Wednesday, August 28, 2019

All Talk of “Winning” and “Losing” at Trade is Daft

Here’s a Don Boudreaux letter to Club for Growth president David McIntosh:
Mr. McIntosh:
Sunday on Meet the Press you said that “And what we like about President Trump’s vision on trade is his goal of zero-zero tariffs. We support that strongly. And I kind of have come to recognize, these tariffs are his way of forcing the Chinese to come to the table. They’re costly. And we want them to go away. But he’s using them to get to that ultimate goal of zero-zero tariffs.”
I’m sorry, but for your happy interpretation of Trump even to begin to be believable he would have to evince an actual understanding of trade, an understanding of realities such as that imports are benefits and exports are costs paid to receive those benefits – that a U.S. trade deficit with the rest of the world does not mean that we are “losing” at trade – that a U.S. trade deficit with an individual country such as China is a meaningless phantasm – that all talk of “winning” and “losing” at trade is daft – and that the pattern of global supply chains is largely determined by comparative advantages, and that disruption of these supply chains with tariffs (and threats of tariffs) inflicts huge losses both abroad and here at home.
Yet Trump’s revealed ‘understanding’ of trade is precisely the opposite of these truths. Nearly every syllable out of the man’s mouth about trade expresses a fallacy. And so his words alone convince me that there’s no reason to believe that his ultimate goal is global free trade.
But since becoming president Trump’s got a record of more than words; he’s got policies. And these policies prove that his goal is not a world of “zero-zero tariffs.”
Forget that history belies those who assert that tariffs raised unilaterally at home eventually lead to a world without tariffs. Instead consider any one of Trump’s trade policies chosen at random – say, his administration’s recent deal with Mexican tomato growers to set minimum prices for Mexican tomatoes sold in the U.S. This deal – which imposes unnecessary burdens on American consumers as it inflates the revenues of both American and Mexican tomato growers – is protectionism pure and simple. It’s impossible to square such cronyism with a commitment to bring about a future with no trade barriers.
It’s dismaying that you and so many other conservatives today pusillanimously excuse Trump’s protectionist interventions – interventions that, were these inflicted instead by a Democrat, you would be among the first to denounce as the economic and ethical outrages that they in fact are.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The above originally appeared at Cafe Hayek.


  1. If only the mainstream media would pick up on these posts.

  2. China is playing trade as a winner-loser game. Victory for China, or at least the government there of acts to secure the means of production within their borders. The idea of low prices was to have manufacturing relocated or built in China while what remains elsewhere gets scrapped. That's the game.

    Ivory tower economists don't see that. Trump does and exploits it or just plain doesn't understand how to fix it or doesn't want to go there. As a result he does ham-fisted out of date things like tariffs. The root cause is ultimately central banking, both the fed and its counterparts elsewhere in the world including China. Another aspect is that in the USA the environment is protected while in China it is largely not. And the environmentalists don't as a rule pressure communists. So for everything from pollution control costs to CO2 reduction drives manufacturing to China.

    On the level of manufacturers it is a competitive 'game', and the government of China is playing and fedgov for the last 20 something years has largely been giving China a handicap or more.