Trump's Laughable Trade Policy

A while back I wrote some blogs about President Trump's mistakes in trade policies. He put tariffs on Chinese imports. I wrote that this would reduce the standards of living in both China and the U.S. Almost every economist that ever lived has predicted two countries gain from trade and both lose when it is stopped. In addition, every President for many decades has endorsed reducing tariffs. Local senators and representative sometimes support tariffs for their own local reasons, but Presidents are elected nationwide and should see their interests as the nation's interests.

I've tried to understand why Trump would do something that hurt the country he is supposed to help, the U.S. Some say it is because decades ago, when we bought lots of Japanese imports, Japanese investors competed against him to buy properties. He blamed their wealth on our imports from Japan. There is also the view that he sees trade as something he thinks he understands but does not. Having given himself title of great negotiator he thought of trade as a won-lose negotiation and he could make China lose.

The result of his tariffs and lack luster response to the Corona virus are a larger trade deficit, a net loss of manufacturing jobs, lower farm prices and higher unemployment. China has found other markets for its products and buys less from our agricultural industry. This was as predictable as the sun coming up tomorrow. 

The internal problem, the political problem, with trade is that when another country finds it can produce something more efficiently an industry may move there. Industries, like the textile industry, sometimes move from one part of the U.S. to another. In a perfect world, some of the benefits of buying off shore would be paid to those who lost jobs (this seldom works very well). Trump has tried to pay farmers for the losses he cause by raising, rather than lowering, tariffs. So we are now paying farmers after our prices have increased due to tariffs. We are in a lose-lose experience.

The benefits of free trade are abstract and counter intuitive. They have to be retaught periodically. Maybe a generation or two will have learned from this Trump debacle.