We (along with everyone else) will have much to say about the stunning rebuke handed out at the midterm election. But one thing seems clear.
Tariffs are bad. And people don’t like them.
Trump’s trade policy has been a disaster from Day 1, and we’re proud to have aggressively opposed Trump’s tariffs from the very beginning. Americans pay American tariffs, and they pay reciprocal tariffs, too. Tariffs have imposed harmful costs and shortages on American consumers without accomplishing any of their wrong-headed goals. Tariffs have raised prices for American consumers on almost everything, cost them jobs and needlessly made enemies of former allies.
But while harming consumers, tariffs create abundant opportunities for corruption and cronyism. To President Trump, of course, this is a feature, because he likes having CEOs and industry titans coming to him on bended knee asking for breaks and exemptions. Trump doesn’t want laws and policies that apply equally to everyone — he wants to be able to use his power to dole out favors to those who flatter him and to punish those who don’t.
Trump’s trade policy has failed by any possible criterion. It hasn’t brought manufacturing back to the U.S., and it hasn’t reduced the trade deficit. Now, those goals are stupid goals. We’re with Dave Chappelle: We want to wear Nikes, not make them. Adam Smith demonstrated 250 years ago the superiority of comparative advantage over mercantilism. If you’re really great at growing tomatoes and your neighbor is really great at making shoes, there is no need for you to make shoes and for him to grow tomatoes. Trade benefits you both.
A country should export the things that it produces well, and it should import the things that other countries produce better. It’s simple.
And the trade deficit is a meaningless concept, because there really is no deficit. I have a 100% trade deficit with the grocery store. I get a basketful of goods, and they get a basketful of my money. But we both freely engage in the transaction, and we both get what we wanted. Where’s the deficit?
Similarly, we send Canada $100 worth of earbuds, and Canada sends us $100. We send $100 to Vietnam, and Vietnam sends us $100 worth of underwear. Where is the deficit?
It is a waste of time to even concern oneself with trade deficits, because countries don’t trade — people trade. We don’t talk about Tennessee having a trade deficit with Virginia, or Dallas County having a trade deficit with Tarrant County. Political entities don’t trade — people trade. The United States doesn’t trade with South Korea — Americans and South Koreans trade with each other. And governments should stay out of the way.
As we have repeatedly explained, government policy should always favor consumer welfare over producer welfare. Producers serve consumers, and not the other way around. We produce to consume — we do not consume so that others can produce. But under Donald Trump, producers have been favored (at least those he likes), and consumers have been harmed. No surprise that eventually consumers push back.