More importantly, one reason the United States is running a trade deficit is that we are wealthy and larger and can spend more on foreign-made goods and services than others can spend on U. A vast number of industries and workers rely on steel, while few work in the steel-making industry. It’s a story as old as the division of labor. It’s a tax on the vast majority of Americans.
These days, I’m often accused of being a globalist. The word is a pejorative meant to insinuate that I am more concerned about international corporations than I am about my fellow American citizens.
Now, admittedly, I support nearly unlimited trade, no matter what other nations do. It’s mostly because I love America. “Hey, those Chinese communists are killing us with high tariffs, so maybe we should do the same thing to our own citizens” sounds like a counterproductive idea wrapped in a false choice to me. Harming hundreds of millions of consumers to try to save a handful of unproductive jobs, no matter how good it feels, doesn’t put America first.
Donald Trump, a man who campaigned on protectionist rhetoric, says he can finagle better trade agreements for the United States. Honestly, if he’s using the threat of tariffs as a cudgel to attain those deals, I don’t really care if Justin Trudeau’s feelings are hurt.
But judging from his rhetoric, it seems the president believes protectionism is preferable to deals that lower barriers for all parties. His public position on trade – one of his only enduring political positions – is that jobs and industries can be saved by using tariffs.
Take Trump’s top trade adviser, Peter Navarro, who recently laid out his basic concerns in a recent New York Times piece: “First, trade must be not only free but also fair and reciprocal.”
“Fair trade,” once used predominately by progressives, is a neologism without meaning. It allows a person to oppose complex agreements for a litany of reasons. The word “fair” is elastic and ambiguous, which is why it’s so popular with adolescents.
The billions of people in developing nations who work tedious menial labor jobs probably don’t find it “fair” that Americans use the savings we gain from their work to build our unprecedented wealth. Is it fair that some countries sit atop vast amounts of fossil fuels or prime farmlands while others sit on arid or barren land?
Let’s hope trade doesn’t get “fair” for us any time soon.
When Navarro writes that G-7 nations’ trade practices “contribute to America’s more than $500 billion annual global trade deficit in goods and services,” he means American citizens purchased goods they prefer from other countries. Sometimes these products are completely foreign-made, and sometimes they’re partially foreign-made, but Americans always get something in return. As economist Milton Friedman argued long ago, the real gain from international trade is not what we export but what we import.
More importantly, one reason the United States is running a trade deficit is that we are wealthy and larger and can spend more on foreign-made goods and services than others can spend on U.S.-made goods and services. For example, China, which many Americans wrongly believe is an economically comparable power, boasts of a $6,894 gross domestic product per capita, compared with our $52,194.
Navarro correctly claims that cars made in Germany and elsewhere in the European Union are subject to a 2.5 percent tariff, while the EU tariff on American cars is four times as high. “No wonder,” says Navarro, “Germany sells us three cars for every one we export to Germany.”
Well, once we consider that Germany has a population of about 83 million and ours is more than three times that number, it makes a lot more sense. But protectionists need to exaggerate the unfairness to allow us to play victims. In any event, if our trading partners are behaving as poorly as Trump claims (and that’s arguable), what would American consumers gain from paying more? Would the Germans buy more Fords?
“Second,” writes Navarro, “President Trump reserves the right to defend those industries critical to our own national security.”
There isn’t even a good fake economic argument for steel tariffs. A vast number of industries and workers rely on steel, while few work in the steel-making industry. So the administration instead wants to impose costs on aluminum and steel imports – far higher than the average tariffs imposed on the U.S. – because it’s a matter of national security.
Steel isn’t technologically sensitive, nor is it uncommon. A person needs to suspend disbelief to believe that the United States wouldn’t be able to quickly ramp up steel production if, for some incredibly strange reason, Canada and Brazil felt the need to undermine our national interests.
Many voters blame international trade agreements for trends that are largely a product of automation or increased production. It’s a story as old as the division of labor. Politicians pretend to show their empathy for the victims of creative destruction by demanding “fairness.” Instead, we end up distorting markets, killing new jobs and ignoring reality.
On top of it all, protectionism is cronyism. It’s top-down control. It’s the state picking winners and losers. It’s a tax on the vast majority of Americans. Tariffs are all the things conservatives used to claim to be against.
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