The first and most important thing to know about trade is that if it weren’t beneficial to the parties involved, it wouldn’t take place. President Trump doesn’t understand this fundamental truth. He talks as if countries are doing the trading, but for the most part it is private businesses buying and selling with each other. Why would they do it if they were being “ripped off,” as the president often complains?

Donald Trump isn’t stupid, but on the subject of trade he is profoundly ignorant. He doesn’t understand, for instance, that trade deficits are economically meaningless because they are offset by capital investments from abroad. He makes the astonishing assertion that “trade wars are good, and easy to win.”

But nothing good has ever come from a trade war, and reducing imports won’t result in a “win,” because if fewer dollars go abroad our exports will also decline, along with many related jobs. And he doesn’t understand that many more companies with many more employees use steel than make it, and that tariffs on steel imports will be very expensive for millions of American consumers.

Complaints about “unfair” trade are mostly a waste of time. In cases in which foreign competition is egregiously aggressive, the application of World Trade Organization rules and remedies is usually sufficient to correct behavior. In all other cases, why should we care if other countries want to subsidize their exports at a cost to their economies and taxpayers as long as there is a net benefit to our producers who use imported intermediate goods and to our consumers?

The president doesn’t get any of this, and a know-nothing trade policy won’t have any winners.

Martin Jones


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