Trumpian Trade Incoherence
Here’s another letter to the Wall Street Journal.
Editor:
In the span a less than two days, the Trump administration revealed yet again it’s trade-policy’s incoherence. On Saturday, Mr. Trump said “I couldn’t care less [if the prices of foreign cars rise due to tariffs], because if the prices on foreign cars go up, they’re going to buy American cars. I hope they raise their prices, because if they do, people are gonna buy American-made cars” (“Trump Says He ‘Couldn’t Care Less’ if Car Prices Go Up,” March 30).
Then earlier today, Trump’s trade adviser Peter Navarro announced on “Fox News Sunday” that – as you describe it – “the revenue generated by imposing tariffs will help offset the cost of extending expiring tax cuts in a package being put together by congressional Republicans that will benefit middle-class Americans.”
If Mr. Trump is correct, the tariffs will cause Americans to significantly cut back on buying imports. Because no tariff revenue is raised on goods that tariffs keep out of the country, Mr. Trump’s prediction that tariffs will prompt Americans overwhelmingly to shift to buying domestically produced goods is a prediction that his tariffs will not bring in significant amounts of revenue. But if Mr. Navarro is correct – that is, if the tariffs will bring in significant amounts of revenue – then the tariffs will do relatively little to shift American purchases to domestic alternatives and discourage imports. There won’t be much in the way of protection of the industries and workers that Mr. Trump and his lieutenants, including Mr. Navarro, have long insisted must be protected by the tariffs.
No word are adequate to convey the muddle-headedness of this administration’s trade ‘policy.’
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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