Tuesday, May 7, 2019

Krugman: Trump's Tweets on Trade and Tariffs are So Idiotic That I Am Going to Reference Them in My Textbooks

Paul Krugman nails it again. Trump is so bad on trade that he makes Krugman look like a sound economist.

PK writes in his new New York Times newsletter:

Trump’s tweets over the past few days may well be featured in future economics textbooks as perfect illustrations of how people misunderstand the basics of international trade and trade policy. In fact, I can pretty much guarantee it, since I’m the co-author of two textbooks.
First, Trump is still saying that because we run a $500 billion trade deficit with China — it’s actually $379 billion, but who’s counting? — that means we lose $500 billion. As some economists quickly pointed out, by this logic we all lose when we go shopping at our local supermarkets. After all, do the supermarkets buy anything from us in return? No!
Second, Trump keeps asserting that China is paying the tariffs he has already imposed. This could be true, if tariffs were driving Chinese prices down; in fact, the threat of more Chinese tariffs on U.S. agricultural exports is one reason grain prices have just plunged to a record low.
But enough time has passed for economists to look at the actual results of Trump’s trade policy so far, and the Chinese are not, in fact, paying the tariffs. As I wrote a couple of months ago, “to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it.”
So if you’re trying to make sense of what’s happening on trade, you should start with the basic point that Trump has no idea what he’s doing, that there isn’t any coherent U.S. policy goal.
-RW


1 comment:

  1. Yet Krugman still attaches the word "we" to the accounting concept of "trade deficits." There is no "we." Individuals trade with each other across artificial, political borders, and politicians and statist economists count up purchases and sales by location of the parties. No importer or exporter cares about this accounting concept; all he cares about is whether he can make the necessary purchase or sale to achieve his ends.

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