If ever there was evidence that voters took a big risk by electing President Trump, this tweet last Friday was it: “Trade wars are good, and easy to win.”
The day before, on March 1, Trump had announced he would soon impose massive tariffs on foreign steel and aluminum imports. This is a gut-punch for American manufacturers that use steel. Trump’s devil-may-care attitude toward an economically destructive act is unnerving and adds insult to what will be serious economic injury.
Trump’s tweet wasn’t just wrong; it was idiotic. Of all the controversial things he has ever tweeted, which is a very large body of material, this may be the most consequential so far.
No one has ever won a trade war. When nations raise tariffs and barriers against each others’ products under the misguided notion that exports are good and imports are bad, there are only losers. Trump speaks now, as he did during the presidential campaign, as if the world’s wealth is being competed for by various countries in a zero-sum game. This is economic nonsense.
As Andy George discovered when he spent six months and $1,500 to make a chicken sandwich with cheese and pickles completely from scratch, the assistance of total strangers through trade puts attractive goods within everyone’s price range. Trade broadens the pool of economic cooperation, allowing more specialization, greater efficiency, and lower costs for every good and service. It allows everyone in the developed world to take chicken sandwiches for granted at less than $10.
Economists disagree about almost everything, but they are unanimous that more commerce increases the wealth of any nation. This isn’t partisan. On the benefits of trade, there is no daylight between a staunch libertarian economist such Milton Friedman and a Democratic partisan like Paul Krugman, nor anyone in between.
Trade wars force everyone to pay higher prices for goods and services. They also kill domestic jobs. In America today, a trade war will also force up interest rates, obliging us all to pay more to finance our dangerously large national debt. This could lead to catastrophic involuntary austerity that would endanger everything from military preparedness to Social Security benefits.
It’s not as though there is any good news to balance the bad. There is no positive tradeoff for the damage that trade wars do. Everyone just becomes poorer as the flow of goods and services across national borders slows down, and we all have to work for longer to pay for the same item that was cheaper yesterday.
This helps explain why nations that pursue self-sufficiency always make themselves poorer. It is not a coincidence that North Korea, whose central Juche ideology is essentially a doctrine of national self-sufficiency, is an economic basket case compared to its prosperous southern neighbor.
Trump’s poor instincts on this seem to have been buttressed by the bad advice of two senior officials, Commerce Secretary Wilbur Ross and White House trade director Peter Navarro. If no one can talk him out of this folly, then historians will look back at his one-term presidency and ask themselves how the promising signs of an impending economic recovery came to naught.
