Spot what is wrong with the following statement.
“The United States must, at long last, be treated fairly on Trade. If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!”
As you have probably guessed, the author of those words is the president of the United States, and the flaw in his reasoning is this: A country that levies tariffs on US goods is not taxing Americans; it is taxing its own consumers. Yes, American exporters are incidentally inconvenienced, but by far the greater harm is suffered by the country imposing the tax. Goods become more expensive for the nation’s consumers, its citizens have less to spend, and its economy as a whole is damaged.
To put it another way, nations that cut their tariffs tend to become rich, whereas those that restrict trade tend to stay poor. It’s true that the European Union levies slightly higher tariffs than does the United States (though there are some important sectoral exceptions). Sure enough, Americans are likelier to have jobs than Europeans, and likelier to be well off. Three hundred and twenty million Americans share, among them, an overall GDP that is about the same as that of the entire EU, with 500 million inhabitants.
The fact that the U.S. is toward the top of the free trade league has a lot to do with its prosperity, but other countries do even better. Australia, whose tariffs are lower than those in the US, could also complain of asymmetry in its trade deals. But Ozzies are far too canny to moan about the policy that is making them rich. Singapore and Hong Kong, where tariffs are effectively zero, wouldn’t dream of abandoning the strategy that has turned them from steamy islands into gleaming city-states.
I could fill the rest of this column with a screed against President Trump’s self-wounding tariffs. I could write about how they will hit downstream industries, destroy jobs, encourage domestic producers to hike their prices and harm America’s alliances. But I have written these things before, and so have other commentators. So let me instead observe that all those columns seem to be working. In a remarkable, though largely unremarked, reversal, support for free trade is shooting up in the United States.
A new report by the Pew Research Center shows that 56 percent of U.S. adults think free trade agreements have been a “good thing” for America, while only 30 percent think they have been a “bad thing” — the most positive figures in three years. The Trump presidency has been marked by protectionist rhetoric not heard since the 1930s, yet Americans have moved decisively the other way.
Why? Largely because free trade advocates have been jolted into making their case. For decades, they assumed that they had won the argument. Open markets were delivering in practice as well as in theory, and almost all economists agreed that the system worked; there seemed to be no need to convince anyone. Those supporting free trade forgot how counter-intuitive their arguments were.
Protectionism rests on a series of assertions which, though specious, sound reasonable: that a trade surplus is a sign of economic strength; that strategic sectors should be shielded from competition; that buying locally boosts jobs; that self-sufficiency breeds independence.
Over the past three years, free trade advocates have been patiently explaining why none of these things is true. Conservative think-tanks, whose trade specialists had had the luxury of picking at details of Obama’s treaties, have had to make their arguments from first principles again. They have articulate allies in politics.
Republican Sens. Ben Sasse, Pat Toomey, Mike Lee and Ted Cruz, along with a host of GOP congressmen, have been waging a heroic campaign to save the policy that truly made America great. Perhaps unsurprisingly, then, according to that same Pew Research survey, the biggest turnaround in opinion has come among Republican supporters.
So let’s leave the last word to the greatest Republican of all. Here is how Ronald Reagan put it precisely 30 years ago, in words eerily apt to the present:
“We too often talk about trade while using the vocabulary of war. In war, for one side to win, the other must lose. But commerce is not warfare. Trade is an economic alliance that benefits both countries … We should beware of the demagogues who are ready to declare a trade war against our friends — weakening our economy, our national security, and the entire free world — all while cynically waving the American flag.”
Amen, Ronnie. Amen.
