Trump's War on Trade

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In a rare point of agreement, both the New York Times Editorial Board and the Libertarian Party are criticizing Trump’s tariffs.

“Tariffs are Taxes that Americans Pay” reads the LP’s new bumper sticker slogan.

“Trump’s Tariffs Are a New Tax on Americans” say the NYT editorial board.

Put simply, a tariff is just a tax on imports. There’s no getting around the cost to Americans, leading free market economists to observe that imposing tariffs is like poking ourselves in the eye to punish our trading partners.

But it goes beyond this. Shark Tank’s Kevin O’Leary unintentionally made the point about the destructive nature of trade wars during an interview with Nick Gillespie for Reason TV:

It’s not an understatement when Don Boudreaux calls the trade war a “War on Trade.” O’Leary calls it a “brilliant” move by Trump to pressure Canada to arrest a powerful Chinese national’s daughter in Canada to poison relations between the two countries.

It was intended, O’Leary suspects, to prevent China from shifting its imports of raw materials from the U.S. to Canada, and it worked.

China did halt imports from Canada, but it also retaliated by threatening to KILL two Canadian prisoners.

Treachery breeds treachery. This won’t end well.

What’s Wrong with Trumponomics?

According to economists like Steve Moore, however, Trump’s tariffs could effectively pressure countries like China to stop manipulating their currency. The long-term devaluation of the Yuan has helped spur the domestic economy — especially manufacturing — in China, and some credit the policy with China’s overall growth and low unemployment (and simultaneous loss of manufacturing output in the U.S.).

Listening to Moore, one can easily get the impression that we are merely experiencing a bump in the road en route to globally free trade.

Not everyone is buying it, though.

Boudreaux — a senior fellow at the Mercatus Center, GMU economics professor, and curator of the eminently readable Cafe Hayek—doesn’t accept the argument that Trump’s trade war will lead to “zero-zero” tariffs in the long run.

Why not? First, because Trump doesn’t indicate any understanding of free trade.

Trump exalts “jobs” above the broader metric of prosperity. Boudreaux maintains that exports are costs Americans pay to receive the benefits of imports. In his view, there is no net benefit to having more jobs or industries in areas in which the Chinese have developed a comparative advantage. As he explained to John Stossel, the result of China’s currency manipulation is an opportunity for Americans to specialize in more rewarding jobs in the service sector.

Don Boudreaux explains the harms of a War on Trade and the benefits to Americans of trade with China.

The ironclad Bob Zadek rule of Government intervention holds that whenever government declares “war” to solve a problem, the problem gets worse.

The President has somewhat backed off of his tweet “hereby ordering” U.S. companies to stop doing business in China, but he seems stuck in the zero-sum thinking of his economic advisor Peter Navarro, who insists that the U.S. must mirror the mercantilist approach China has chosen to our own destruction.

What John Bolton’s advice is to foreign policy, Peter Navarro’s advice is to trade — a misguided American exceptionalism that puts us a great risk of losing the traditions of peace and free markets that made us great.

We also discuss the wisdom (folly?) and (un)constitutionality of executive orders regulating trade under The International Emergency Economic Powers Act.

Lastly, I ask Don why conservatives are suddenly embracing a more powerful executive, and aligning themselves with Elizabeth Warren’s “economic patriotism.”

Do Trump’s tax cuts and deregulation measures redeem his economic nationalism?

Find out, Listen Today!