David R. Henderson  

If You Hurt Us, We're Going to Hurt Us Too

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Trade in the CEA's Annual Repo... The new fault lines...

So there!

EconLog co-blogger Scott Sumner has admirably noted problems with the tariffs that President Trump has decided on imposing.

Scott noted a number of arguments against Trump's moves. I'll note arguments against Trump's assertions.

Trump writes in his tweet:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.

Consider these claims in order.

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with.
Trump's premise is false. You don't lose billions of dollars on trade: you gain on trade. If people were to lose from trade, they wouldn't trade. They trade to gain--and they do gain. Let's say I buy a car from Japan or a toy from China--pardon me, since the Chinese government temporarily banned the use of the letter "n"--I buy a toy from Chia. I value that car or that toy at something greater than what I pay for it or I wouldn't buy it. So I don't lose; I gain.

trade wars are good
No. Trade wars are bad. The hint that they're bad is the word "war." The evidence that they're bad is that the things we want to buy from producers in other countries are suddenly made more expensive.

and easy to win
They can be won. If the tax that Trump imposes on imports to us persuades other countries' governments to reduce their taxes on our exports to them, then, yes they can be won. In the much likelier scenario where the other country's government imposes taxes on our exports to them, then the trade war is lost. So Trump's definitely wrong in saying that it's easy to win. It's hard to win.

And notice how other governments are already responding. They're saying: You're hurting our exporters and your consumers so we're going to retaliate by hurting your exporters and our consumers.


Comments and Sharing






COMMENTS (3 to date)
Mike W writes:

Is it possible that Trump's action has a non-economic purpose? A negotiating motive...maybe with China, maybe with our allies or maybe a domestic political agenda?

If the actual economic cost of this move is not substantial...and Scott Sumner says that it is not...then it may have a geopolitical purpose that we are just not aware of right now. If so, what's the risk?

And if his tweets are merely rhetoric because he doesn't want to publicly disclose his real diplomatic purpose, is this a problem? Should the public always be told the truth?

Alan Goldhammer writes:

Mike W writes,

Is it possible that Trump's action has a non-economic purpose? A negotiating motive...maybe with China, maybe with our allies or maybe a domestic political agenda?
I think this is doubtful. He's proposing tariffs on steel and aluminum from all countries including Canada where we get a lot this. this morning our President tweeted about going after European car manufacturers. Trade wars never end well.

Thomas Strenge writes:

Trump should have read Henderson instead of Navarro.
Maybe Congress will act and make us a free trade zone? We might hit double digit GDP growth!

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