Thursday, July 28, 2016

A Letter to “A Proud Trump Man”

A Don Boudreaux  letter to someone who describes himself as “a proud Trump man”:
Mr. Rocky Roberts

Mr. Roberts:

Thanks for your e-mail.

Objecting to a recent blog-post of mine, you – who describe yourself as “a proud Trump man” – write that you and others who support Donald Trump’s candidacy oppose only “increased international trade and immigration but not increased international investment in America’s economy.”  Indeed, praising the Mercedes factory near your home in Alabama, you claim that you “cheer” all such investment “which doesn’t harm national security.”

You’re wise not to object on economic grounds to foreign investments in America.  But there’s a deep inconsistency between your support for such investments and your support for Trump’s mercantilist assertions and policy proposals.  For Mercedes, Toyota, Michelin, Sony, Ikea, and other foreigners to build factories and facilities in, and to otherwise invest in, the American economy they must acquire American dollars.  Ultimately, the only way for foreigners to acquire American dollars for investment is to sell goods and services to Americans – that is, to export to America – and then to not spend all of their export-earned dollars on purchases of American exports.  The result of this foreign saving of American dollars is an American trade deficit.  This result, of course, is one that Trump frequently if ignorantly warns spells the ruination of America.

Your opposition to increased imports, therefore, is in fact, and unavoidably, opposition to some combination of increased American exports and increased foreign investment in America.  In short, another name for the so-called “U.S. trade deficit” about which Trump squawks so regularly is “U.S. capital-account surplus” – that is, increased foreign investment in America that you astutely recognize is an economic boon for Americans.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercator Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek.

1 comment:

  1. Yes but, you see, El Trumpo wants 'smart' trade. A term that would be totally devoid of meaning except for "proud Trump men".