Free Minds & Free Markets

'Trade Wars' Don't Put Americans First

You cannot advocate trade restrictions without also advocating state-bestowed privilege.

Michael Reynolds/SIPA/NewscomMichael Reynolds/SIPA/NewscomWhen Donald Trump can propose tariffs on imported steel, aluminum, washing machines, and solar-panels without being roundly booed off the stage, one has to wonder if reason has any power to win the day. Is this truly a democracy of dunces?

Trade is really not that complicated. Kids do it every day, and they know what they're doing. But something happens when they grow up. Most people never grasp the most basic economics. They harbor what Bryan Caplan calls an anti-market bias. This seems in conflict with Adam Smith's famous "propensity to truck, barter, and exchange one thing for another," but that might just mean that people's explicit notions conflict with their implicit, unacknowledged guide to everyday activities. They also rarely hear anyone make the clear principled case for free trade.

Almost everyone in public life is a protectionist to some extent. Even those who lean toward free trade talk as though countries—rather than individuals—trade. Hence their favorable reception of government trade agreements. Once you buy into that sort of collectivism, you are bound for trouble. (Gary Johnson was no help at all in the 2016 campaign. Merely declaring yourself and your running mate "the free traders in the race"—without explanation—teaches no one anything.)

Beyond that, most people have no incentive to explicitly cultivate the economic way of thinking. Each person's one vote amounts to squat, so voters have no incentive to acquire the tools with which to judge political candidates, who as officeholders have a lot to say about economic matters, e.g., imports, taxation, and regulation.

Still, Americans trade every day with others, so they implicitly "know" why trade is good and why restriction is bad. They like variety, choice, and bargains. Yes, they are nationalists, so they think differently about trade the moment goods and money cross a national boundary. They see virtue in buying "American," even if "American" means many foreign factors of production. Nevertheless, when they shop, most of the time they act like free traders.

But come on! Even with these headwinds, we free traders—we advocates of the liberty—ought to have prevailed. "Money buys more under free trade," goes an old British Liberal Party slogan. Why isn't that persuasive? Perhaps it's because people don't ever hear it said. Perhaps it's too logical, too simple.

"Trade wars are good," Trump says with characteristic aplomb, "and easy to win." Well, presidents always think about wars, trade or otherwise, that way. After all, they aren't on the front lines. (I think of the line attributed to Bastiat: "When goods don't cross borders, soldiers will.")

With trade wars the front lines are populated by consumers who face higher prices and the industrious folks who want to export their products but can't or who use now-higher priced imported materials and machines. They get hurt, but most people, being economic illiterates, won't know it's the trade restrictors who have inflicted the casualties. In other words, they overlook "what is not seen," as Bastiat would put it. So Trump will get off scot-free. True, some writers will identify the true culprit—George W. Bush and Barack Obama have been faulted for their steel and tire tariffs—but who reads those writers besides those who already understand? We're all prone to confirmation bias.

Anyway, here's the important stuff to keep in mind.

• We live in a world of scarcity, which means we constantly have to make choices and face trade-offs. Time, energy, labor, and resources used in one way cannot be used in another. Therefore, if the government puts its thumb on the scale for one industry or firm, other industries and firms will be unable to obtain the resources and labor services they need to serve consumers, who will have less money after paying higher prices to buy other things.

• We work to live, not vice versa. It shouldn't take an Adam Smith to recognize that the purpose of production is consumption.

• Individuals, not nations, trade. Remind yourself of this truism and many fallacies melt away. I have no conflict of interest with Chinese or Canadian steelmakers or other foreign producers. On the contrary, we have a harmony of interests.

• Trade is positive-sum, not, as Trump emotes, negative sum. At the moment of an exchange, both parties expect to benefit and can do so—or else they would not trade. (One or both may later decide they've made a mistake, but that this irrelevant.)

• Exports pay for imports. The "wealth of nations" does not consist of cash. It consists of access to goods and services. We want what money can buy. But we have to give something up to get what we want. If we didn't want to buy, we would not need to sell. It would be nice if we could get things without having to give up anything, but everyone is in the same boat, so that is not to be.

• "Trade deficits" are not bad. Who cares if in the aggregate the individuals who comprise Group A buy more from the individuals who comprise Group B than the individuals in Group B buy in the aggregate from the individuals Group A? A "trade deficit" will simply be the counterpart to a capital-investment account surplus. Foreigners can't spend dollars at home, so exporters have essentially two choices about how to use their dollars: buy American-made goods or invest in the United States. (Trump and his team of restrictionists want foreigners to both buy American exports and invest in the United States, but you can't spend a dollar more than once.) Here is where the typical trade restrictionist shows his lack of discernment: he will start talking about government budget deficits. Now it is true that government debt is one of the things foreign holders of dollars can invest in. But here's the thing: they couldn't do it if the U.S. government weren't running deficits! Balance the budget (after at least drastically shrinking it) and that problem disappears. It's completely under the politicians' control. Let's stop scapegoating China for buying federal debt instruments.

• Finally, you cannot advocate trade restrictions without also advocating state-bestowed privilege. So if you are offended by privilege, you must oppose all trade restrictions. Restricting trade on behalf of a relatively few steelworkers and firms must—must—privilege them over the vast majority of American workers and firms and all consumers. It cannot be otherwise. A few jobs are saved—and in this age of robotics, I do mean a few—at the expense of the many. Why should those few get special government treatment? That question has to be answered before anything else.

When I raise this point with interlocutors, I often hear this comeback: So protect everyone! In other words, since restrictions (taxes) on steel and aluminum imports harm makers and exporters of, for example, autos, airplanes, and spare parts, all we have to do is protect them against their competition. The logic is that all firms and workers should have their foreign competitors hobbled. Then all will be fine. Will it?

Um, no, it won't be. To see why, imagine that the government built an effective real wall against all foreign goods with summary execution of smugglers. No producer would have to worry about foreign competition. Would we all really be better off? Of course not; we'd all be poorer. Specialization and the division of labor—let's call it social cooperation—make everyone richer. But, as Adam Smith famously noted, "the division of labor is limited by the extent of the market." The smaller the market, the less refined the division, the result being fewer goods, more expensive goods, and inferior goods compared to what we'd otherwise in a larger trading area. You can see this by envisioning life in a city that did not permit any outside products (imports): the residents could buy only what someone in that city could make. Sound good to you?

Photo Credit: Michael Reynolds/SIPA/Newscom

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  • Cy||

    A view of unrestricted and open free trade only works if everyone in that market are free people. Otherwise, you wind up with degrees of slavery and enriching of the slave owners. I 100% back free trade with countries that don't restrict their citizens rights. Good luck finding those countries.

  • Sevo||

    "A view of unrestricted and open free trade only works if everyone in that market are free people."

  • Scarecrow Repair & Chippering||

    Absolutely wrong, as Sevo says. Unilateral free trade is a benefit in itself, absolutely regardless of what other countries do.

    Fretting over other countries' civil rights is similarly nonsensical. I once gave some Thomas-the-Tank-Engine chocolate lollipops as sticking stuffers and was upbraided for not knowing that Disney owned the TtTE copyrights and Disney supported gay spousal benefits. My retort was that how did she similarly police the UPS guy who delivered things, the UPS warehouse handlers, the UPS accountants?

    Trade with Cuba and North Korea would do far more to civilize those countries and overthrow their dictators than trade embargoes. I imagine the Castro Brothers and the Kim clan rejoicing at our complicitness in closing their borders for them. We denigrated East Germany and the USSR for the Berlin Wall and the Iron Curtain; then we turn around and do the exact same dirty work for Cuba and North Korea. The last thing those regimes want is any exposure to freedom and choice. Both would have become democratic long since if we had traded with them.

    Red China may still be Communist in name, but it is by now just another autocratic country which has had to embrace free markets in one sense or another merely to remain in control. If they are stupid enough to subsidize what I buy and "force" American society to allocate its resources to more productive business, why should anyone get in their way?

  • Ken Shultz||

    What is it about American consumers benefiting from a higher standard of living by being able to buy the things they want for less money that's bad for American consumers? Even if the other country hurts their own consumers, ours still benefit.

    By historical standards, it's amazing that our inflation rate has stayed so low since China joined the WTO circa 2001--especially considering all the debt our government has accumulated since then.

    Americans having access to cheaper substitutes by way of free trade is an obvious explanation for that. If Mexico hasn't benefited from NAFTA as much as they'd hoped (and the next likely president of Mexico probably wants out), it's because they couldn't compete on a cost basis with the Chinese manufacturing for the American consumer by way of GATT.

    Flushing that benefit down the toilet is foolish from an American standard of living perspective. It only makes sense as a political calculation--by preying on the ignorance of those in the rust belt who should know better.

  • Ken Shultz||

    Incidentally, making things more expensive with artificial trade barriers only leads to artificial security for protected industries, at best, and for how long that will last, nobody can ever know. In fact, shielding industries from market forces only makes the fall for that industry even harder when reality invariably sets in.

    The Soviet Union and China tried throwing millions of people in gulags and work camps in attempts to shield their industries from market forces in various ways. Market forces took them by the balls and destroyed the Soviet Union anyway. It scared China so badly, they dropped central planning and normalized relations with the west. If you think we won't suffer proportionally for doing the same stupid protectionist things they did before 2001--and for the same reasons, too--then you're nuts.

  • Michael Cook||

    Maybe they benefit only a few and maybe they don't. The tariffs are a tool in broader negotiations, which will be generally bi-lateral and address specific imbalances. The President is better qualified to decide what is best for the greater number of Americans than is the staff of Reason, though you can argue the specifics as they arise.

  • Number 2||

    "The President is better qualified to decide what is best for the greater number of Americans."

    Pardon me while I laugh...


    (And this applies to any President, not merely the current one)

    Individual Americans are better qualified to decide what is good for them than anyone who purports to decide for them.

  • Sevo||

    Gee, how did the 'greater number of any group' ever get along without a 'president' to make our choices for us?
    Let me join you in laughing at the slaver.

  • I'm Not Sure||

    "The President is better qualified to decide what is best for the greater number of Americans..."

    This is just silly. Mr. Trump knows a vanishingly small percentage of the people in this country. How can anyone- even Mr. Trump- possibly know what's best (except, perhaps, in the most trivially simple matters) for people he doesn't know?

  • Scarecrow Repair & Chippering||

    You wouldn't even make a good third-rate troll.

  • Ken Shultz||

    "Maybe they benefit only a few and maybe they don't. The tariffs are a tool in broader negotiations, which will be generally bi-lateral and address specific imbalances. The President is better qualified to decide what is best for the greater number of Americans than is the staff of Reason, though you can argue the specifics as they arise."

  • Ken Shultz||

    This is actually an astute observation from someone is apparently familiar with the recent negotiations in Mexico City between the U.S., Canada, and Mexico on a revision of NAFTA. Reason has been putting up at least a post a day about the tariff, Trump's tweets on free trade, etc., but I don't think they've once mentioned the context of what was going on in Mexico City when Trump made those statements.

    For those of you who don't know, Trump used the threat of a tariff to goose negotiations with Canada, specifically, on his demand that Canada accept cars that use more American parts and labor imported into Canada--before they're finished off in Canadian factories. The Canadian balked, so Trump lit a fire under their asses with the steel tariff.

    Whether or not you agree with Trump's tactics, those were his tactics--according to the Canadian, Mexican, and American trade officials in Mexico City.

  • Elias Fakaname||

    That is the sort of thing we want Trump to do. Use trade as leverage to get third parties to loosen their own trade restrictions, and in cases like China, knock off some of the bad behavior. Like their rampant IP theft.

    Given how poorly so many of our trade agree,Mets are structured, there should be plenty of low hanging fruit up for grabs.

  • Ken Shultz||

    That isn't what I want him to do.

    To my mind, what Trump is doing is threatening to hold his breath until he turn blue. Going to bat for white, blue collar, middle class voters in Midwestern swing states might help Trump get reelected and might help him fend off the Democrats taking over the Senate (if not the House). But threatening to hurt ourselves unless Canada gives us what we want. Yeah, it'll hurt Canada, too, but that's not the point.

    I'm interested in what's good for the American economy, and, like I said, if Trump bets it all on one roll of the dice and wins, that doesn't mean betting the farm on a roll of the dice was a smart thing to do.

  • Elias Fakaname||

    While that's a possibility, are you sure you're not overstating a bit? I am see some real benefit to negotiating better trade terms with bad actors like China. Not just for the oddest either. Again I bring up their abusive IP practices.

    Either way, you make several good points.

  • vek||

    Dude, that's how negotiating works. The fact is if we did it, it would be a small harm for us. If he wins, it's a small benefit. He's not better the whole farm. It's all proportional betting so to speak. If you have a million bucks to play black jack with, this is him letting like 50 grand ride on one hand or something, not the whole million.

    The reason we're in such a mess is because all our previous negotiators were fucking pussies like you're advocating he should be. If you don't DEMAND better treatment, NOBODY is ever going to offer it. You have to twist their arms a little bit. If you win, AWESOME. If not, no biggie. If every president had handled shit like Trump the last 30-40 years we're probably have ACTUAL free trade agreements with the major countries of the world instead of these horrible 1 sided deals we have now.

  • Nardz||

    Well said.
    Additionally, analogizing negotiation to blackjack or craps (roll of the dice) is... uninsightful. There is nothing similar about those games, in which pure probability rules the day. Despite some other astute observations, the choice of blackjack and craps as an analogy makes me call into question Ken's other conclusions.
    If you want to portray Trump's tactics as gambling, poker is the appropriate analogy. I'm not going to say that Hold'em isn't gambling, but it is in many way analogous to negotiation. Players seek to maximize profit by considering, but not replying upon, probability as one factor. The most important factor in poker is psychological. You try to represent something and you try to decipher what your opponent(s) are representing. There is a high degree of skill involved. Negotiation is the same. You know what you can and can't accept, your opponent knows what he can and can't except, and you're both trying to figure out not only what the other can and can't accept, but what each is willing to risk.

  • Nardz||

    For example: I have King+Queen and raise pre-flop to $10. 4/10 people call that raise. The flop comes down Ace-8-2. I don't have an ace; I can choose to bet, representing an ace and hope that no one else has one; I can choose to check and see if anyone else bets; if someone else bets, they're representing that they have a pair (A, 8, or 2). The process of betting is about discovering information. So let's say in this example that everybody, including me, checks the flop. The turn is another Ace. Based on the lack of betting on the flop and the presence of now two Aces on the board, it's probable that none of my opponents have an ace. So this time I bet $12, representing a pair and simultaneously theorizing that none of my opponents have one (at least not one they're comfortable with). Well, after I bet $12, one player re-raises to $40 and the other two players fold. I have $70 left and now have a decision to make: I can fold, I can call, or I can go all-in.

  • Nardz||

    Based on my familiarity with the player and his likely behavior in that situation, I go all in (raising him an extra $42) deciding that the $70 (leverage) I have left is worth the risk to win the $92 already in the pot, because I've concluded that he'll probably fold, but if not I'll still have a slight chance to win. He folds, and using the information and my chips I've increased my stack from $70 to $162. That's poker.

    Negotiation, like poker, is about calculation, analysis, presentation, intuition, and implications. One must assess one's tools/leverage and the consequences of various outcomes. Based on all of that information, one proceeds to utilize the tactics and positions one thinks best. In the above example, I have to consider the consequences of going forward with either $70 or $162 and the costs/benefits of each scenario while weighing those against the risk, or probability, of possible outcomes.

    Trump's rhetoric is analogous to betting in a poker game - he's presenting a certain position and gathering information based on the responses to that position. From what I've seen, he's pretty good at this.

  • vek||

    Pretty much. Poker is a much more accurate analogy than a pure game of chance. Basically what everybody else is saying is that the USA should fold EVERY SINGLE TIME at the first possible chance if everybody else at the table doesn't fold before us! What kind of a way would THAT be to win at poker!?!?!?

    It's not wonder most people are such chumps in life. You have to take risks to win. That's just how life works. I'm not the type that likes to bet the whole farm, but I'm fine with fairly big risks. You have to be to get anywhere.

  • Ken Shultz||

    Anyone who doesn't know this because you've been reading about this exclusively at Reason, blame yourself. Reason's standards have dropped dramatically, and if they've made you say and believe foolish things because of that, then take that lesson to heart. Things around here aren't like they used to be. Reason's take that free trade is good and Trump's tactics are wrong may be correct, but what this guy is saying in the quote above has Trump's rationale absolutely correct. Because we disagree with Trump's rationale doesn't mean that isn't is rationale.

    And what are we going to say if Trump pulls the rabbit out of the hat?

    I'll say that winning a bet on a single hand of blackjack doesn't mean that betting your life savings like that was a smart thing to do.

    We need to understand what we're criticizing in order to criticize it effectively.

  • Gaear Grimsrud||

    I for one appreciate your insights here. I'm afraid I have relied on the Reason coverage of this issue. Thank you for your comments.

  • creech||

    How accurate are these stats that I've seen in WSJ: 70% of U.S. steel and alum use is manufactured in the U.S. and only 3% of U.S. production goes into military and aviation uses? If these are correct, (and most imports come from Canada in any case) how is "national security" threatened??

  • Echospinner||

    It isn't but it allows Trump to use executive order and bypass congress.

  • para_dimz||

    We're not in a full flegded war. Hedges are created for contingencies.

  • Ken Shultz||

    Trump is a lot like Reagan in one especially relevant way--they were both able to exploit the contempt elitists have for white, blue collar, America. We don't talk about Trump Democrats the way we talked about Reagan Democrats and the Reagan coalition, but we should. Reagan Democrats of the rust belt thought that the Democrat party leadership of Reagan's era only cared about African-Americans, feminists, Latinos, and other minorities.

    The white, blue collar, middle class from the rust belt states of Ohio, Michigan, Wisconsin, and Pennsylvania, who put Trump in the White House, see the same thing--only more so. It isn't only that they think the progressives who drive the Democratic party only care about the interests of BLM, feminists, illegal immigrants, LGBTQI+, environmentalists, et. al. It's also that those groups are now openly contemptuous of the white, blue collar, middle class for being white, blue collar, and middle class.

    Ask any progressive you know why the white, blue collar, middle class thinks the Democratic party leadership is contemptuous of them, and I bet the conversation quickly turns to why the homophobic, racist, and ignorant white, blue collar, middle class of the Midwest should be held in contempt.

  • Elias Fakaname||

    Absolutely. The democrats have spent years stepping over s large part of their base, and them treating them with contempt based on identity politics. Blacks are starting to figure out that Obama fucked them hard in favor of letting unlimited amounts of illegals in to the US. The shift in black votes in the 2016 presidential race prove that.

  • Ken Shultz||

    They know the elitists hate them, too--finds them "deplorable". You say that trade wars benefit the few at the expense of the many--and that's true. But what is it that makes that kind of demagoguery so marketable to Midwestern swing voters? Why is suddenly treating them as the elitists so effective?

    Reagan sold the same demographic on capitalism because the contemptuous elitism of the Democratic party put them in play. Trump is selling them on protectionism because of the Democrats' contemptuous elitism, as well. I suppose we should all look in the mirror. If swing voters everywhere think libetarianism is all about homosexuality, smoking pot, and destroying their jobs at the hands of foreign competitors, then don't be surprised if they don't embrace us. Make the case for free trade in such a way that it makes swing voters think we care about them specifically or suffer the consequences.

  • Elias Fakaname||

    Ken, the problem is that many libertarians, including much of the commentariat here are openly contemptuous of industries that crushed by things like China's protectionist policies. I've been excoriated several times when I've pointed that out. Why would anyone convert to a party, and philosophy that is at best indifferent to their economic destruction?

    By my observation, led out libertarians are often the worst salesmen for libertarianism.

  • vek||

    Honestly it's because dogmatic libertarians are fucking idiots. So many clearly have no idea how the world really works it is ridiculous. They argue AGAINST a president trying to push for lower barriers to selling our goods abroad! How fucking stupid can you get???

    In the real world, where there is NO such thing as real free trade, you have to negotiate as good a deal as you can. You have to twist arms to do this, nobody gives away the farm for free! Our politicians have been so stupid over the past couple decades that they signed off on deals that were far less advantageous than ones we easily could have negotiated. As soon as someone comes along who says "I want to get better deals for our companies, and I'm willing to twist arms to do that." everybody freaks out!

    You can't go into a deal, ANY DEAL, ready to just bend over the second the other guy objects. I have closed I don't even know how many hundreds of business deals in my life. That's NOT how you do it. You have to be prepared to walk if you don't get the terms you want. Most of the time when you turn around to walk away, the other guy caves and gives you what you want. I think Trump is just doing what any decent negotiator would do, and he ACTUALLY has the best interests of America at heart. He wants to open up other markets more than close ours, but the threat is what will get us better terms.

  • Nardz||


  • eyeroller||

    Would Hillary Clinton have been better on this issue? I'm no fan of hers, but my hunch is that she would be less prone to start trade wars.

    (I know everyone hates Hillary Clinton, you don't have to restate that here.)

  • Ken Shultz||

    Obama screwed with two trade agreements--South Korea and Colombia--even invalidated one that had already been passed.

    In both situations, as I recall, he renegotiated the trade agreement so that it was acceptable to the UAW.

    "The deal was supported by Ford Motor Company, as well as the United Auto Workers, both of which had previously opposed the agreement. Remarking on the UAW's support, an Obama administration official was quoted as saying, "It has been a long time since a union supported a trade agreement" and thus the administration hopes for a "big, broad bipartisan vote" in the U.S. Congress in 2011.[15]" E2��Korea_Free_ Trade_Agreement

    Obama campaigned on opting out of NAFTA in 2008.

    If Hillary Clinton hadn't taken Trump's course in trying to win back the rust belt for the Democrats, after narrowly beating Trump in Ohio, Wisconsin, Pennsylvania, and Michigan, then she'd have been a fool. She certainly wouldn't be facing any pro-free trade, ideological pressure from within the Democratic base--either from the grass roots or from the unions.

  • I can't even||

    Depends on who was paying her off.

  • Elias Fakaname||

    Indeed. I don't see the Clintons going out of their way for anyone unless they can wet their beaks first.

  • Michael Hihn||

    Short version.

    If I save $5.00 on something made in China, then THAT $5.00 creates a job that would not otherwise exist, when I spend it on a product or service that would otherwise not exist.

    THAT is how stupid Trump is.
    For the few who don't already know.

  • Elias Fakaname||

    That doesn't take into account opportunity cost of China dumping their product here versus domestic production. Which may be a net positive or negative. It would depend on a lot of individual factors.

  • vek||

    FIRST, the moral argument that you should be able to trade with whoever you want it true. No denying that.

    BUT the practical argument is mathematically wrong in many instances, which is why some people aren't for free trade.

    $100 product cost made in the USA.

    $80 made in China. This is actually realistic savings for many categories of goods because shipping and logistics costs are far greater importing.

    If a company stops manufacturing here and imports their product, the US economy has lost $100 in productivity. That $20 savings CANNOT in any way, shape, or form replace that $100 in productivity lost.

    The ONLY thing that makes the argument work is the THEORY that the worker will go on to do something comparable or better paying.

    The problem is that doesn't actually happen in the modern world. A more realistic scenario is a $20 an hour factory worker becomes a $10 an hour service worker, which would still leave a serious net gap in GDP even after the $20 savings.

    OR even worse, but quite common, they end up on disability or other welfare. So they go from being a net positive tax contributor to being a huge drain on everybody else to the tune of 10s of thousands a year. Every one person that goes this route might negate the taxes paid in by 10, 20, or 50 low to mid wage workers that are still working!

  • vek||

    That is the real world outcome we have had in reality. And it has NOT been positive. For some items where we cut costs by 90% by outsourcing, it's totally a good thing. But almost nothing saves us that much by importing. You can buy made in the USA jeans that cost LESS than Levi's, the differences are just not THAT big on almost anything.

    So many of the items on the margins have in fact done great harm to our economy. Going even further, that's not even taking into account the fact that the $100 from making it in the USA will in fact get spent around the US economy several times over, which in fact means it is generating several hundred dollars in economic activity in our borders. If it gets shipped over to China, it does not have that effect. So that "great" $20 savings by outsourcing it has in fact cost the US economy several hundred dollars in GDP to save a big fat whopping $20. The math just don't work!

    This is a collectivist way of looking at it, but frankly it's the angle most people think about it all in. And they're not wrong that 1 way free trade has fucked things up as much or more than its helped. From a collectivist angle, not the moral libertarian angle, free trade can very much be a net negative in many situations.

    So love it or hate it, that's the truth of the situation. It's not what libertarians want to hear, but it's mathematically true.

  • JFree||

    shipping and logistics costs are far greater importing.

    No they aren't. Our government spends a shit ton (like close to $1 trillion per year) subsidizing transportation fuel - specifically 'freedom of the seas' to ship crude out of the Middle East and keep it low-priced and as 'global infrastructure' in a sense for commercial shipping companies. That cost is not borne by the beneficiaries but is spread around to 'Americans' (and more accurately future generations of Americans (who are also being robbed of energy resources because the subsidy encourages excessive use of them today).

    It in effect becomes a subsidy for excessive long-distance transportation - which in effect becomes a subsidy for banks/investors/companies/nations which rely on transporting low-value products long distances. Without those subsidies, a TRUE free market would tend to produce low-value products in smaller amounts that are highly geographically dispersed - in much the same way that a rock/gravel/sand quarry has a very limited 'market range'. This has a HUGE distorting effect - eg in the US suburban sprawl replaces truck farms - or parts of the US remain uninhabited because the money spent on fuel subsidies isn't spent on actual transport infrastructure.

  • JFree||

    Another example of this sort of subsidy distortion. Cheap plastic crap (stuff that is extruded or stamped or molded or somesuch to no serious specs - eg plates, cans/pails, etc) has virtually NO internal economies of scale re actual production. When I lived in Iran during Shah's era, those sorts of small-scale low-level entrepreneurial workshops were all over the place. The only reason a big global-sized factory that makes that stuff can make a 'business case' for investment is if the transport costs to get that stuff to 'customers around the globe' are subsidized by someone OTHER THAN the investor. Otherwise, that factory doesn't get built.

    Currently the US pays enough of a subsidy to make it profitable to export American garbage for recycling - but not enough to ship plain old dirt around the world. But when some investor/crony finds a business case for a global dirt-processing factory (justified presumably with a discount rate based on subsidized interest rates too), then you can bet we will find a way to scale up our transport fuel subsidies.

  • vek||

    Totally... But even though we effectively subsidize long distance shipping, it's still more expensive to import a Chinese bobble to New York than it is to transport it from Ohio to New York. The production cost may be higher in Ohio, but by the time the shipping savings are worked in the Chinese cost advantage is greatly reduced. It also depends on the size, weight, etc of the goods in question. Of course on the west coast the effect is smaller.

    But I totally get your point about our military essentially subsidizing this global system. It's BS, and it should stop.

    I love how enviro-nazis don't hardly ever bring up the environmental costs of shipping things pointlessly half way around the world to shave a few percent off of production costs. This should be one of the green brigades biggest things to push for since it's so obviously bad for the environment. The practice of importing BS commodity goods is INCREDIBLY resource inefficient. It is only monetarily efficient because of subsidies, and the fact that the rest of the world has a shit ton of uneducated workers. In terms of true efficiency there is no third world toilet on earth that can match the USA, Germany, Japan etc in efficiency. Hell I bet even Italy is far more efficient than China or India! LOL

  • para_dimz||

    Doesn't that rely on an assumption that the $5 stops at that more expensive transaction?

  • Jimoxe||

    As long as the costs of income taxes, social security taxes, property taxes, minimum wage laws, environmental and safety laws are built into the cost of goods made in the US, we will always be at a disadvantage trading with countries that don't have these costs.
    They will always be able to produce cheaper than us.
    The protectionists understand this and want to use tariffs to attach those costs to foreign made goods to level the field.

  • Jerryskids||


    If you're going to compare "cheaper" you have to include all the costs - like all those social goods you listed. You know why America has less manufacturing but cleaner air and water and better, safer working conditions than China? Because that's what cleaner air and water and better, safer working conditions cost us. You buy cheap shit from China and part of the cost/benefit equation is that you're exporting the industrial pollution along with the dirty, dangerous low-wage jobs. There's always trade-offs, there ain't no such thing as a free lunch.

  • Elias Fakaname||

    China will include free lead in your drywall, and in lots of other products too.

  • Jerryskids||

    The worst part of the steel and aluminum tariffs is that it's not consumers importing the stuff, it's manufacturers. Factories that produce jobs are the ones getting screwed here. But listen to Trump for 5 minutes and the little cry-baby's going to be whining about how "unfair" something or another is and just like any leveler he doesn't give a shit that he's making everybody equally miserable rather than unequally prosperous.

  • Sevo||

    "The worst part of the steel and aluminum tariffs is that it's not consumers importing the stuff, it's manufacturers."
    One other point that adds to the consumer/worker grief:
    No company passes through costs at cost; that's the way to go broke. Raw material gets the highest mark-ups, given the wastage and shipping costs.
    So double the tariff cost to the customer and reduce the sales by the elasticity of the demand.

  • vek||

    Yeah, as far as things to try to protect, raw materials like steel and aluminum are some of THE WORST things he could possibly slap tariffs on. Going after consumer goods like washing machines makes a lot more sense from the angle he's coming at it all from, but I guess you can't use national security arguments on iPhones to bypass congress or whatever I guess.

  • Leo Kovalensky II||

    "Trade is positive-sum, not, as Trump emotes, negative sum. At the moment of an exchange, both parties expect to benefit and can do so—or else they would not trade."

    This is the piece that, I think, the protectionists never understand. Everything is just a zero-sum interaction. Trade, by definition, is a positive-sum interaction, otherwise why would either party agree to trade?

    The concept seems so simple, yet here in the real world, the majority of people either don't understand it, or refuse to understand it due to their own biases.

  • Leo Kovalensky II||

    If you doubt that Trump thinks everything is a zero sum sort of gamesmanship, then look no further than his constant "winning" mantra.

  • Scarecrow Repair & Chippering||

    And trade knows no borders. Trade doesn't suddenly turn evil just because someone steps 50 feet across a border. If it's a great deal for me this side of the border, it's still a great deal from the other side, until government steps into the picture and fucks it up.

  • Leo Kovalensky II||

    This is true whether you're talking about the trade of goods or labor. Anyone that thinks government has any role to regulate or tax the transaction of goods or labor between willing trade partners has no claim to the name "libertarian"

  • vek||

    Labor, when brought into the country, effects all of the other citizens, AND if we allow anybody citizenship, it changes the politics. I will NEVER be for open borders for this reason. Unless we make it clear those people will never get citizenship and have the right to vote, and they have no right to any taxpayer funded ANYTHING (including schools, care at ER facilities, etc etc etc) I will never, ever, EVER be for open borders.

    Goods are a totally different thing from people.

  • Elias Fakaname||

    And there's no way we can offer citizenship without the right to vote. There would be an I. Ideiate lawsuit and the plaintiffs would almost certainly win on legitimate constitutional grounds. Trump's concession to the democrats would have given the dreamers residency without any guarantee of citizenship. Which would so,be the voting issue, and likely one of the main reasons the demcorats pissed on the offer.

  • vek||

    Personally I think we need more statuses for people being here, or at least need to more widely use some of the statuses we don't do much with now. In ancient Rome most people in the empire were not full citizens. They had different statuses, different rights and privileges, for different people. There's nothing wrong with this concept. Other nations presently have a lot more variety than we do in this area, where it is mostly just full citizen or super temporary and can be booted at any moment.

    I would be totally fine with allowing in more skilled workers to come here, do their thing, and come and go as employment worked out for them, provided they could not vote.

    As far as low skill people, I just don't see where there's much need for importing those kind of people in the 21st century... We still need a fair amount of that kind of labor now, but it's just going to continually shrink going forward. So much mundane shit is going to be automated it's going to be crazy. But in theory at least, if they weren't voting, I wouldn't have as much of an issue with it as I do now.

  • Mezzanine||

    It's truly mind boggling how the simple concept of trading currency for a product somehow goes over their head. As George Carlin said "Some people are really fucking stupid"

    Although the fact that Hillary and Trump were the two Presidential candidates would indicate the depth of that stupidity is far greater than he could have ever guessed.

  • Scarecrow Repair & Chippering||

    Been reading The Taste of Empire and here's something quite apropos I just stumbled across (pages 218ff). Britain's farms were inefficient little things, and when Britain repealed their Corn Laws in 1848, it was cheaper to import California wheat 14,000 miles away than Irish wheat. Prices dropped by a factor of ten, and British wheat farmers switched to fruits and other food. When they repealed sugar tariffs in 1874, cheap German beet sugar made it possible to turn ugly fruit into jam that everybody could afford.

    Trade enables comparative advantage over wider areas for more people. Here, it specifically dropped the price of bread, enabling the working class to spend more money on other products, switching British farmers from inefficient wheat to more profitable crops. The only real downside was that the landed aristocracy saw their rural rents drop drastically, and I doubt very many people lost much sleep over that predicament!

    Note these were unilateral British changes. They did not negotiate treaties to drop their tariffs, and they reaped tremendous benefits, as did the wheat farmers in California, Australia, India, and Canada, the beet farmers in Germany, the cattle ranchers in Argentina, and so on around the world.

    That's the kind of trade war we ought to declare -- drop our tariffs altogether and dare the rest of the world to follow suit or lag behind.

  • Leo Kovalensky II||

    It's economics 101, and Trump has failed.

  • Elias Fakaname||


    No, he hasn't. So far he's doing ok. We'll see how this plays out. After decades of shit trade deals, he has his work cut out for him? Let's all hope he doesn't overplay his hand and fuck things up.

  • Sevo||

    "Note these were unilateral British changes. They did not negotiate treaties to drop their tariffs, and they reaped tremendous benefits, as did the wheat farmers in California, Australia, India, and Canada, the beet farmers in Germany, the cattle ranchers in Argentina, and so on around the world."

    "The Economist [the magazine] was founded by the British businessman and banker James Wilson in 1843, to advance the repeal of the Corn Laws, a system of import tariffs...." (Wiki)
    They still claim to be classical liberal, but unless someone corrected the list top port, it wasn't that way when I let the 'scrip lapse some time back.

  • JFree||

    The only real downside was that the landed aristocracy saw their rural rents drop drastically, and I doubt very many people lost much sleep over that predicament!

    Cash rents dropped because you can't collect rent from a corpse or an exile. The Corn Laws were repealed as a way to avoid dealing with the ACTUAL economic problem at the time - the potato blight in Ireland and absentee v resident land ownership. The 1st round of blight deaths led to a grain shortage because farm labor was dead. Fewer acres were planted. Ireland was Britain's breadbasket. That shortage created the coalition (and it ain't who you think) to repeal Corn Laws and import grain without tariffs. Repeal also made it unprofitable to plant wheat that year. Irish land immediately turned to pasture so tenants were now both starving and unemployed. The 2nd potato failure turned it into famine with no exit except to emigrate to the US in huge numbers or resort to violence.

    The economic history and political coalitions of these events which lasted a full generation is critical but also, even today, used as mere court history. The events led ENGLISH classical economists to ignore Ireland and create neoclassical marginalism which ignored land. Led Marx (also classical) to realize that POWER would always protect itself so the difference between land/capital didn't matter so he too could now ignore 'land'.

    Assuming Irish need not be considered, no one need lose sleep over anything

  • Chumby||

    What do the aluminumilenials think?

  • Nardz||

    You fucking kidding me, Sheldon?
    "Free trade! Free trade!"
    Tell me: Where the hell does free trade exist? Certainly not legally within the US. ALL of our trade is extremely regulated. Don't bitch about one economic restriction if you're going to try to sell our economy as "free" without tariffs and "unfree" or economically ignorant only after tariffs.
    GFY, you global-statist piece of trash.
    And I love the refrain: "individuals trade, not countries."
    Oh? I guess we don't have corporations then? Apple and Samsung make deals with individual that owns and mines cobalt, not companies or countries?
    Com'on man.
    You want a freer market? You got a lot of work to do then, because the status quo is far from free. By bitching about the statism of tariffs as ruining the "free" market, you imply a falsehood - that the market is currently free. It is anything but.

  • Iheartskeet||

    Is this a parody account like that Open Borders Liberaltarian guy ?

  • Nardz||

    It is not, but if you'd like to point out any logical inconsistency you've found in the comment - feel free.
    You might also tell me what real bargaining power you, as an individual, have (other than choosing to purchase something or not - I'd make a health insurance joke here, but thankfully that forcible purchase is moot now).
    The point is: we don't have free trade. Throwing temper tantrums over proposed tariffs strikes me as silly in that light.
    It also tends to elicit the worst side of libertarians, and I'm no fan of that.

  • Iheartskeet||

    I shouldn't really need to, because there are numerous posts above that articulate the issues beautifully and refute your comically inept points. Add to fact, you simply refuse to engage the arguments in the original article. You merely repeat a bunch of talking points that have been shot down before, and then toss in some semantic slights of hand that don't prove a damn thing.

    In other words, as I suspected, you are indeed a parody account.

  • Nardz||

    No substance response. I may be a parody account, but I at least have the ability to formulate thoughts and take a position - this is something you lack.
    Your words have no value.

  • Iheartskeet||

    Ha ! Knew it !

  • Nardz||

    And ok, post may have been a bit harsh - but do I make a point? Just because it's a "libertarian" instead of a progressive using the "you're stupid and easily manipulated, that's the only explanation for supporting Trump" argument, doesn't make it valid or less insulting. Haughtiness is haughtiness, and rather more indicative of conventional dogma than actual insight.

    Have you considered there may be validity to the notion that idealizing our current over-regulated market just to contrast it to proposal for a limited tariff might, you know, undermine the idea of a legitimately free market? Do we really have free trade if bound by the terms of govt trade deals?

  • Elias Fakaname||

    A lot of them don't. Personally, I'm something of a pragmatist. I don't believe we will ever get China to behave better inragrds to trade and IP theft without periodically strong arming them as a reminder that they need us more than we need them. Simply because they lack any real principles. Here are also a number of checks mmenters that actually believe that letting Vhina heavily subsidize their export markets to crush US businesses is a net positive as long as they can save and extra 5% off their purchases. Not giving a shit about all the Americans whose lives are ruined. Even joking about how 'they took our jerbz'. Like it's cute.

    Then they wonder why the LP isn't more popular.

  • vek||

    A thing I've started saying to people lately is this, I ask them:

    Me: Quick question. Is it ALWAYS in your best interests to do the very nicest, kindest, bending over backwards to be nice to somebody else thing? Like in every single situation in your entire life?

    Them: Well, no. Sometimes you have to do what you have to do to take care of yourself.

    Me: Okay, well on a lot of stuff our entire government for decades has been trying to do almost nothing but the nicest, kindest thing possible, no matter how bad the negative consequences. It's just not sustainable. Sometimes you have to accept we need to be FAIR instead of nice. Or even slightly mean, instead of nice. That's just reality. The money doesn't exist to cover this stuff, so no matter how kind we might want to be, it can't go on.

    Them: Uhhhh...

    I use this on welfare, and other nanny state stuff a lot. But it also applies to trade and plenty of other things. There's no reason we OWE foreign countries sweet deals to their benefit, and at our loss. We don't owe anybody shit.

    We've also been dicks in other arenas, mostly ones that make the least possible sense, like with our wars. Why couldn't we have been nice and kind with making war (AKA not made war), and shrewd with trade deals??? That would have been nice!

  • I can't even||

    Trade is really not that complicated.

    Really? I want to sell some steel in China and Germany. Quickly tell me - what tariffs and duties will I have to pay?

  • Mezzanine||

    That's the entire point you idiot. Trade only becomes complicated when countries start putting regulations on it.

  • Nardz||

    Where is this utopian place in which no trade regulations exist? I'd like to move there...
    Provided it's not a shithole

  • Elias Fakaname||

    I'm guessing Somalia doesn't have structured tariffs, or a fcntioning govern,ent for that matter. Although it won't meet your shithole criteria. And they make up for the lack of tariffs by having Warlords steal your shit when it gets there.

  • vek||

    Maybe we've all been looking at this Somalia thing wrong... Perhaps libertarians should just get up a few hundred thousand guys with AR-15s and go found a colony there. Those people are a bunch of savages, and I'm sure could be militarily defeated and kept out of a small area pretty easy. We could establish libertopia!!!

  • Nardz||

    It's really not a bad idea in theory.
    Can only imagine the whining from progressives and globalists and un types.
    This is why we, and Somalia, can't have nice things.

  • I can't even||

    This is a negotiation tactic right now. If it does come to a "trade war", the countries with massive trade surpluses are the ones with the most to lose - and the one that will fold quickly.

  • Nardz||

    I'm not exactly pro or anti tariff - agnostic there - but I am kinda pro trade war.
    No nation has more leverage than the US. That we have allowed shitty trade deals to bend us over and turn us into a "service economy" is due to the avarice and graft of our self styled feudal lords.
    I also wonder what we're going to do with all the people that may have strong work ethics but struggle with linguistic processing. The practical and the poor folk. How many mechanics and carpenters can we have?
    Least we can do is impose a tariff on illegal immigration...

  • NF||

    So the good part of a huge trade deficit is that the foreigner can now buy American assets with the dollars we paid for their goods? Doesn't sound so great...

  • vek||

    Yup. That's another huge hole in free trade theory. Ignoring WHO owns assets is insane. It's fine to allow foreign investment in our country in the natural course of business... But when certain countries have massive piles of our money they need to do SOMETHING with over a period of decades, it can eventually become an issue. China owns trillions in US based assets now.

    Foreigners now own more US based assets than US citizens/companies own foreign assets. Back in the day this was reversed. So US citizens and companies used to bring in extra wealth to the country that we skimmed off of foreign economies as investors, now the US economy gets skimmed off the top by foreigners. Being the owner or investor is always better than being a renter... At some point the owner/renter thing can become a little more lord/serf ya know? Not a good place to be.

  • gzuckier||

    Tariffs are not a war between US steel producers and foreign steel producers. Tariffs are not a war between US steel producers and US steel consumers.

  • Martiandawn||

    Unrestricted free trade would work in a world without nations. Until a group of enterprising statists banded together to create one, that is. Since we live in a world that does have nation states which not only compete with each other but also have differently-privileged groups that compete within their own borders, we can expect those nation states to regulate trade in such manner that benefits their own economic interests.

  • para_dimz||

    I loved studying free trade theory back in college. I loved pin-up girls, too. I found out neither are real, though.

  • Mark P||

    The author assumes that international trade is presently free and Trump is messing up this idyllic state. The tariffs Trump proposes will not result in retaliatory tariffs because high tariffs against American exports ALREADY EXIST. In theory, there is nothing wrong with a trade deficit, but Americans can not be merely international consumers without producing something of comparable international value. The reserve status of the dollar has allowed Americans purchasing power based on the largest government debt in history, but that won't last long and we need a plan B when plan A fails. Just because the words "free trade" appear in the title of free trade agreements such as NAFTA doesn't mean the trade is actually free. These agreements contain hundreds of pages of regulations and restrictions, and Trump is using the threat of tariffs to rework these unfair agreements.


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