What sparked this essay was a midweek Meet the Press podcast where Sen. Lindsey Graham (R-SC) was being interviewed over Trump's aggressive plans to spread his unilateral corrupt protectionist tariff wars globally. The mainstream media interviewer played her hypocritical NIGYSOB game, putting him on the spot over his prior record in favor of free trade deals and asking him to reconcile Trump's rhetoric with it, [NOTE: in reference to the interviewer, I think this ABC post headline makes the point: "Biden once slammed Trump's China tariffs. Now he's building on them"; when has Biden, Harris or any Dem been asked to justify higher tariffs on merchandise purchased by middle-income Americans?]
Note that Graham and Trump have had moments of disagreement; after all, Graham once competed against Trump for the 2016 Presidential nomination. Graham has since been largely s staunch vote for Trump. Trump nevertheless is intolerant of criticism or unwanted advice. Among other things, Graham has criticized Trump's vow to exonerate convicted J6 criminals. Trump calls Graham a RINO and argues he is the only reason Graham still has a political career. (Graham was elected on his own while Trump was still a registered Dem.)
I have written numerous tweets and posts about Trump's incompetent understanding of the trade deficit. I'm going to clip a relevant video from my favorite economist, Don Boudreaux, at the bottom of the post. I think there are a couple of possible explanations for Trump's confusion about a trade deficit being a "bad" thing: say, an invalid inference from a truly bad thing, the federal deficit, and the GDP formula every Econ 101 student knows:
where:
C=Consumption
G=Government spending
I=Investment
From a naïve understanding, the latter seems to suggest a trade surplus is positive for the economy. (Boudreaux discusses this in the clip, pointing out some double counting, e.g.. foreign investment via trade. He notes that exports are the price we pay to get imports, having more stuff available to the domestic economy can be viewed as a surplus, and dollars foreigners get from trade can be invested, e.g., in US debt or in American companies or local facilities for foreign-based businesses (including relevant jobs). Not to mention a large percentage of our imports are used by American businesses for related production of goods or services, and some foreign goods contain American imports::
Taking the aggregate numbers as an example, about 45% of U.S. imports reflect intermediate inputs to the production of American goods...For example, of all consumer expenditures in goods that are made in China, more than half stays in the United States as payment for local content.
I remember Trump bitching about how prior trade representatives had been gullibly suckered into one-sided agreements; I was thinking, "What the hell is this idiot talking about?" Basically, import/export transactions are not negotiated by government. (Sometimes they are regulated. For example, arms sales may be restricted. Before I can download Oracle database software for my licensed (domestic) client, I need to check off the downloaded software wouldn't go to a small number of foreign countries (like North Korea). There may be general product restrictions, e.g., FDA approval of infant formula imports or prescription drugs.)
.Anti-trade populists like Trump rationalize their mercantilist position on protecting domestic producers and workers against the potentially destabilizing effects of unfettered, possibly cheaper imports. They are wary of companies wanting to arbitrage high American labor costs by shifting production abroad and then importing the same finished products.
Let's point out a couple of relevant points: First, there's the law of comparative advantage. Just because we produce something doesn't mean we should. Nations can and do specialize in goods or services where they have some natural advantage. Consider, for instance, the production of tropical fruit. Some countries, e.g., Costa Rica, are able to cost-effectively compete vs. the American agricultural sector. But suppose for the sake of argument, we had an expensive technology yielding tropical fruit. A trade agreement with Costa Rica might flood the market, undercutting the business model for our domestic producer. Yes, there might be some short-term pain for those whose livelihoods are tied to an unsustainable industry. Workers, possibly with retraining, may transition to more productive careers elsewhere in the American economy. American consumers improve their standard of living, able to save or spend the price differences.
Second, improvements in production technology (e.g., robotics) have lessened the headcount required to achieve production targets. Our manufacturing sector and our GDP have grown for decades, yes even with trade deficits, something Trump does not acknowledge. Only a small percentage of manufacturing jobs lost are due to foreign competition. ("Our research shows that, in fact, only about 314,000 jobs (11 percent of the manufacturing jobs lost) were lost as a result of trade and that falling exports, not rising imports, were responsible. Service sector offshoring destroyed even fewer jobs. These figures are tiny relative to the millions of positions lost and created every year in the United States by normal market forces.") Yes, the market share of service sector jobs has grown relative to the manufacturing sector for decades, but this trend is not peculiar to just the US but other developed economies as well.
So today's corrupt protectionism/mercantilism usually masks its corrupt nature by arguing they aren't anti-trade but are for "fair" trade, This is virtue-signaling rubbish. Here is a tweet Trump wrote after he started his trade war with China in 2018:
Trump is incompetently arguing that America is "losing" billions of dollars in trade to China: what the hell does that mean? That we spent millions on Chinese TV's that don't work? No, essentially he is counting voluntary American purchases of Chinese goods and subtracting Chinese purchases of American goods. He's not arguing China violated the terms of its trade agreement. He just seems pissed Americans voluntarily bought more stuff. In this case he started by singling out Chinese solar cells and appliances. He then targeted steel and aluminum imports, arguing domestic production was of strategic importance. China then retaliated against $3B in US exports. Trump then targets another $50B in Chinese goods, citing Chinese IP theft and other unfair practices. China responded in kind.. Trump then targets another $200B and promises to more than double that if Beijing retaliates. China adds $60B in American goods. They then talk a trade deal with Trump delaying and reducing planned tariff increases. Trade talks are stuck, Trump finally implements 25% tariffs on a large percentage of goods and promises 10% on remaining goods. China retaliates and so on.
This process illustrates a fact of life that Trump underestimated: Trade wars have consequences. For example, China eventually cancelled a huge chunk of US soybean imports to the benefit of Brazilian. This brings to mind another Trump lie that foreign countries, not ultimately US consumers pay, The point is Trump later redirected relevant tariff revenues for bailouts of export farmers hurt by canceled sales.
The point is Graham during the podcast Sen. Graham basically repeated Trump's trade warrior talking points and I can still remember him supporting Bush's free trade deals. Not that the Dems are much better than Trump; the Dems have long had labor union support, and the unions generally oppose free trade and other forms of competition, i.e., immigration. In fact, Graham has a mixed record on trade. To what extent Graham's positions have evolved under Trumpism, I'm not sure. But the GOP has been pro-trade in my adult life until Trump. Me , I'm principled free trade (even unilateral free trade) and oppose economic sanctions.
