Pixel Tracker

This page was cached on Wednesday, December 19 , 2018, 7:34 am | Fair 40º

 
 
 
 

Veronique de Rugy: On Trade, Trump Is Who He Claims to Be

When it comes to trade, we should take President Trump at his word. This is one policy area where he's been remarkably consistent over the years.

That's why I'm always surprised whenever articles, TV commentators or friends in casual conversations argue that his real goal in boldly imposing unilateral tariff hikes is to achieve freer trade.

As we embark on a trade war, let's put this question to rest. Deep down, President Trump is not a free trader.

Nothing in what the president has ever said suggests that he's anything but a diehard mercantilist. Yes, it's true that he complains loudly of the treatment of U.S. exporters abroad — treatment he no doubt wants to change.

It's also true that he has endorsed dropping all tariffs around the world to zero.

But even these seemingly free-trade stances stem from fundamentally protectionist beliefs: First, that if there were no tariffs, U.S. exports would rise dramatically and surpass imports, shrinking the dreaded trade deficit. And second, that exports are great and imports are bad. In other words, America wins with low imports and high exports.

He is wrong on all counts. If the U.S. trade deficit were to ever disappear, America's economic health would take a turn for the worse. As long as the United States is growing and remains an attractive place to invest, we will continue to run a trade deficit with the rest of the world.

The reason is simple: Foreigners sell goods and services to U.S. consumers in order to acquire precious American dollars. They want these dollars in part so they can buy exports.

But they also want to invest in America's powerful economy, including buying some of Uncle Sam's debt.

As long as foreigners find it profitable to invest here, they'll continue selling stuff to us — stuff that improves our standard of living.

This reality means Trump's obsession with increasing exports relative to imports is misguided. The imports are a means to achieve what Mark Perry of The American Enterprise Institute calls "job-generating foreign investment surpluses for a better America."

That also means that a world with no tariffs will not necessarily translate to a lower U.S. trade deficit.

Sure, it might increase our exports. But lowering the deficit would practically require an increase in imports so that foreigners can acquire the dollars to buy those additional exports.

Thus the president would likely hate the outcome of a zero-tariff world, putting us back where we are today.

But at the very least, could bullying our trading partners succeed in opening up more opportunities abroad? President Trump is right that some countries' protectionist policies are making it hard for American exporters to sell their goods.

Unfortunately, the answer is probably still no.

For one thing, unilaterally increasing tariffs against other nations has never been an effective way to get them to lower theirs. Other government officials, often protectionists themselves, use the attack as an excuse to raise their own tariffs even higher to protect domestic interests.

Retaliation from Mexico, Canada, China and the European nations is proving this point once again.

Furthermore, there is something depressing in the belief, held by many exporters, that the damage here at home from import tariffs — which is paid for by thousands of companies "downstream" in the production process and their millions of workers — is an acceptable price to pay.

How many Americans need to lose their jobs in the name of a few specific exporters selling more goods abroad? When do we decide that price is too high?

Historically, the only way the United States has managed to get other countries to drop their trade barriers has been through multilateral agreements where everyone commits to behaving better.

It is not a perfect process, but it beats pretending that Trump's protectionism will do any good.

— Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University, a columnist for Reason magazine and the Washington Examiner, and blogs about ecomomics for National Review. Click here to contact her, and follow her on Twitter: @veroderugy. Click here to read previous columns. The opinions expressed are her own.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made using a credit card, Apple Pay or Google Pay, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Email
Select your monthly membership
Or choose an annual membership
×

Payment Information

Membership Subscription

You are enrolling in . Thank you for joining the Hawks Club.

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.
You may cancel your membership at any time by sending an email to .(JavaScript must be enabled to view this email address).

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.