Unless Trump wants to retreat to a 1776-sized economy or relive the Great Depression (care of Smoot-Hawley) it's best we not follow the outdated mercantilist philosophy that was supplanted fortunately by Adam Smith, who deplored tariffs.
President Donald Trump has issued shameful tweets, offensive tweets and self-serving tweets. Rarely, however, has he sent out a tweet that better conveys his abject ignorance about the country and economics than the tweet he posted Wednesday:
“Our Country was built on Tariffs, and Tariffs are now leading us to great new Trade Deals — as opposed to the horrible and unfair Trade Deals that I inherited as your President. Other Countries should not be allowed to come in and steal the wealth of our great U.S.A. No longer!”
No, no, no.
Our country was founded on a principle Trump often seems unacquainted with: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”
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Unless Trump wants to retreat to a 1776-sized economy or relive the Great Depression (care of Smoot-Hawley) it’s best we not follow the outdated mercantilist philosophy that was supplanted fortunately by Adam Smith, who deplored tariffs (“extraordinary restraints upon the importation of almost all sorts of goods from those countries with which the balance of trade is supposed to be disadvantageous”). Unlike Trump, Smith knew that a balance of trade “deficit” is not disadvantage, let alone a debt to be repaid or money stolen from us:
“Nothing … can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded.
“When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade which is forced by means of bounties and monopolies may be and commonly is disadvantageous to the country in whose favour it is meant to be established, as I shall endeavour to show hereafter. But that trade which, without force or constraint, is naturally and regularly carried on between any two places is always advantageous, though not always equally so, to both.”
Trump’s zero-sum economics is wrong, and as we see, harmful to America. (“From Wisconsin to South Carolina, small businesses are starting to lay off employees, and they’re citing Trump’s tariffs. Many firms have warned that the worst is yet to come.”)
And, finally, the notion that other countries are stealing our wealth is wrong. In fact, the opposite is true. We send dollars to foreign exporters, who in turn invest in America and hire our workers. They are making the United States richer. Just ask the Department of Commerce:
“In 2013, majority-owned U.S. affiliates of foreign firms employed 6.1 million people. In addition to these direct jobs, foreign direct investment (FDI) contributes to a number of indirect jobs. However, little is known about the total number of jobs attributable to FDI in the United States. We use the United States Applied General Equilibrium (USAGE) model to estimate the total jobs attributable to FDI. We find that in addition to 6.1 million direct jobs, there are 2.4 million indirect jobs attributable to the economic activity of foreign firms and 3.5 million indirect jobs attributable to technology spillovers from foreign firms, for a total of 12 million jobs attributable to FDI in the United States.”
It turns out a deliberately ignorant president is a menace to our democracy and economy (who knew?!). The staffers who rationalize his nonsensical pronouncements and the right-wing media that praise him are enabling a destructive president, who, if allowed to succeed, would make us less free and less prosperous. Listening to him certainly makes our politics dumber.