Trump Cannot Understand Trade Between Countries

For me, the most entertaining political theater of President Trump these days is his war on trade. Free trade is one of the most enduring economic principles of my field, economics. Some ideas come and go but free trade endures.

The basic idea of free trade is that one area or group of people is best at producing something and another place/group elsewhere is best at something else. By trading both places have more of both goods. Surprisingly, trade also benefits both groups if one place, like one country, is more efficient at everything. That more efficient country will still specialize in the product it does best and trade for others with less efficient countries. Stealing technology or lower wages rates do not negate the benefits of free trade. All of this is called Comparative Advantage.

Within the U.S., restrictions to trade between the states is against the law. In fact, one of the reasons George Washington and James Madison urged holding the Continental Congress in 1776 were the restrictions to trade and tariffs between the colonies. If trade between our states is determined to be in our advantage, so is trade with other countries.

In the last day or two since his talks with China's Prime Minister Trump announced China was going to eliminate tariffs on some items and start buying U.S. products. These were misleading statements because China had no tariffs on the products he mentioned and has been buying U.S. goods for decades. Some cabinet members were asked to explain his remarks. They said they could not.

I don't think there has been a President in more than a century who opposed free trade. Trump is the first.

Certainly it appears he is returning to the free trade earlier Presidents.








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