The Trump Administration Just Declared All Foreign Exports Unfair
· Reason
During his first term in the White House, President Donald Trump reportedly scribbled the phrase TRADE IS BAD into the margins of a speech he was preparing to give to other world leaders.
That remains the most concise illustration of Trump's economic views when it comes to the free exchange of goods. And if you wanted to see what that phrase would look like when translated into an official government policy, look no further than the announcement made by U.S. Trade Representative Jamieson Greer on Wednesday, as he outlined the administration's plans for more tariffs targeting imports from 16 of America's largest trading partners.
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"Across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically," Greer said in a statement. "This overproduction displaces existing U.S. domestic production" and harms American manufacturing as a result.
Does it? Let's think about this for a moment.
At the most basic level, this is no different from saying "trade is bad." Greer is suggesting that the mere fact of other countries selling products into America should be considered an "unfair" trade practice that could trigger tariffs.
Such excess production is fundamental to trade at every level. A baker will make more loaves of bread than she can eat because she can sell the rest to earn money that can be used to buy clothes, shoes, other types of food, and so on.
For the same reason, a farmer has an incentive to grow more food than his own family can consume.
The farmer's excess production is what allows the baker to have fresh fruits and vegetables, while the baker's excess production allows the farmer to have bread without making it himself. To take it a step further, the farmer's production also boosts the baker's output, as she can now make apple pies with what she buys from the farmer. Trade is not a zero-sum game.
More simply: The whole point of having exports is so you can buy imports.
The global economy is more complex, but that fundamental principle remains the same. Half of all imports to the U.S. are raw materials and intermediate parts (the apples) that we use to manufacture finished goods (the apple pies). In other words, it is the excess production of lumber, copper, and aluminum in other parts of the world that allows us to make more finished goods here.
But, in Greer's view, the farmer's excess production is displacing the baker's vegetable garden and apple trees. In Greer's world, the baker would be better off if she had to grow her own apples to put in the pies she's making, rather than trading with the farmer who has a surplus of apples. He should only grow as many apples as he can eat! Doing anything else is unfair.
Or think about this in terms of American states, if you prefer that analogy to global trade.
Is Iowa's surplus corn production displacing the potential corn industry in Arizona and harming Arizonans? Of course not. Residents of Arizona are obviously better off because they can import loads of Midwestern corn rather than trying to grow their own in the middle of a desert. If we banned cross-state trade, would there suddenly be a thriving wild salmon industry in Missouri? No. This is a very silly way to think about an economy.
Indeed, the world that the Trump administration is envisioning—one where every nation produces exactly the right amount of every commodity and item that it needs to consume—is impossible as a practical matter because not every country has access to all raw materials in the proper amounts. There is no wild salmon in Missouri.
It would also be a much poorer world.
What if every farmer produced only enough food to feed himself and his immediate family? What if every shopkeeper stocked only enough goods to supply her own personal needs? What if Alaska refused to ship salmon to the rest of the country, or Iowa refused to export corn? That's not a world I want to live in.
Trade, in fact, is good.
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