Donald Trump

On Trade, Sanders is More Dangerous and Trump More Illiterate

The duo represents America's worst protectionist spasm since Hoover.

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No election season is complete without a little — or a lot of — trade bashing. What's more, this bashing has always been a bipartisan sport. President Barack Obama, who is now begging Congress to pass the Trans-Pacific

BernieTrump
abisdale via Foter

Partnership, did a lot of anti-NAFTA breast beating back when he was trying to out-sprint Hillary Clinton to the Oval Office. And beating up on China for currency manipulation was a Mitt Romney hobbyhorse when he was trying to dislodge Obama.

Still, even by the low standards of election-year politics, this season has set a new high (or is it a low?) on trade. The Democratic anti-trade standard bearer of course is Bernie Sanders and the Republican is Donald Trump. Although they are both dead wrong on trade, Sanders sounds professorial in his wrongness whereas Trump sounds like an illiterate. That's one reason why, I believe, Sanders might be more dangerous.  The hoi polloi never get trade theory right anywhere. But if you seduce the elites into protectionism, then you're really, truly done for.

My friend and Reason contributor Steve Chapman has already done a splendid job of debunking Sanders' nonsense that Flint and Detroit have been decimated by NAFTA because this trade deal allowed American automakers to move to Mexico and pay slave wages to Mexican workers instead of remaining in Michigan and paying living wages to American workers. But the fact of the matter is that Flint and Detroit and the entire Rust Belt was in economic free fall long before NAFTA was a glimmer in the eyes of the ruling classes.  And much of Michigan's traitorous auto industry hasn't moved to Mexico but to southern United States. Indeed, if there is a villain threatening American manufacturing jobs, it isn't NAFTA, it's automation, which has diminished the number of people required to produce each vehicle (heartlessly freeing up American workers to take up more soulful jobs).

Sanders is bad, undoubtedly, but Trump is a 200 pound, walking-talking economic fallacy. This is what he bellows in his stump speech:

What is the United States trade deficit with Mexico, Japan and China?  Let's start with China.  Almost $400 billion per year.  If you have a company when you're losing $400 billion you've got to do something very fast.  We don't.  We've been losing hundreds of billions of dollars per year, frankly for decades.  It's not going to happen any more.

It is unclear whether he really believes that a trade deficit is tantamount to "losing" money or whether he's just saying it because he thinks that's the level of comprehension of his audience. Either way, it is hard to pack so much stupidity in so few words.

For starters, a trade deficit only means that America — or rather, American companies and consumers — are buying more from China than selling to them. This means we are getting something from China for the money we give it, namely, goods and services that we presumably value more than pieces of paper. In any non-barter economy everyone has a running "trade" deficit with someone and "surplus" with someone. I routinely buy dresses (way more than should be legal, actually) from my dressmaker and sell her nothing at all, but that does not mean I am "losing" money. I get something in return. Maybe Trump is not worried about a trade deficit but a budget deficit. Maybe he thinks we are buying more goods from China than we can afford. But that's a wholly different issue. When I buy a dress, I can pay for it by: dipping into my savings; working a few hours extra; or taking a loan — none of which has anything to do with the dressmaker.

Trump also believes that if only China would stop devaluing its currency, America's trade deficit with it would disappear. As far as he is concerned, a cheaper yuan lowers the price of exports and increases the price of imports, resulting in job losses in America. Exports good, imports bad is an old mercantilist fallacy that Adam Smith debunked 200 years ago.

But there is no good evidence that a higher yuan necessarily means a lower trade deficit. Historically, the deficit has coincided with both a strong and weak yuan. Betweem 2005 and 2008, the yuan rose 21 percent and yet the trade deficit went up, not down.

One reason why a stronger yuan doesn't do much to hurt China's trade competitiveness is that while it increases the dollar price of Chinese goods, it also lowers the yuan price of foreign raw material, allowing Chinese manufacturers to keep a lid on the price of finished goods.

But don't expect Donald Trump to grok any of this. He has a story and he's sticking to it. Sanders may be more dangerous but Trump is arguably more willfully uneducable. Between the two of them, America may be experiencing its worst protectiionist spasm since Herbert Hoover. As they say, history always repeats itself, first as a tragedy, then as a farce. And if the working class are hurting now, wait till one of these two farcical candidates get their hands on the economy.

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  1. Does anyone seriously think Bernie Sanders can negotiate us into a trade war? TRUMP ’16

  2. I wonder what Trump thinks the Chinese do with their $400 billion in net greenbacks, stuff it in their pillows, burn it?
    That of course would be very peachey for the U.S. because it wouldn’t represent any claims on U.S. products and we should be thanking the Chinese for their very generous gifts.

    1. They are now buying up all of Merica with our money. Wake up, they are trying to buy Starwood Hotels today but tomorrow it will be Mount Rushmore, the White House, the Dallas Cowboys and your grandmom’s house. Stop the Chinese invasion, vote Trump come election day or you will all die from Chinese swine flue.

      – Trump

      1. didnt’ the Japs already buy up all our land back in the eighties?

        1. Some, but they had to sell at a loss in the late nineties.

        2. P. J. O’rourke once commented, “Maybe the Chinese will be more successful than the Japanese in destroying the US economy by giving us free stuff”.

        3. Yeah. Who do you think the chinks are buying it from?

      2. Can they take the Dallas Cowboys back to China with them?

        1. You’d like that, wouldn’t you? Dream on! The big blue and white star will be painted red and yellow! And the pre-game singing of the national anthem will be replaced with “If I Had a Hammer.”

  3. protectiionist, also keep a lit on the price of finished goods, should this be lid?

  4. “Sanders more in dangerous and Trump more illiterate” ^

    That’s just fucking priceless.

    1. And of course, I get the word sequence out of order, which is also priceless.

      1. Ah, I see what’s going on. She changed the wording in the headlines.

        Third times a charm, right Shikha? 😉

    2. But Trump is a winnnnnnnnnnnnnnnnnnnnnnnnnnnnnnner!!!!!!!!

      He said so himself so it must be true!

  5. “But don’t expect Donald Trump to grok any of this. He has a story and he’s sticking to it. Sanders may be more dangerous but Trump is arguably more willfully uneducable.”

    “It is unclear whether he really believes that… or whether he’s just saying it because he thinks that’s the level of comprehension of his audience….”

    His story seems to work well, why should he change it?

  6. Trump is a self-avowed deal maker, a buyer and seller of real estate and such. He doesn’t necessarily understand manufacturing and global trade–much less economics. He’s mostly interested in what’s good for his cronies, not what’s good for manufacturing or the country.

    Sanders is a malcontent who hates every success that he didn’t have himself. He has no clue about manufacturing, global trade, economics, or even real estate. He hates private property and agency. Bernie is far more dangerous than Trump.

    Trump will fill the proverbial swimming pools of his friends with gold coins but Sanders will attack our civil rights and our economic system even more so than has Obama.

  7. Whoa, whoa, whoa! Is Reason now saying there are options worse than Trump?? I don’t think Shikha is toeing the Trump=Hitler party line here.

    1. Trump does equal Hitler, but so do most of the other candidates – but what I’d really like to know is why everybody seems to think Hitler is the gold standard of evil stupidity. Comparing somebody to Hitler isn’t really as bad as it gets, there’s worse.

      1. Not according to the left.

        For them, Hitler is it.

        Stalin and Mao? – eh they just made some mistakes along the way. You can’t make an omelet without breaking a few eggs.

        1. They were agrarian reformers who let their enthusiasm cloud their judgment.

          1. One day they were confiscating farm land to increase production and the next they were starving millions and shooting those who objected. Somethings things just happen even to good leaders

            1. “Somethings things just happen even to good leaders”. You may be joking, but seriously, the most dangerous leaders are those who are willing to violate our rights for our own good, whether it’s Stalin or Obama.

  8. Anyone who hates Free Trade also hates the Free Market.

  9. Wait, I though Reason had secret, cocktail-party-related instructions never to say anything bad about Bernie. What happened?

    1. Again we assume reasoners care about the lame lefty cocktail parties in D.C. In fact, it is the wild libertarian/conservative blowouts that are worth attending.

      g

      1. Body shots off Dana Loesch Body shots off Rachel Maddow

        1. And the squirrels ate my “greater than” symbol. I though those were allowed?

          1. Testing: (direct typing of symbol)
            Testing: (the #62 code)
            Testing: (the gt code)

          2. Apparently not any more!

    2. I’m guessing she doesn’t get invited to many cocktail parties. Liberals tend to be very racist in practice. They might invite a token black or two, but a token Indian?

  10. I bet Donald Trump’s companies run trade deficits with their suppliers…

  11. it is hard to pack so much stupidity in so few words.

    They say its hard, but to him its easy. You’re not putting any effort in. Which is what’s wrong with America today! Sad.

  12. When I buy a dress, I can pay for it by: dipping into my savings; working a few hours extra; or taking a loan ? none of which has anything to do with the dressmaker.

    I learned a new thing about Shikha: She will do anything to get that dress. That one.

    Trump also believes that if only China would stop devaluing its currency, America’s trade deficit with it would disappear.

    I don’t ascribe too much blame to El Trumpo for that, Shikha. How many times have you heard economists say, on TV, that the trade deficit with China is because the Chinese central bank devalues the yuan? I can count like 10 of them. And all of them are wrong, because not one of them knows economics. They’re mostly statisticians who play at being economists on TV.

  13. There is one criticism of trade deficits that makes enough economic sense to give one pause: If you’re spending $ on consumer goods more than you’re making in $ income, then whoever you’re buying from may invest in capital that you’ll need to make $ in the future. As David Brudnoy put it, the USA may become “hewers of wood and drawers of water” for the Chinese. That is, you’ll have to work for them to make back what you’re spending now, because you won’t have enough of your own capital to be self-employed. (“Self” can be taken on either an individual or national basis.) OTOH, saving $ by spending less of it bodes well for your future. So thinking ill of a trade deficit to the rest of the world on net (not with a particular country) isn’t entirely senseless.

    1. Trade is not the only source for a country’s income. Even a net trade deficit with the entire world is not a problem, because the money used to pay for the imports is created in the profits of the domestic economy.

      The US domestic economy is huge. We can afford a lot of imports.

  14. What an inane article. Who comes to this website and isn’t for Free Trade? My question is who supports TPP or Obamatrade? At 5,500 pages it makes Obamacare look like a post-it note… A black president greasing the skids for a human rights abusing slave labor using country like Malaysia is beyond the pale.

    1. “Who comes to this website and isn’t for Free Trade?” Well, we certainly have our share of trolls and other contrarians who like to stop by and give us a hard time. But secretly, Reason is hoping that political pundits and other non-libertarians might actually read a Reason article and learn something worthwhile.

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  16. Donald Trump is a billionaire. Shikha Dalmia is a what…….thousandaire?

    Talk to us about economic illiteracy AFTER you crack your first billion, alright?

    He may not have got it in a way you like, but he’s clearly not illiterate.

    1. With the sole caveat of real estate, he certainly appears to be economically illiterate (for the record, I am a ‘thousandaire.”) How else do explain his casinos going bankrupt? You do know that a casino is a state sanctioned license to steal from stupid people, right?

    2. The Donald has gotten rich using Other Peoples’ Money (OPM), but not necessarily helping other people get rich, though. So he’s obviously a perfect candidate for POTUS!

    3. Asstoss,
      Just go with ”you’re just jealous” next time. Saves typing and has the same effect: i.e. we’ll figure out right away you’re a retard.

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  19. RE: On Trade, Sanders is More Dangerous and Trump More Illiterate

    Its very simple people.
    Comrade Sanders will trade in your rights and wealth and give you back a socialist slave state.
    How’s that for a fair trade?

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