000 in disposable income, while French households had only $35,000, and British households had only $36,000. The average home size in the United States is around 2,000 square feet. The average British home size is less than 1,000 square feet.

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Quotation of the Day…

… is from page 728 of Gordon Wood’s excellent 2009 volume, Empire of Liberty: A History of the Early Republic, 1789-1815 (footnote deleted):

The result was an odd mixture of credulity and skepticism among many middling Americans. Where everything was believable, everything could be doubted. Since all claims to expert knowledge were suspect, people tended to mistrust anything outside of the immediate impact of their senses. They picked up the Lockean sensationalist epistemology and ran with it. They were a democratic people who judged by their senses only and who doubted everything that they had not seen, felt, heard, tasted, or smelled. Yet because people prided themselves on their shrewdness and believed that they were now capable of understanding so much from their senses, they could be easily impressed by what they sensed but could not comprehend. A few strange words spoken by a preacher, or hieroglyphics displayed on a document, or anything written in highfalutin language could carry great credibility. In such an atmosphere hoaxes of various kinds and charlatanism and quackery in all fields flourished.

DBx: Wood here describes the ascent, in early 19th-century America, of populism. Not much has changed with the current ascent, in early 21st-century America, of populism, except that one source of seeming immediate sensory perception now is electronic (especially social) media.

Pictured above is a modern U.S. president peddling snake oil by displaying randomly scattered hieroglyphs.

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Heaven Save Us From This ‘Negotiator’

Here’s a reply to a commenter at my Facebook page.

Mr. Fioru:

Like many others who try to justify Trump’s trade ‘policy,’ you describe his tariffs as “a negotiating tactic,” allegedly imposed in response to other countries’ trade restrictions. I find this attempted justification incredible.

Forget the inconsistencies that infect Trump’s own various claimed justifications for raising tariffs. (These inconsistencies are revealed brilliantly by Mike Munger.) Forget that, because foreign trade restrictions inflict most of their harm on the citizens of the foreign countries imposing them, it is ethically dubious for our government to impose costs on us (which is what U.S. tariffs do) in order to pressure other governments to treat their citizens better. (What happened to ‘Put America First’?) Forget that Trump refuses to use a tried-and-true means of negotiating reductions in trade restrictions – namely, the multilateral trade-negotiation possibilities, and dispute-resolution facilities, provided by the WTO.

Instead, recognize that for a negotiating tactic to be worthwhile, the goal of the negotiator must, at a minimum, be achievable. Trump’s goal is not.

To the extent that any clarity can be discerned through the fog of Trump’s trade-policy pronouncements, he’s most obsessed with eliminating America’s so-called “trade deficits” with individual countries – such as, for example, the U.S. “trade deficit” with Canada. He thinks that U.S. “trade deficits” with individual countries are both meaningful and caused by foreign unfair trade practices. But on both counts he’s wrong. In a world of nearly 200 countries, these so-called “trade imbalances” are completely natural. It would be extremely bizarre if they did not occur. It’s practically impossible for any country to export to every individual country with which it trades the same amount as it imports from that country.

The very fact that Trump not only believes that economic meaning exists in an economically meaningless concept (“bilateral trade balances”), but believes also that it’s within the power of governments to arrange for their countries each to achieve the impossible outcome of having ‘balanced’ trade with the U.S., is sufficient to prove that the president is utterly clueless about the economics of trade.

If you’re correct that Trump’s tariffs are indeed “a negotiating tactic,” he’s negotiating in economic ignorance to achieve an impossible outcome. And because reality isn’t optional, when that impossible outcome fails to materialize, Trump will feel justified in further hiking U.S. tariffs, convinced by his economic ignorance that he simply must become an even tougher negotiator.

Such ‘negotiation’ will end poorly, especially for Americans (and, not coincidentally, also for the Republican party).

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

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More on the Condition of U.S. Manufacturing

Here’s a visualization of manufacturing output by country in 2018.

In 2024, the Chinese produced $5.65 trillion worth of manufactured outputs (or $4.62 in 2018 dollars). The U.S. in 2024 produced, in 2017 dollars, $2.38 trillion worth of manufactured outputs – which, when converted into 2024 dollars, is $2.98 trillion worth of manufactured outputs.

The United States is still the world’s second-largest manufacturing economy.

My former student Robyn Weaving did some research for me recently into different countries’ per-capita manufacturing output. Excluding all countries with a population in 2025 of less than one million, on a per-capita basis the U.S. is the country with the world’s 11th-largest manufacturing output. China ranks 28th, with per-capita manufacturing output of only half that of the United States.

The top 50 countries (with populations of one million or more) ranked by per-capita manufacturing output are here. Although expressed in 2015 dollars, these figures are for 2023 and come from this United Nations data source.

Note that only one of the countries – Japan – that rank above the U.S. in per-capita manufacturing output has a population of more than 100 million. Five of the top-ten countries have populations of less than 10 million.

Make of this information what you will, but these data strike me as giving lie to two incessantly chanted claims – one, that we Americans “don’t make things anymore,” and two, that China is wiping the floor with the U.S. on the manufacturing front. And this lie seems further exposed when these data are combined with the fact that, as Colin Grabow summarizes:

The country [U.S.] ranks number one in real manufacturing value-added per worker by a large margin. With value-added of over $141,000 per worker in 2019, the United States bested second-ranked South Korea by over $44,000. The gap with China was over $120,000 per worker.

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Some Links

Hans Bader warns of the harm that will be done by Trump’s tariffs punitive taxes on Americans who purchase imports and import-competing products. A slice:

European Commission President Ursula von der Leyen said last month that the European Union made a “zero-for-zero” tariff offer to get rid of its tariffs on American products if the U.S. will get rid of its tariffs. But Trump was not satisfied with that offer, citing the fact that last year, the U.S. had a trade deficit of over $200 billion with the European Union. Trump has complained about the EU having value-added taxes (VATs) and digital service taxes (DSTs), but these taxes are clearly not the primary reason the U.S. has a trade deficit with Europe — the United Kingdom also has a VAT and a DST, yet the U.S. runs a trade surplus with the United Kingdom. Even in a world with no trade barriers, the U.S. would run a trade surplus with some countries, and a trade deficit with many others.

[DBx: So much for the notion that Trump will eliminate U.S. tariffs if other countries eliminate theirs.]

Scott Sumner is correct: “America is a manufacturing powerhouse.” A slice:

It is important to recall that China has more than 4 times America’s population.  Thus, in per capita terms, American manufacturing output is more than two and a half times larger than that of China.  Indeed, in per capita terms, the US leads every single country on that list, except for Germany (which has 1/4th our population).  We even lead countries like Japan and South Korea in per capita manufacturing output, despite their impressive export sectors.

I suspect that people underestimate American manufacturing because it is a relatively low share of GDP.  But that doesn’t reflect the fact that our manufacturing sector is doing poorly—it isn’t—rather, that our other sectors are so productive that our total GDP per capita greatly exceeds that of almost all other countries.

Also writing insightfully about the state of manufacturing in the United States are Norbert Michel and Jerome Famularo. A slice:

Finally, another big problem with the “China shock” narrative is that the overall employment changes during the period were largely balanced. That is, any negative employment effects from increased import competition were offset by a corresponding increase in exports and export-related jobs. (This offsetting effect occurred even with the lingering labor market problems from the Great Recession.)

Overall, the evidence simply does not support that increased trade with China decimated manufacturing in the United States. Even the job losses concentrated in the Rust Belt, whatever their cause, were offset by new jobs in the South. The net effect of these changes has made Americans richer, and policies designed to shrink trade will only make Americans poorer.

Vladimir Snurenco makes clear that humanity would be much poorer without plastic. A slice:

Plastic-packaged food lasts much longer — a huge win for the poorest one billion people. Airtight plastic containers keep everyday staples like maize flour, rice, and cooking oil fresher, more affordable, and easier to store. Moreover, plastic packaging enables food to travel longer distances and reach remote areas more easily. This is especially important in poor regions, where road infrastructure is lacking and refrigeration is rare.

In healthcare, plastic syringes and protective gear like gloves and masks have made a big difference. Single-use plastic equipment helps reduce infection rates and has played a huge role in vaccine distribution. Plastic medical equipment is vital to protecting the world’s most vulnerable from disease and death.

Amy Willis talks with Juliette Sellgren about Juliette’s marvelous podcast, The Great Antidote.

Nick Gillespie talks with C. Bradley Thompson and Jeremiah Johnson about the rise of the “MAGA manosphere.”

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