Tuesday, January 31, 2017

Trump is Never More Certain Than When He is Completely Clueless

Steve Chapman writes:
Trump is never more certain than when he is completely clueless. The truth is that protection against foreign trade leads away from prosperity and strength. A country that deprives itself of foreign goods is doing to itself what an enemy might try to do in wartime—cut it off from outside commerce. It is volunteering to impoverish itself.

Countries don't "ravage" us when they make "our" products; they help us. At the risk of belaboring the obvious, the essence of trade—foreign or domestic—is that it makes both buyer and seller better off. Otherwise, they wouldn't bother.

But preventing such mutually agreeable transactions is Trump's dream. Already he has announced he will renegotiate NAFTA and walked away from the Trans-Pacific Partnership, a 12-nation deal that Barack Obama signed but Congress had yet to approve.

Trump may promise "great deals," but he is likely to get—and would probably be content with—no deals. What foreign government will rush to sign an agreement stipulating that our companies will only "buy American and hire American"?

His belief that international commerce is bad for Americans and protection is good for us is not a theory but an ancient superstition. One of the most irrefutable insights of economics is that if a country can buy something abroad for less than the cost of making it at home, it's better off buying it. That transaction allows citizens to consume more for each dollar spent. It makes them richer.


  1. "One of the most irrefutable insights of economics is that if a country can buy something abroad for less than the cost of making it at home, it's better off buying it."

    Well no shit. The more meaningful economic insight of comparative advantage is that (economic actors within) a country can sometimes buy something abroad for MORE than the cost of making it at home and still be better off (because it specializes in activities of greater productivity).

    Also Chapman is dishonest here. Trump keeps saying he wants free and fair trade. Just because Chapman prefers multi-national, top-secret trade deals with baked in protectionism and political kickbacks that create new supranational courts and deal mostly in topics other than trade doesn't mean that Trump can't negotiate better trade deals.

    Also, I'm just guessing here that Trump knows more about negotiating and deal-making in one fingernail than Chapman could ever learn.

    Let's face it, beltarianism is a far more dangerous threat to liberty than Trump trade.

    1. Free trade is the only fair trade. Trump's wants something different, he's qualifying his support for free trade by calling it fair as well. Why? Because he wants to protect domestic industry at the expense of the consumer, via tariff if necessary. That's not a good deal for the American people, and NAFTA might be a better deal for the American people than what Trump's proposing.

      Trump has already killed an 8 year old girl who was also an American citizen. I can't remember the last time Nick Gillespie went on a murder spree.

  2. On the topic of international commerce being bad for America, let's rewind the clock to 2005 and listen to some wisdom from the wisest of beards.

    "Why is the United States, with the world's largest economy, borrowing heavily on international capital markets--rather than lending, as would seem more natural? What implications do the U.S. current account deficit and our consequent reliance on foreign credit have for economic performance in the United States and in our trading partners? What policies, if any, should be used to address this situation? In my remarks today I will offer some tentative answers to these questions. My answers will be somewhat unconventional in that I will take issue with the common view that the recent deterioration in the U.S. current account primarily reflects economic policies and other economic developments within the United States itself. Although domestic developments have certainly played a role, I will argue that a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today."

    "When U.S. receipts from its sales of exports and other current payments are insufficient to cover the cost of U.S. imports and other payments to foreigners, U.S. households, firms, and governments on net must borrow the difference on international capital markets.3 Thus, essentially by definition, in each period U.S. net foreign borrowing equals the U.S. current account deficit, which in turn is closely linked to the imbalance in U.S. international trade."

    "The extensive attention paid to the trade imbalance in the media and elsewhere has tempted some observers to ascribe the growing current account deficit to factors such as changes in the quality or composition of U.S. and foreign-made products, changes in trade policy, or unfair foreign competition. However, I believe--and I suspect that most economists would agree--that specific trade-related factors cannot explain either the magnitude of the U.S. current account imbalance or its recent sharp rise. Rather, the U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves the products of more fundamental driving forces."

    - Ben Bernanke


    Does anyone realize what the stated motivation behind the Fed's policies was ... all the way from 2005 onwards? Trump is just crystallizing the same old argument.