Pandemonium, Not Policy
Here’s a reply to a recent correspondent.
Ms. C__:
Thanks for your follow-up e-mail to my note.
You write that I “wrongly scrutinize President Trump’s trade actions like an academic economist. He’s a successful businessman strategically deploying trade policy to bargain for America’s advantage over other countries.”
With respect, you and Trump suppose that global commerce is a zero-sum activity; you think that one country gains wealth only by tricking or forcing other countries into losing wealth. That this supposition is mistaken can be seen by observing your own daily life: You are enriched by working for your employer and by shopping at your local supermarket. So, too, is your employer enriched by employing you, and your local supermarket is enriched by selling groceries to you. And no one is made poorer. Voluntary exchange by people using their own property is positive-sum, not zero-sum – an economic reality that doesn’t change if a political border separates the persons who trade with each other.
In addition, Trump and the apologists for his protectionism offer myriad different justifications for tariffs. Taken together, these justifications reveal, not a ‘strategy,’ but excruciating ignorance of trade as well as an incoherent approach to trade policy.
I took a five minutes to google “Trump” “tariffs” and different justifications for tariffs, such as “national security” and “protect American jobs.” Just in the past week, we’re told that Trump’s tariffs are meant to protect American jobs and invigorate American industry, supply leverage to pressure foreign governments to change their trade policies, supply leverage to pressure foreign governments to change their non-trade policies, strengthen America’s national security, fight alleged “unfair competition,” and – from the incoming chairman of the Council of Economic Advisors – to improve America’s terms of trade and to reduce the trade deficit and to deal with the (fictional) problem of America’s “hollowed-out” industrial base. And just yesterday, Trump boasted that he’ll use tariffs to raise so much revenue that we’ll need a new agency – the External Revenue Service – to collect it.
This jumble of justifications reflects ignorance of reality (for example, America’s industrial base has not been “hollowed out”), ignorance of economics (for example, every American job protected by a tariff is matched by an American job destroyed by that tariff), and dizzying inconsistency (for example, because no revenue is reaped by imports kept out of the country by tariffs, tariffs for protection are a poor tool for raising revenue).
Far from being masterful strategy, Trump’s trade policy is mindless pandemonium.
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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