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Steven Kamin decries the harmful economic uncertainty being generated by Trump’s trade ‘policies.’

Kyle Handley is understandably unimpressed with Robert Lighthizer’s recent attempt, in the pages of the New York Times, to defend Trump’s indefensible protectionism. Three slices:

One of Lighthizer’s central arguments is that the US has “transferred” $20 trillion of its wealth to foreign entities. The implication is that the country has been drained of resources due to trade deficits, leaving it at the mercy of foreign creditors. But this is a misrepresentation of what these international investment flows mean in practice.

The $20 trillion figure he cites refers to the net international investment position (NIIP), which measures the difference between US-owned assets abroad and foreign-owned assets in the United States. When we look at gross versus net figures, they tell a different story: As of Q3 2024, US assets abroad totaled $37.86 trillion, while foreign-owned assets in the US stood at $61.46 trillion, resulting in a net investment position of -$23.60 trillion. This is not a one-way loss. It is a reflection of the US economy’s attractiveness to global investors. The “wealth” wasn’t transferred to foreigners; they bought it. Owning US stocks, bonds, and real estate has been a pretty good investment in recent years, and the US has long been the top global destination for foreign direct investment. If we flip this around and see US investors buying foreign stocks for their retirement portfolios, we wouldn’t say foreign wealth was transferred to US retirees.

If foreign ownership of American assets is framed as a failure, then logically should we conclude US ownership of $37.86 trillion in foreign assets is somehow exploiting the rest of the world? It’s just not a serious argument. American companies have invested heavily abroad—whether it’s Ford in Mexico, Apple in China, or Coca-Cola in Europe—and those investments are seen as a sign of US multinational firms’ economic strength. (They also, as my colleague Scott Lincicome recently noted, invest heavily here too, reflecting the often-complementary nature of US multinationals’ domestic and overseas investments.)

One need only look at the latest figures from the BEA (reproduced below) on outward and inward foreign direct investment to see this is a two-way street. The United States has over $6 trillion in outward FDI in Europe, the Asia-Pacific, and Latin America combined. Likewise, foreigners have invested in the US. For example, Japan’s Honda builds the Accord in Ohio, Korea’s Kia has manufacturing facilities in Georgia, and Germany’s BMW has operations in South Carolina and elsewhere.

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Lighthizer’s analysis focuses almost exclusively on bilateral goods trade deficits, reinforcing a narrative that the US is losing to countries that export more goods to America than they import. But this overlooks a major component of US trade: services. That’s a problem when your only solution to trade deficits is a tariff on goods.

The United States is a global leader in services trade, running large trade surpluses in key sectors such as finance, education, tourism, technology, and R&D. The same countries where the US runs a goods trade deficit—such as China, Korea, and Japan—import billions of dollars in US services such that the US runs an overall trade surplus in services with the world. In many cases, these surpluses offset the goods deficit, making the overall trade relationship far more balanced than Lighthizer suggests.

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Lighthizer’s policy prescription—a system where tariffs are automatically imposed whenever a bilateral trade deficit reaches a certain threshold—is deeply flawed. It assumes that trade imbalances are purely the result of policy choices, ignoring the role of investment, financial flows, supply chains, and consumer preferences.

Moreover, trade imbalances are inherently linked to capital flows. A country that runs a trade deficit—such as the US—must also run a financial account surplus, meaning it attracts investment from abroad. Lighthizer’s tariff mechanism would disrupt this balance, potentially reducing foreign investment in US businesses, real estate, and financial assets. It also, as economic theory and practice both show, would perversely reduce US exports.

Scott Sumner expresses his well-founded objections to Trump’s proposed “reciprocal” tariffs.

GMU Econ alum Jeremy Horpedahl busts the myth that foreign workers are denying jobs to Americans.

Walter Olson reports on the resignations at the U.S. Department of Justice in response to the Trump administration’s disgraceful decision to ease up on the corruption case against NYC mayor Eric Adams. A slice:

In Trump’s second administration, it has taken only three-and-a-half weeks to bring the DOJ to a mass resignation event. Yesterday, as the New York Times reported, Danielle R. Sassoon, interim US attorney for Manhattan, “quit after the Justice Department told her to withdraw corruption charges against Mayor Eric Adams.… Ms. Sassoon, 38, joined the Southern District in 2016. A graduate of Harvard College and Yale Law School, she clerked for Justice Antonin Scalia on the Supreme Court and is a member of the Federalist Society, the conservative legal group.” Earlier, Sassoon had clerked for noted conservative judge J. Harvie Wilkinson of the Fourth Circuit.

It was a high-visibility resignation. Handling a large volume of complex cases and high-level white-collar crime investigations, the Southern District of New York is regarded as a premier US attorney’s office. Sassoon, who had been named interim chief by the incoming administration itself, most recently co-led the district’s appeals unit and is perhaps best known for successfully prosecuting crypto founder Sam Bankman-Fried.

The background is the incoming administration’s decision to drop bribery and corruption charges against New York City Mayor Eric Adams. The case is complex, but Andrew McCarthy of National Review, who’s anything but a reflexive critic of Trump’s legal moves, dismisses as “ridiculous” and “laughable” the department’s cover story for dropping the charges, a decision he says was instead reached on “explicitly political grounds.”

Also critical of the Trump administration’s handling of the Eric Adams case is the Editorial Board of the Wall Street Journal. A slice:

Worse is the lesson for Administration lawyers. The message is that rather than exercise individual legal judgment, they’d simply better salute without cavil—or else the Administration will ruin their reputations.

National Review‘s Mark Antonio Wright rightly decries Trump’s disregard for Constitutional text, laws, and norms. Three slices:

There’s no need to overreact to the fact that the president of these United States casually tweeted out on a Saturday morning the statement, “He who saves his Country does not violate any Law.”

No — it’s sobering enough that the Chief Magistrate of our Republic would favorably repeat the words of Napoleon Bonaparte (the quote is perhaps apocryphal) on this subject and his excuses for the reality that he deformed his own republic into an empire, with himself as its monarch. Indeed, it should be sobering enough that such a statement from this president is no shocking event in our politics.

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In certain similar ways to the French emperor, Donald Trump is a Great Man too. He has changed history, and he may very well leave an enduring mark on it. And, I’m sure, he may do some good things while in office. But after everything we have seen of Trump these last ten years, no American ought be surprised by the fact that our duly elected president cares nothing at all for our Constitution, its Madisonian vision of separation of powers and check and balances, or his oath to protect it and defend it.

What Trump has declared is, indeed, antithetical to a republican form of government per se. As John Adams, our second president, once wrote, “A republic is the best form of government, a government of laws, not arbitrary rule.”

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But what Trump has declared is most certainly un-republican, and therefore un-American. There is no legitimate argument otherwise. To defend it is the road to serfdom.

While a president is cloaked in numerous awesome powers, he is in no sense above the law; he has no legitimate power to abrogate it. Indeed, his very office is a creation of law, of the Constitution. No matter the circumstances, no American — certainly no president — is above the law as such. No, not even to “save it.”

Reason‘s Robby Soave criticizes the Trump administration for its juvenile reaction to the Associated Press’s insistence on continuing to call the Gulf of Mexico the “Gulf of Mexico.” A slice:

President Donald Trump’s exceedingly silly efforts to rename the Gulf of Mexico the “Gulf of America” became particularly obnoxious this week, as the White House announced that it would strip the Associated Press of access to presidential press briefings and Air Force One flights. The news organization’s transgression? Sticking with Gulf of Mexico in its official style guide.

There are obvious hypocrisies running in both directions here. Many liberal and mainstream media organizations have embraced the progressive push to rename various public locations, landmarks, sports teams, etc., or to use new and awkward naming conventions in an effort to appease social justice activist groups. The A.P. deciding in July 2020—in the midst of the summer of unrest following the killing of George Floyd—that its style guide would henceforth capitalize black but not white is a good example of this.

But in this case, the MAGA hypocrisy is even more galling. If Joe Biden’s White House had stripped a right-leaning news organization of Oval Office access because it refused to recognize the area in front of Lafayette Square in Washington, D.C., as Black Lives Matter Plaza, conservatives would have gone ballistic. Imagine a Biden surrogate asserting that any journalists who failed to properly respect the space’s new name were guilty of spreading misinformation—the opprobrium would be cacophonous and well-deserved.

Cato’s Michael Cannon warns of the dangers to ordinary Americans’ health posed by RFK, Jr.

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… is from page 102 of my late, great colleague Walter Williams’s 1982 book America: A Minority Viewpoint (original emphases):

Under the market system, power is distributed proportionately or as it were, one-man-one-vote. In other words, though poor individuals have fewer dollars, each dollar has jus as much power as another person’s dollar. This means that poor people can compete with rich people and get at least some of the goods produced by society. For example, poor people competed successfully with higher-income people for housing in West Philadelphia, Oak Lane, Germantown, and elsewhere where higher income people used to reside. However, they will not be able to do the same in the suburban areas where the political mechanism of zoning reduces effective competition through requirements that units be single-family dwellings of a minimum footage and constructed on lots of minimum size.

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More than two dozen individuals have e-mailed me since Trump was re-elected to express their displeasure with my hostility to Trump’s trade ‘policies.’ I apologize that I’ve not written back personally to many of you. Please accept this letter to the group as my response.

All:

Thanks for your many notes.

I’ll state my conclusion immediately: None of your attempts to justify Trump’s protectionism is credible. It’s obvious that each of you is sincerely, and in a generous spirit, searching to find what you assume to be a deep and ingenious logic to Trump’s tariffs and tariff-threats. Yet you search in vain.

Trump has a four-decades-long record of expressing hostility to free trade, and what he says today differs in no essential respects from what he said in years past. Trump is what he has always been: a cartoonish mercantilist. He believes that the purpose of international trade is to bring as much money into the economy as possible; he’s completely blind to the fact that the ultimate gains from trading with foreigners are the goods and services that we receive from them as our imports rather than money. This false belief of his explains his hostility to U.S. trade deficits with the world.

But this mistaken belief of his is only the start of his confusion. He’s not even consistent. With one breath he bemoans U.S. trade deficits and with the next breath boasts of his efforts to persuade foreigners to invest in America – hilariously unaware that the foreign investments about which he boasts contribute to the trade deficits that he bewails. Why should a person so utterly ignorant of a such a foundational reality be presumed to be the mastermind of a grand strategy that will redound to Americans’ benefit?

It gets even worse. One justification for his announced “reciprocal tariffs” is the fact that the U.S. has trade deficits with several individual countries. It cannot be said too often that in a world of three or more countries, there is absolutely no reason to expect any pair of countries to have ‘balanced’ trade with each other even if no country ran an overall trade deficit or trade surplus. This economic reality isn’t some esoteric theory or unique opinion held only by committed free traders; it’s common sense every bit as understandable as is the fact that your household doesn’t – and shouldn’t – have ‘balanced’ trade with supermarkets, dentists, Amazon, or any other individual entity with whom you trade.

Yet the President of the United States now wants to conduct trade policy in pursuit of the U.S. having balanced trade with every individual country. Forget that a host of practical realities clearly beyond Trump’s ability to comprehend would prevent the achievement of this ridiculous goal. Instead recognize that having this ridiculous goal itself is sufficient to reveal that Trump’s ignorance of trade is vast and beyond question.

There’s no question that tariffs and tariff threats can sometimes be used to pressure foreign governments to bend to the will of the U.S. government. There’s also no question that it’s possible to tell happy stories of how a wise and informed U.S. government might use this power to achieve both economic and non-economic outcomes that redound to the net benefit of Americans. But even under the best of circumstances it’s wise to be cautious about encouraging the use of such discretionary power. In the case of Trump & Co., the case for tolerating such discretionary use of the tariff-imposing power is completely crazy: For the reasons mentioned above and others (for example, his belief that U.S. tariffs aren’t paid by Americans) Trump is a proven ignoramus when it comes to trade. There is no more reason to entrust our trade policy to a man as ignorant as he is about trade than there is to entrust our health to a proud faith healer.

Sincerely,
Don

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… is from this recent post, at his Substack site, by Arnold Kling:

Maury [Obstfeld] was in my cohort at MIT. He singles out Michael Pettis for misunderstanding international economics. I would say that if Paul Krugman, Maury Obstfeld, and Tyler Cowen all think that you’re wrong on a point of economics, you ought to be very humble about pushing it, or be willing to back away altogether. But folks like Pettis or Oren Cass just defy conventional economics with sheer bluster and demagoguery.

DBx: Yes.

If Michael Pettis and Oren Cass – and also Robert Lighthizer, Peter Navarro, Wells King, and Donald Trump (to name just a handful of today’s most vocal protectionists) – really believe what they say about trade, they reveal themselves to be ignorant of the most basic economic principles of trade. The fact that their ignorance runs so deeply that it prevents them from grasping just how uninformed they are doesn’t diminish that ignorance even though it infuses their pronouncements with tones of unwarranted confidence. And this ignorance is sufficient reason to reject as fantastical any of the many suggestions that the protectionism today peddled by Team Trump is really a brilliant strategy – one that mere economists cannot appreciate – that will befuddle America’s enemies and strengthen us Americans in the long-run.

Protectionism as a means of enriching the nation is nonsense, pure and simple. It’s as logical as is the assertion that ten minus two equals seventeen. Arguments in support of protectionism enchant only two sorts of people. One is individuals who have something to gain from it at the larger public expense; the second is individuals who have yet to think seriously about the matter.

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GMU Econ alum Dominic Pino argues what shouldn’t need to be – but, alas, what today nevertheless must be – argued, namely, the Trump administration should abandon its scheme of copying other countries’ tariff tax rates. Two slices:

“Reciprocal tariffs” are framed to sound like a simple matter of fairness. But there’s nothing fair about letting other countries make U.S. tax policy, and that’s what the Trump administration’s proposal amounts to.

The basic principle of national sovereignty on taxation was a major flashpoint during the Biden administration, when Secretary of the Treasury Janet Yellen was trotting around the world trying to create a global corporate-tax cartel. As NR’s editors said of Yellen’s attempt at creating a global minimum corporate tax, “Taxation and sovereignty are inextricably intertwined. Different countries have different taxing and spending priorities.”

“Reciprocal tariffs” would similarly outsource U.S. tax policy to other countries. The administration’s as-yet-unclear proposal would reportedly include considering non-tariff factors such as other taxes, subsidies, regulations, and exchange rates along with tariffs in setting the “reciprocal” rate for the U.S.

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The fundamental problem here is that Trump believes tariffs are paid by people in other countries, not the country imposing the tariffs. That’s the only way you can view it as “unfair” to one’s citizens to have a lower tax rate than another country. Foreign governments taxing their people more is a terrible reason for the U.S. government to tax Americans more.

Bob Graboyes does “a nautical-neurological exploration of Donald Trump’s support for tariffs.”

Scott Lincicome reports that the Inflation Reduction Act is a huge – to put it nicely – waste of money. Two slices:

As the Breakthrough report documents, the IRA’s subsidies have already become way more expensive than the already-high $383 billion price tag the Congressional Budget Office originally calculated (which itself was billions more than what Senate Democrats first claimed). “More recent estimates,” the report notes, “project the total cost of these programs to run closer to a trillion dollars, with the cost of wind and solar subsidies alone substantially exceeding the cost of the original estimates not only for the clean energy subsidies but for the entire cost of the package, inclusive of non-climate related spending.”

Even these revised totals, however, substantially undershoot the IRA’s actual costs because they stop counting after the 10-year budget window closes. Thus, as my Cato Institute colleague Travis Fisher discussed in 2023, energy firm Wood Mackenzie has estimated that the IRA’s energy subsidies could hit $3 trillion through 2050, and his own forthcoming estimates push the number even higher—to as much as $4.7 trillion over the same timeframe.

Even in Washington, that’s a lot of money.

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In short, an IRA focused on supply-side reforms alone may have done more for the environment than the subsidy-focused law we got, while saving American taxpayers trillions in the process. And the fact that, as noted above, no one in power in 2021-2022 even considered modeling this alternative approach is a policy failure of epic proportions.

Terry Anderson offers sound advice on what to do with federal lands in the U.S. A slice:

Federal agencies manage 640 million acres, 28% of U.S. land. The three largest federal land agencies—the U.S. Forest Service, the Bureau of Land Management and the National Park Service—together manage a swath of terrain almost the size of Argentina.

If Messrs. Musk and Trump owned the federal lands, they would have three options: raise the price of goods and services (timber, minerals, visits to national parks), reduce labor costs and liquidate money losers.

Mr. Musk should begin by asking the federal land agencies to submit profit-and-loss statements, as any business does. It took days for me to unearth this information from the government. I estimate that for 2023 (2024 data aren’t available yet) the Bureau of Land Management lost $734.6 million, the Forest Service lost $9.77 billion, and the National Park Service lost $2.82 billion.

In 2015 the Department of Commerce estimated that all federal lands were worth $1.8 trillion. Applying a simple long-term government bond yield of about 5%, a $1.8 trillion asset should yield $90 billion a year, not lose more than $13 billion.

My intrepid Mercatus Center colleague, Veronique de Rugy, identifies five major flaws in that misbegotten beast, the Consumer Financial Protection Bureau. A slice:

The CFPB’s unusual governance structure—made up of a single director (who can initially only be fired for cause) and funding outside the normal congressional appropriations process—has been a lightning rod for controversy. The Democrats who wanted this agency thought it would be a great idea for the CFPB to get its funding from the Federal Reserve’s earnings (up to a cap) instead of annual appropriations from Congress, all while its director couldn’t be fired by the president. The irony is rich. Many of the same legislators who are complaining loudly right now about the lack of congressional oversight over the Department of Government Efficiency designed the CFPB to be insulated from congressional oversight and democratic accountability. And indeed, its aggressive agenda is evidence that the unaccountable structure enables the CFPB to pursue far-reaching policies that can burden businesses and the economy at large.

Jack Nicastro is correct: “Subsidizing American farmers is not a valid justification for the U.S. Agency for International Development.”

Juliette Sellgren talks with Cara Rogers Stevens about Thomas Jefferson and slavery.

Boom!

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… is from page 62 of Johan Norberg’s excellent 2023 book, The Capitalist Manifesto (original emphasis):

[T]he market economy is the first economic system that makes it profitable to be colour-blind and look for the best supply and the best demand, regardless of who is responsible for it. Of course, it will not make everyone colorblind, but it does so more than otherwise would have been the case (especially in combination with the liberal values on which capitalism is based). Attitude surveys show that Western market economies are the world’s least racist societies.

DBx: Yes.

Indeed, in the modern market economy, to find large collections of overt racists you must look to governments and the non-profit sector, especially higher education. Shielded from the forces of competition, and largely living off of funds either extracted from taxpayers or cajoled out of gullible philanthropists, too many Western intellectuals give vent to their racist predilections. Throw a stone in a university faculty club or in the coffee room of a randomly chosen nonprofit outfit. Only there do you have a real likelihood of hitting a genuine racist, someone obsessed with skin color or ethnicity and absolutely certain of his or her theory of the inherent moral inferiority of particular sorts of individuals.

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Here’s a letter to Time:

Editor:

President Trump’s proposed imposition of “reciprocal tariffs” is a terrible idea that promises only economic harm to all Americans save the tiny handful who’ll be relieved of the need to compete fairly for dollars spent by American consumers (“What Are Reciprocal Tariffs and Who Might Be Impacted by Trump’s Plan?” Feb. 13). Dartmouth trade economist Douglas Irwin, writing in today’s Wall Street Journal, explains in more detail the damage that will be wrought in America by such tariffs.

But one point deserves more emphasis: When Mr. Trump justifies his proposed tariffs by saying (as you quote him) “whatever they charge us, we’re charging them,” he misleads. Protective tariffs are charges that governments impose on their own citizens. Although typically spoken of as being “imposed on imports” or “imposed on foreign producers,” protective tariffs – being designed to raise the prices paid by domestic citizens – are taxes that governments “charge” their own citizens. A more accurate way to say what Mr. Trump does would be “whatever they charge their citizens, we’ll charge our citizens.”

Put in this correct way, it’s clear that our government is under no economic or ethical obligation to saddle us with unnecessary burdens simply because other governments so saddle their unfortunate citizens. Quite the opposite.

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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Douglas Irwin, writing in today’s Wall Street Journal, exposes the economic illiteracy of Trump’s proposed “reciprocal tariffs.” Two slices:

At an Oval Office press conference Thursday, President Trump confirmed that he’s going ahead with his reciprocal tariff plan. The U.S., he said, will impose the same tariffs on other countries as they impose on the U.S.: “No more, no less.” That sounds fair—we treat them the way they treat us—but it’s actually a terrible idea.

It amounts to outsourcing U.S. tariff policy to other countries. They would dictate what our tariffs would be. If other countries put high tariffs on American goods, then we would impose high tariffs on their goods. So much for American sovereignty. So much for deciding what’s in our own national interest. The British economist Joan Robinson once said that a country shouldn’t throw rocks into its own harbors just because other countries have rocky coasts. The same principle applies here: The U.S. shouldn’t have stupid tariff policies just because other countries have stupid tariff policies.

A reciprocal policy would enormously complicate the U.S. tariff system. The Harmonized Tariff Schedule of the U.S., which details individual rates on particular commodities, has about 13,000 line items. The U.S. trades with roughly 200 countries. Is Washington ready to impose and manage 2.6 million individual tariff rates? The lobbying pressures for exemptions and exceptions on the U.S. side would be enormous. This would fill the swamp, not drain it. Foreign exporters would go to great lengths either to get their products under a lower tariff classification or to transship them to another country to reduce the duty they would face.

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The Trump administration thinks it’s using tariffs to beat up other countries. In reality, U.S. businesses and consumers will take the hit. Even Mr. Trump’s hero William McKinley said, “Commercial wars are unprofitable.” Sadly, it’s advice that the administration seems likely to ignore.

The Editorial Board of the Wall Street Journal rightly criticizes Trump’s economically ignorant tariff threats. A slice:

All of this explains why markets breathed a sigh of relief after Mr. Trump delayed the pain Thursday by directing his Commerce Secretary and U.S. Trade Representative to study how tariff rates could be adjusted to match foreign trade barriers. Commerce Secretary Howard Lutnick said he planned to complete the report by April 1. Lobbyists, ready, set, go.

Mr. Trump has expressed special pique at European tariffs on U.S. autos and India’s on Harley-Davidson motorcycles. But his willy-nilly tariff threats—on one day, off the next—create business uncertainty that will hurt U.S. investment and hiring.

Eric Boehm reports that Trump’s ‘reciprocal’ tariffs could be the largest tax increase in the U.S. since WWII. A slice:

The specifics of Trump’s reciprocal tariffs plan remain sparse. The executive order Trump signed Thursday instructed the Department of Commerce and the U.S. Trade Representative to develop new proposed tariff levels that take into account the tariffs charged by other countries to import American goods, as well as industrial subsidies, value-added taxes, and other economic policies that Trump views as unfair. It will take weeks (and perhaps longer) for the new tariffs to be calculated and rolled out, and the changes may be implemented on a country-by-country basis, according to Megan Cassella, a reporter for CNBC.

Regardless of how it shakes out, it seems like Americans will be facing a massive tax increase. “White House officials claim that the new policy could yield up to roughly $1 trillion in new annual revenue,” the Washington Examiner reported.

That number seems a bit absurd. America imported about $3.3 trillion of goods last year, so achieving $1 trillion in new tariff revenue would require tariffs to be set so high that they would severely reduce imports—thus reducing the revenue from tariffs. Think of it as a reverse Laffer curve. That’s one reason why tariffs are a poor way to generate revenue.

Still, if that’s the figure the White House is going with, let’s call it what it is: The largest tax increase since World War II, as a share of America’s gross domestic product (GDP). Total American GDP was about $29 trillion last year, so a $1 trillion tax increase would consume about 3.4 percent of the economy, making it the largest tax increase since the Revenue Act of 1942.

Claude Barfield describes Trump’s proposed tariffs on semiconductors as “foolhardy.” Two slices:

The Biden administration, and now the incoming Trump administration, seem determined to support and subsidize the US semiconductor industry for competitiveness and security imperatives. A central vehicle for this semiconductor industrial policy initiative is the CHIPS and Science Act of 2022. In addition to providing substantial sums for R&D, the act provided some $39 billion to advanced semiconductor manufacturing in the US.

Despite this support, Intel’s struggles have continued, and indeed become graver. In 2022, in an attempt to regain technological prowess, the company brought back former CEO Pat Gelsinger, who had led the company before its downward spiral. Gelsinger embarked on a highly ambitious campaign not only to restore Intel’s lead in advanced chip design, but also to compete in the capital-intensive market for manufacturing chips. Over the past three years, while there has been some progress on the design side, Intel has failed to significantly beak into chip manufacturing—even as huge capital costs sapped the company’s resources and undercut investor confidence. Last December, only weeks after the Biden administration signed an agreement to supply some $7.5 billion in manufacturing subsidies for Intel for new “fab” construction, the Intel board fired Gelsinger, leaving the company with interim leadership.

That brings us to the Trump administration. Despite his jabs at the CHIPS Act, President Trump has stated his commitment to reshoring US manufacturing, particularly in strategic technologies like semiconductors (export controls will not hold China back forever).

…..

Foolishly and dangerously, President Trump has vowed to put tariffs on semiconductors. TSMC manufactures 90 percent of the world’s most advanced chips and while it is investing in the United States, it will be many years before the US can cease importing these chips from the company.

The Editorial Board of the Orange County Register writes correctly that “Trump’s tariffs are neither clever nor wise.” A slice:

We already know that tariffs are in fact a terrible idea, just as we know that things like rent control or price controls are bad ideas. Both in theory and practice, these policies fail. Yet are superficially appealing to those with no appreciation for the reality of trade-offs.

Trump is such a person. While he has declared the word tariff “the most beautiful word in the dictionary,” he’s at the same time indicated he doesn’t really know how tariffs work. “It’s not going to be a cost to you. It’s going to be a cost to another country,” he said at a rally in September.

In case it needs to be spelled out: tariffs are taxes on imported goods, with the importers paying the taxes and passing along the higher costs to you, the consumer.

GMU Econ alum Dominic Pino explains that Value-Added Taxes (VATs) are not tariffs. A slice:

As you can see, the VAT does not give Swiss chocolate an advantage over American chocolate from the Swiss consumer’s perspective. He is paying the same VAT either way. It’s not a tariff when an American pays sales tax on a good imported from Europe, and it’s not a tariff when a European pays VAT on a good imported from America.

Also helping to debunk the false claim that VATs are an akin to protective tariffs is my intrepid Mercatus Center colleague, Veronique de Rugy. A slice:

A VAT is a consumption tax, not a tariff. It applies equally to all goods sold in a country – domestically produced or imported. If a country has a 20 percent VAT, both a domestically made car and an imported car sold within that country pay the same VAT. There is no built-in preference for local producers; in that sense, it is not discriminatory.

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… is from page 3 of Philip K. Howard’s 2024 book, Everyday Freedom:

For most of American history, the power and imperative to own your own actions and solutions – the concept of individual responsibility – was implicit in the idea of freedom.