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Trump's Totally Free Trade Idea Is Really Smart

It's a damned shame that he doesn't seem to really believe in it.

TrumpG7Pignatelli/Euc/Ropi/ZUMA Press/NewscomAt the G-7 summit meeting in Quebec, President Donald Trump reportedly suggested the idea of totally free trade to the leaders of Canada, Germany, Britain, France, Italy, and Japan. "Ultimately that's what you want, you want tariff free, no barriers, and you want no subsides because you have some countries subsidizing industries and that's not fair," Trump said. "So you go tariff free, you go barrier free, you go subsidy free, that's the way you learned at the Wharton School of Finance." Let's call that insight waging trade peace.

Well, hooray! Tariffs and other trade barriers are taxes on consumers and protections for the profits of uncompetitive corporations. So how high are tariffs now? According to the World Bank, U.S. tariffs applied to all products average about 1.6 percent. That happens to be the identical rate for Germany, France, Italy, and the United Kingdom. Japan's average is 1.3 percent and Canada's is the lowest at 0.8 percent. In other words, we and our allies are well down the path toward totally free trade.

Trump's salutary sentiment in favor of totally free trade was, however, swept away in a fit of Twitter pique at Canadian Prime Minister Justin Trudeau who rather mildly suggested that Canadians would retaliate against Trump's new tariffs on Canadian steel and aluminum. Miffed at the pushback from Trudeau, Trump tweeted, "Our Tariffs are in response to his of 270% on dairy!" As my Reason colleague Eric Boehm astutely points out, this tweet undermines the president's specious national security rationale for steel and aluminum tariffs.

The president's smart call to eliminate not only tariffs but also subsidies complicates his complaint about Canada's tariffs on American dairy products because the U.S. dairy sector is massively subsidized by the federal government. Americans for Tax Reform reported in 2012 that as a result of the federal government's system of dairy price supports the "U.S. prices for butter are twice that of world market prices, while cheese prices were 50 percent higher, and nonfat dry milk prices were 30% than world averages." Despite this distortion of market prices, U.S. dairy exports to Canada amount to about $300 million annually, or just under 0.09 percent of $341 billion in U.S. goods and services exported to Canada. Overall, the U.S. ran a trade surplus of $8.4 billion with our northern neighbor last year.

Eliminating tariffs, quotas, and subsidies would hugely benefit consumers not only in the U.S. but around the world. For example, a 2010 study by European economists estimating the effect of totally eliminating all trade barriers between the United States and the European Union found that that would boost incomes in the E.U. by as much as $86 billion and incomes in the U.S. by as much $82 billion annually. A 2016 study on the economic effects of broader free trade under the Trans-Pacific Partnership agreement (rejected by Trump) found that its adoption would have resulted in an increase in annual real incomes in the United States by $131 billion, or 0.5 percent of GDP, and an increase in annual exports by $357 billion, or 9.1 percent of exports, over baseline projections by 2030.

On the other hand, a 2017 World Bank study on the costs of protectionism estimated what would happen if countries around the world all increased their tariffs to the legal limits allowed under the World Trade Organization's rules. If that happened, global average tariff rates would more than triple from 2.7 percent to 10.2 percent. That increase would result in real income losses of 0.8 percent or more than $634 billion relative to baseline estimates after three years. In addition, global trade would fall by 9 percent or more than $2.6 trillion relative to baseline estimates by 2020. Overall, average incomes in the U.S. would be 0.4 percent lower in 2020 than they would otherwise have been.

During the 2016 presidential campaign, Trump threatened to impose a 45 percent tariff on foreign goods. In order to raise tariffs that high, the U.S. would have to withdraw entirely from the World Trade Organizaiton. In a 2017 study, Chinese economists modeled how such a huge across-the board-increase in tariffs would impact the U.S. economy. The results are not pretty. "The U.S. experiences the biggest welfare loss, and its real wages will drop by 2.2 percent," they estimated. In contrast, the real wages in China would fall a negligible 0.03 percent.

The evidence is conclusive that the U.S. loses hugely if the president launches a trade war and wins big if he chooses instead to wage trade peace.

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  • I can't even||

    Trump suggests dropping all tariffs and subsidies, Trudeau and the Europeans tell him no. So Trump bad!

  • Ron Bailey||

    I: Isn't he supposed be some kind of genius negotiator? So negotiate!

  • I can't even||

    He sure seems pretty good. He offered them exactly what they claimed to be seeking, exposing their hypocrisy when they rejected it. Now that they are being honest about their protectionism, he applies the stick - and begins the process of weaning them off of the bad trade deals and American military protection that Canada and Western Europe have been enjoying since WWII.

    They need us far more than we need them, so walking away is a perfectly logical negotiating tactic.

  • Ron Bailey||

    I: The Chinese study referenced above actually finds that most EU countries would fare far less badly with respect to real wages than would the U.S. in its across-the-board 45 percent tariff scenario 4. In fact, some would see real wages increase. See Table B7

  • 100% Satisfaction Guaranteed||

    "would"

    sorry, predictive economic studies are basically useless

  • Libertymike||

    Knowledge deficit.

  • aajax||

    Does that include predictions about the effect of tax cuts?

  • Azathoth!!||

    Why did you gloss over this--

    "He offered them exactly what they claimed to be seeking"

    Trump has just said, quite openly, to every nation in the G7 'you get rid of tariffs, and we'll get rid of tariffs'. His opponents, who've been chiding him about tariffs, chose to keep theirs

    There is no downside here for Trump.

  • I can't even||

    They could change the name from "Reason" to Gloss at this point.

  • aajax||

    No downside for Trump, just for American consumers. Remember, it's always "Trump First", not "America First".

  • MJBinAL||

    It appears to me that even if you disagree with Trump's policies, he is clearly not pursuing them for personal gain. If you can provide examples with support to back up your slur it would be appropriate to do so.

  • MJBinAL||

    This is a response to aajax.

  • JunkScienceIsJunk||

    This is true. But what happens if they decline to get rid of tariffs?

  • MoreFreedom||

    First, thank you Mr. Bailey for your continuing service and articles.

    "The evidence is conclusive that the U.S. loses hugely if the president launches a trade war and wins big if he chooses instead to wage trade peace."

    I'm inclined to believe a study by Chinese professors employed by the Chinese government (using "a multi-country and multi-sector general equilibrium model of Eaton and Kortum (2002) with inter-sectoral linkages a la Caliendo and Parro (2015)") is likely to be pro-Chinese slanted at best, perhaps simply via model selection. While I do expect any increase in tariffs will hurt the US, I'm not convinced it will hurt the US more than China. I also agree that US imposed tariffs will hurt Americans more than tariff increases in other countries.

    Perhaps it's wishful thinking on my part, but it seems Trump blamed foreigners (tariffs and illegals) for our economic woes to get elected, knowing that the government we collectively voted for, is the real reason. Consider all the changes to his stands on these issues since he was elected. Trump has said he's a free trade guy, and he put that on the table which was rejected by other politicians. Seems fair to say, that Trump is waging war on protectionism. That's a boon for the world, and probably more so for the world than the US, but it's still good for US prosperity. I wish him luck.

  • aajax||

    Countries cannot comply with Trump's demands without either violating WTO agreements, or else he is asking them to do much more than he is willing to do. He is only willing to negotiate tariffs one-on-one, but under WTO, nations agree to treat all nations equally. It's not clear whether he favors free trade or just wants to wreck the WTO. I'm not sure he even understands the alternatives. At any rate, he seems to think that free trade is supposed to benefit producers and "countries" rather than consumers as individuals. In this he is just another corporatist and collectivist.

  • damikesc||

    Except he is the only one willing to drop all tariffs.

    Is he bluffing? Maybe. But nobody is willing to call the bluff.

  • ||

    Except he has to first ween us off our (Canada/EU) addiction to tariffs. I'm pretty sure we do in fact benefit from it more than the USA does.

    It's not easy dealing with Justin. In addition to not having the skills required for this, he already made an unnecessary mess of things in Europe and Asia with trades negotiated with them. In one instance, he didn't even show up I believe it was in Asia. Trump wants real business deals. Not fluff ones like we signed with India which benefits India way more than it does for Canada. No one wants to listen to a country that wants to put gender and climate change issues as part of a deal.

    He's now falling back on this 'patriot' tactic in an effort to use this as a way to make himself look strong standing up the USA. It's all so transparent it's pathetic.

    Canadians should have noticed - elections have consequences. And now that the tigers are negotiating, we have a baby gazelle at the table. Harper would have been much stronger.

  • Pro Libertate||

    Canada needs to wake up and act like the economic powerhouse it is. The U.S. is and should be its closest ally, not Europe--not even the UK. Trudeau needs to go.

  • ||

    Absofuckinglutely. It drives me nuts Trudeau would even consider making us part of the G6 clique.

    The way I see it, it will always be a G2 if the G7 were to ever end. We have absolutely nothing to gain from forming an alliance with Europe. It's irrational and impractical. 87% of our economy - never mind culturally which is basically priceless - is tied to the USA. We're a country that is blessed to be next to the most prosperous and dynamic economy and people in world history and we're not taking full advantage because of our shallow nationalism that sometimes creeps in.

    France would fuck us over in a Jiffy Lube second. The USA has always let us play with our ball. And that's a fact.

    Bunch of babies the Euros have become.

  • ||

    Canada has the talent and resources to be an even stronger economy than France or the UK but why we aren't is an entirely different discussion. One in which I've pondered a lot over the years.

  • BestUsedCarSales||

    I've said it before. I would much prefer a new world alliance. Ignore Europe. Start talking more with Mexico and Brazil. They have a lot to gain, and us working together to deal with their problems, and our problems has the potential to be much more growthful than anything Europe has to offer.

    Bunch of incestuous, aristocratic, children in Europe.

  • Ron Bailey||

    B: New World Alliance = NAFTA + CAFTA-DR?

  • BestUsedCarSales||

    I'm fine with free trade with anyone. I think we should do it unilaterally if we have to even. I just think there should be more popular emphasis on our new world allies.

    Even in most public spaces they, at best, treat nations like Mexico as if they're nothing but poor refugees waiting to come here. Many do not recognize them as the large economic engines they are, and the tremendously greater potential they have.

  • Ron Bailey||

    B: Just for fun, let's compare GDP of Latin America with EU. Latin America is $5.6 trillion. EU is $16.4 trillion.

  • ||

    True but Brazil's economy has a lot of potential with a huge population. Let us North Americans get in there and begin the process of modernizing it.

  • BestUsedCarSales||

    And so they are largely still developing nations, with far more potential for growth then the EU. Aligning with them, improving relations, and helping create a place for them to grow will do far more in the long run.

    Latin America has a lot of problems, but I believe there is huge gains that can be had there.

  • BYODB||

    Latin America could be Africa to our China, if you know what I mean.

  • aajax||

    More upside potential in Latin America though, perhaps.

  • MJBinAL||

    Yes, but the EU has peaked. If the EU were a stock, it would be a sell.

  • Pro Libertate||

    Never has made sense to me. There aren't many countries as close as the U.S. and Canada.

  • BestUsedCarSales||

    Would Harper have been quite so... Trudeau though?

  • ||

    He would have sized up the intentions better I think.

    He's much more measured than this current putz.

  • BestUsedCarSales||

    But he's not Trudeau.

  • BestUsedCarSales||

    Like, have you ever just looked into Trudeau's eyes (ignoring his eyebrows)? Have you ever just felt him pierce into your soul and let you know that, "hey baby, things are gonna be okay. LMAO"?

  • Mickey Rat||

    That would imply that there is activity behind those eyes.

  • aajax||

    Would he have lifted tariffs on subsidized American dairy products if it hurt Canadian farmers?

  • ||

    Harper wasn't going to touch a thing.

    I just wonder how he'd deal with Trump. Better than Justin is my point.

  • MJBinAL||

    American dairy products are not subsidized, they are price supported. If we stopped our price supports the price of US dairy would go down not up.

  • Starchild||

    U.S. government tariffs hurt people in the United States regardless of whether other governments impose tariffs or not.

    If Donald Trump really understands that dropping all tariffs and subsidies is a good idea, he should act on that understanding and seek to eliminate tariffs imposed by the U.S. government, which can be done without requiring other governments to follow suit.

  • Ron||

    So if i understand it, if we drop price supports for dairy, dairy prices will go down and then marginal families can then afford to buy dairy products for their kids and the government can then get out of providing food at schools for those kids. Do you want to put the entire government out of business just so people can afford food again

  • Shirley Knott||

    Yes, please.

  • BestUsedCarSales||

    God, imagine a world where poor people could find help without the government. Then when the government finally goes away, who will be here to help all the poor people?!

  • Hackmaschine Mutter||

    Reference data used from World Bank, "Weighted mean applied tariff is the average of effectively applied rates weighted by the product import shares corresponding to each partner country. Data are classified using the Harmonized System of trade at the six- or eight-digit level. Tariff line data were matched to Standard International Trade Classification (SITC) revision 3 codes to define commodity groups and import weights. " What the heck! Really? That's your resource material?

  • Just Say'n||

    In the spirit of free trade maybe we should stop subsidizing their defense.

  • HGW xx/7||

    Amen. Western Europe is truly the spoiled teenage brat of the world: constantly told how wonderful and special they are, gifted every bit of assistance they desire, and then they continually bitch and moan about how much they hate their "parents"...you know, the ones who foot the bill all to often, i.e. the US?

    Eventually, though, the parents have had enough and kick the kid from the nest. Are we to that point? Would be a very nice bit of savings if we said: "hope your subservient welfare cases do well in the battlefield!"

  • ||

    This.

    As a Canadian, it's even worse here because Canadians actually believe we have the leverage to act 'tough' or play hardball with the Americans because we have hydro.

    The naivety of Canadians should be in a book.

    For years I've suggested to Canadians we need to pul our damn weight militarily. No one takes seriously a country that can't defend itself on its own. But noooo, Canadians believe 'no one will ever invade them' (not connecting the dots that's because we fall under the sphere of U.S. military protection) and that all our money should go into public health. I even remember some woman saying cut the Olympic budget because public health.

    We're a one-dimensional thinking populace.

  • BYODB||

    Unfortunately true, and frankly I mostly blame the French influence on Canada. Looking at you, Quebec.

  • aajax||

    If Japan doesn't need to be able to defend itself in the neighborhood it is in, certainly Canada doesn't face any threat that the US would allow.

  • Sevo||

    They'll hold their breaths until he gives in!

  • gclancy51||

    You realize you're Europe's child, not vice versa?

  • I can't even||

    Yes. Russia has about the same GDP as Spain, yet they are a threat to the rest of Europe because.

  • BestUsedCarSales||

    Because they have Spanish Fly and they're not afraid to use it.

  • MoreFreedom||

    "In the spirit of free trade maybe we should stop subsidizing their defense."

    Trump has said he wants to do that. The problem is our subsidies go back into the pockets of the military industrial complex (MIC) here in the USA. It's a problem, because the MIC has a lot politicians that depend on their campaign cash contributions. Trump needs allies in the government considering how hard the establishment (both the RINOs that control the GOP and the Democrats) is working against him; thus, he's picked the military for now.

    He could use more support, say from other Reason authors who seem to think he's an authoritarian big government guy. The signs seem to point more towards Trump not trying to win battles with Congress he knows he can't win now (like signing budget cap busting spending bills) because stirring up a hornets nest doesn't help in getting cooperation from the hornets, say to deal with Mueller.

  • ||

    Does or doesn't the USA have a trade surplus? I keep reading different figures that says it has a deficit or a surplus.

    Asking for Justin.

  • Ron Bailey||

    R: From the USTR link above: U.S.-Canada Trade Facts - U.S. goods and services trade with Canada totaled an estimated $673.9 billion in 2017. Exports were $341.2 billion; imports were $332.8 billion. The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017..

  • ||

    Thanks. I saw that. It's just that I recently read an $18 billion deficit.

    Meh.

    What's a couple of billion Canadian quarters among friends?

  • Unicorn Abattoir||

    About 30 dollars?

  • aajax||

    The sad thing is, there is all this discussion about trade deficits/surplus, which are largely irrelevant to economic health, if at all. In fact trade deficits are largely a result of economic health (i.e., being attractive to foreign investors) and trying to reduce trade deficits is mostly harmful to economic health.

  • vek||

    This is bullshit.

    People don't say "Hey, let's produce these goods at a loss and sell them into the USA so we can invest there!"

    They sell goods because they can (theoretically) produce them for cheaper than we can. Usually because they simply are poorer and have lower wages.

    A country having a small deficit is definitely NOT harmful to economic growth, assuming markets aren't being intentionally distorted too bad one way or another to cause this situation.

    As for running large, long term deficits... WHO owns assets matters. A trillion dollars in US based real estate being owned by American citizens, with all the rents staying in the USA, is in fact better for the US economy than all that income going to Chinese owners. That's just a fact. Some types of foreign investments can be positive, some can be negative.

    It's fine to believe people should be able to do what they want no matter the consequences... But to deny there ARE macro economic positives and negatives is utter nonsense. Too many libertarians fall into this trap.

  • JunkScienceIsJunk||

    They sell goods because they can (theoretically) produce them for cheaper than we can. Usually because they simply are poorer and have lower wages.

    You're correct. However, let's say for the sake of argument their wages are so low relative to ours that they're essentially zero. And the companies selling those good are also poor, and sell the products to us for virtually nothing. That means we are getting free stuff. Getting free stuff is GOOD economically, even if it puts entire industries out of business.

    If the USA had 99% unemployment, but everybody had everything they needed and wanted, trade deficits and unemployment figures would be completely irrelevant.

    I know I'm exaggerating here to make a point, but the important fact here is that the only true measure of economic well-being is standard of living. If another country is essentially using slave labor to create a product, that's good for us. (ethical considerations notwithstanding)

  • MoreFreedom||

    " ... let's say for the sake of argument their wages are so low relative to ours that they're essentially zero."

    Assuming these foreigners are willing to work for less than Americans (I won't assume their wages are essentially "zero") it seems the morally right thing to do is to employ them rather than the relatively lazier Americans who demand more for their work. I feel comfortable saying that, as I'm willing to apply it to myself. People who argue you should buy from Americans first, seem tribal in comparison, and without an argument as to why it's morally superior, but with an argument as to why it's in one's financial interest.

    But the financial interest argument fails in my mind, because if buying from your neighbors is better than buying from a foreigner, then that's putting self-sufficiency first. But it's obvious that self-sufficiency means no one benefits from the division of labor, or trade. And most people wouldn't be able to even produce a pencil, and it seems impossible that everyone could own all the resources (mines, cropland all around the world to grow all the things desired, etc.) needed for everyone to produce their own pencils, and actually do all the work to produce everything they need (unless we went back to the technology and living standard of the Middle Ages).

  • vek||

    MoreFreedom:

    "But the financial interest argument fails in my mind, because if buying from your neighbors is better than buying from a foreigner, then that's putting self-sufficiency first. "

    Yes and no. What it REALLY is to me is accepting reality for what it is: Whether I like it or not, I am legally, financially, and politically tied together with other citizens of the USA. If I live in a town where 10% of the population lose their job, then my taxes go up to maintain the infrastructure in that town. I will also foot the bill for welfare spending. So on and so forth. That is simply reality. It doesn't necessarily have to come to a self sufficiency argument, but there are points to be made for that to a degree as well.

    Whether or not it is moral, it is practical for me to desire other people pull their weight.

    Some imported products cut costs considerably by being done overseas. Maybe by half or more. But many others don't have a cost advantage at all, or a very small one. Look at plastic tupper ware type products next time you're at the store. They're mostly made in USA. But not all. That's because we're competitive in that industry, even with lower foreign wages. The ones being made overseas are probably a net negative for the USA versus domestic ones, even if they're ever so slightly cheaper.

  • vek||

    If you take a $100 product and cut the costs by 70%, that's worth outsourcing. But if you only cut it 10%, that will be a net negative for the US economy and all its citizens. It makes logical sense for a business to want to shave costs by 10%. YET on the whole the US economy sending $90 overseas never to return to save that $10 cannot mathematically make the US better off. That $10 saved/spent on other things cannot make up for the loss of the $90, which will now be used to purchase US based assets reducing future American income as well. The reduced tax base then forces people to in fact pay higher taxes too, so the end consumer REALLY doesn't even end up truly realizing that full $10 savings anyway!

    This also all hinges on the theory that the person who loses the job making the widget gets a job that is comparable/better than the one lost, but this is also not the case in the real world. We have something like 15 million fewer people working versus 10-20 years ago, by labor force participation rate figures. Many that are working are at lower wages. So we've actually traded ourselves into a lower standard of living in many ways, EXCEPT those who have been in industries unaffected by globalization.

    Hence there are trade situations where it is a good thing for the US economy, and where it is not. Every individual transaction may seem to be a positive, while the collective effect is in fact not. It's pretty simple math really.

  • vek||

    Junk: But that's not how it really works in our system. If it were truly free that'd be a different story... REALLY many products get sold to us at 20% less than it would cost to make them here after shipping etc. Then millions of people lose their jobs, so they can't buy the 20% lower priced goods period. Since we have a welfare state the remaining working people then end up supporting them through bogus disability claims, food stamps etc. AND the Chinese now have trillions to buy our own assets with in exchange for their widgets, leaving less future income in the hands of Americans, and more in the hands of the Chinese.

    That's how it has actually worked out unfortunately. Free Trade THEORY works, IN THEORY. But it leaves out many pieces of the real modern world. It literally doesn't even account for the fact that ANYBODY could ever become unemployed at all. It assumes every single person magically just transitions to their best possible use in a comparative advantage industry... But that doesn't actually happen. It pays no mind to long term asset accumulation. Plus a dozen other things.

  • vek||

    I think we would be fine if we had REAL free trade with China, as things would balance out. But this one sided crap has not done well by us in many ways. It has served the middle middle class on up quite well, assuming they didn't work in a hard hit industry, just like illegal immigration has. But it has also screwed many millions of people in the lower middle class, or certain hard hit industries, AND indirectly those who think they benefited because their taxes have had to go up to subsidize socialized expenses no longer being paid for by all those unemployed people.

    It's far more complicated IRL than most libertarians will admit. Most of it simply comes down to the fact that the real world is NOT the world presupposed in the theory. Subsidies, welfare, fiat currency etc all cloud the situation. In a world with no subsidies, no government regulations, no welfare, etc free trade theory would probably pretty closely track real world outcomes... But we don't live in that world.

    I'm still down for trying out real free trade, but I at least accept that it isn't necessarily 100% positives for all parties in all situations. Nothing ever is really.

  • Rev. Arthur L. Kirkland||

    I hope the United States eliminates the protectionism with respect to dairy in particular and agriculture in general because (1) free markets are desirable and (2) plenty of Trump supporters will be too busy navigating bankruptcy to vote.

  • stop trying so hard||

    This is a great article, it shows Trump understands far more than the economically ignorant leftists think he does, and that their silly predictions of doom and widespread bankruptcies are more a commentary on their own financial situations and their dawning realizations that they get economics wrong.

  • Sevo||

    "...it shows Trump understands far more than the economically ignorant leftists think he does,..."

    As shown by the asshole directly above you.

  • ||

    dawning realizations that they get economics wrong

    Not just wrong but wronger than Unfrozen Caveman Hitler.

  • BYODB||

    I don't see what's so hard to understand. Breaking windows generates economic activity which is an unmitigated good. I know this because Krugman tells me so.

    /sarc

    Of course, it's easy to punch Krugman in the face but there are plenty of those on the so-called 'right' that believe much the same nonsense. Both the 'right' and the 'left' seem to be in agreement that top-down economic control is what the populace wants, which is probably accurate up until the voters get exactly what they asked for. Then they might start to see the flaws.

  • aajax||

    I don't think you can pin that one on Krugman.

  • BYODB||

    Not originally, no, but it's amazing such a view has survived so long. Like I said, Krugman is just an easy target.

  • aajax||

    I meant Krugman doesn't subscribe to it at all.
    But you are right that both parties look to policies that favor special interests like producers instead of individual American consumers, which is what they should do. Consumers are favored by free markets and a minimum of regulation, whereas special interests thrive on regulations, which they largely write or underwrite.

  • Tony||

    Trump is just pissed that he wasn't the prettiest head of state in the room.

  • Cy||

    You crushing on German chicks still or did Trudeua's recent beta negotiating finally win you over?

  • BestUsedCarSales||

    He was giving Tony the look.

  • Tony||

    The Trump clan probably refers to people as Greek letters too despite them all looking like fucking Martians.

  • Cy||

    I always knew you were a racist.

  • Mark22||

    Tony is into pretty but stupid Canadians. He likes Merkel only because he thinks she's a drag queen.

  • I can't even||

    Before or after his eyebrow fell off?

  • Tony||

    They make him feel dressier.

  • Half-Virtue, Half-Vice||

  • BYODB||

    So, Trump having been shot down with his suggestion for totally free trade logically it then flows that reality must take over from the doe-eyed Utopians here at Reason? Maybe it's about time.


    So far, Ron appears to be the only author around here that even understands that tariffs are a tool of foreign policy. It's nice to at least see this fact acknowledged, even if it's too late to recover their credibility.


    Now, as always, one of the major failings of libertarianism is it's failure to recognize that the rest of the world exists.

  • John Jacob Jingle Rhymer||

    Bingo. Ron was doing okay only through the first paragraph. See my post of a few minutes ago.

  • aajax||

    Except the whole idea of creating the WTO was to minimize government manipulation of trade for political purposes. It recognises that governments exist, among other reasons, for the purpose of protecting the consumer's right to trade with whoever they decide is most advantageous to them, not reward or punish them for purchasing decisions or block their way. To do otherwise is counter to freedom and prosperity.

  • MikeP2||

    No, the wto was created as a pressure relief valve to keep trade wars from becoming shooting wars

  • MJBinAL||

    BINGO!

  • Dillinger||

    I think he means it. I like it. I liked it yesterday too.

  • ||

    Wait 48 hours; he may reverse himself. Trump stands for whatever he says at the time he says it.

  • aajax||

    One good thing about Trump is his ability to do a u-turn when his crazy schemes prove too crazy for even him to hang onto. I would like to see it happen more often, though.

  • MikeP2||

    Did you learn that at VOX or Slate?

  • gclancy51||

    Interviews and a memory longer than a year usually suffices

  • JoeBlow123||

    "In other words, we and our allies are well down the path toward totally free trade."

    This is true and not true from what I understand. Mr. Bailey I would love to read any easily synthesized articles/papers on non-tariff barriers. Most of the barriers to entry to trade are now laws people make about things like environmental regulations or other silly laws explicitly designed to keep foreign competition out. China is an expert at this as they have somehow effectively managed to keep foreign competition out despite relatively small tariffs of roughly ~7-8%. Which China is doing nothing to decrease either.

  • John Jacob Jingle Rhymer||

    Bingo. See my post of a few minutes ago.

  • MJBinAL||

    Yes, the Chinese have managed to master this better than the French.

    From one of my other posts.

    "France is famous for some other creative trade barriers. For example, for some goods they will require that each package be individually inspected by a customs inspector, and assign one customs inspector. So, if they can kill the import with tariffs, they kill it my effectively limited the quantity in another way. In this case, you can't import more than one "hard working" French customs inspector can personally individually inspect."

    The Chinese use lots of policies to make this work. Like,
    * you can't bring that product here unless you disclose all your intellectual property about it's design to the government.
    * You have to sell this through an government approved distributer who will support the product and charge and "appropriate markup"
    * and a seemingly infinite list of others.

  • Robert||

    Dairy prices are massively propped up all over the world. It's been said that the world is awash in surplus butter & cheese. The USA succeeds in getting the prices higher than elsewhere, not for lack of trying by other countries, but because they don't have the demand to sustain them. That goes for a lot of things. American consumers still buy, while in other countries only black market transactions would go on at American prices.

    This is not a good thing for America, but it's byproduct of a good thing, i.e. prosperity. The richer you get, the more parasitic your parasites can be. Other countries would like to be able to afford the parasites here.

  • aajax||

    American prices are lower than Canadian prices apparently. Hence the Canadians crossing into the US to buy dairy products.

  • MJBinAL||

    Canada is SO free trade oriented they levy an import tariff of 270% against US dairy.

  • MJBinAL||

    And we do not subsidize the price of dairy as Ron suggests. We SUPPORT (increase) the price of dairy. If we were to eliminate those price supports Canada would probably increase that 270% tariff to a 500% tariff. In the spirit of free trade you know.

  • John Jacob Jingle Rhymer||

    The second paragraph of this column is very disingenuous, because, notwithstanding POTUS Trump's comment about Canada's diary-products' tariffs, in fact, as among all of the G-7 countries (and many other countries, too, for that matter), by far, the most onerous restrictions upon free trade are the barriers and subsidies, not the tariffs.

    While "Reason Magazine" purports to be libertarian, it's more centrist Dem/RINO than libertarian and it's so decidedly anti-POTUS Trump that its reputation takes a hit.

  • MikeP2||

    Subsidies. Yes. It is sad how little this is discussed.

    For all the complaints about the US government manipulation of markets, it is so far less than what China, the EU, Mexico, etc do in their markets that it is laughable to whine about tariffs as THE issue in free trade. tariffs pale in comparison to subsidies and marlet manipulations

  • MJBinAL||

    Or Germany and France.

    France is famous for some other creative trade barriers. For example, for some goods they will require that each package be individually inspected by a customs inspector, and assign one customs inspector. So, if they can kill the import with tariffs, they kill it my effectively limited the quantity in another way. In this case, you can't import more than one "hard working" French customs inspector can personally individually inspect.

  • aajax||

    Libertarians are not in the business of coercing other countries to drop subsidies or barriers, except to try and persuade them that such are not in their interests. If they can't be persuaded, then we just have to adapt rather than penalize ourselves in hopes that they will stop penalizing their people. In other words, educate and persuade, not naively conduct lose-lose trade wars.

  • vek||

    This is why libertarians never run anything..,

    Being nice ALL THE TIME, and never even trying to twists someones arm, will simply never work. If you have the power to make somebody else do what is in your best interests, AND you also know it is really in their best interests too, there is no good moral reason to not do it.

    I don't think we should use our power to screw weaker nations over... But I have no problem negotiating strong and hard. If we'd done this with China we may have made them cave and open their markets to global competition 20+ years ago. How much better off would the world have been if we'd just had a real negotiator that refused to offer barrier free entry to the USA without them reciprocating?

    As I said, this idiotic thinking is why pure libertarians never run anything. You need at least a dash or two of reality thrown into libertarianism now and again to make it functional IRL.

  • JunkScienceIsJunk||

    Being nice ALL THE TIME

    It's not about being nice. It's about adhering to your philosophy. If your philosophy says that you're against tariffs, implementing tariffs is a violation of your philosophy, even if it's with the intent of ridding the world of tariffs. This is why libertarians also hold the view they hold on immigration, targeting noncombatants, and health care. A violation of the NAP is un-libertarian, every time.

    As I said, this idiotic thinking is why pure libertarians never run anything.

    I'm sure you know that this isn't the reason.

  • vek||

    And there you go and prove my point right off the bat! You're saying it makes sense to not give up one ounce of purity in theory to gain 1,000 pounds of real world results! Idiotic.

    Being a 110% purist is simply no way to get anything done in the real world. And it IS a large part of why pure libertarians never run anything. Anybody with an iota of common sense can see how fucking autistic it is to not bend the rules once in awhile to achieve an end goal that is 1 million times more awesome than the rule bending is bad. So most people think libertarians are fucking idiots who will never get anything done, which many on the ultra purist side are. So nobody votes for them, even those that largely agree on the general principles. I would vote for one of the Pauls, or Amash, etc long before I would vote for most ultra purists that I actually agreed with more, because they actually would get stuff done.

    For instance: The types who were against the marijuana legalization efforts because it wasn't full decriminalization with zero regulation. FUCKING STUPID. It's a step in right direction, even though pure libertarian principles were sure as hell not being adhered to at all.

    Not that the people who negotiated all these modern trade deals actually gave a shit about real free trade, they were just corporatist shills, but if they had they did it all wrong. What's better: the shit show trade agreements we have now... Or real free trade? I'd go with the real deal myself.

  • vek||

    After the fall of the USSR if anybody with any sense had been negotiating these deals we could have used our leverage as the world's largest economy, and the sole super power, to blow open markets world wide... But we didn't. There could be REAL global free trade right now, but some autistic person like you would prefer to allow cronyism to rule the land instead of even temporarily bend ones principles.

    Not to mention that if you're saying tariffs violate the NAP... Then one could make an argument that retaliatory tariffs are warranted because other nations aggressed against us. I see no need to make such an argument, but if you're going to involve the NAP with tariffs it is a logical thing to consider...

    Purist libertarians couldn't lead their way out of a wet paper bag. They could never administer any real world nations or anything else with all the purity spiraling. HOWEVER pragmatic libertarians would be the very best people in the world to run nations, because they'd actually be constantly moving things more towards libertarian end goals, even if that meant not perfect laws moving in the right direction, or bending the morals once in awhile to achieve a greater goal.

    I want the good end results, and as long as it doesn't include mass murder or whatever I'm fine with playing hard ball sometimes to actually have a freer world.

  • vek||

    Thank God the founding fathers weren't retarded, autistic, idiot, purist libertarians who tried to follow moral principles to the point of defeating themselves... We'd still have Queen Elizabeth on our money if they were. THEY were mostly all very pragmatic libertarian leaners. THEY set up the best government in the history of the world. Purity spiraling morons would have never even managed to decide on the text of the Declaration because they'd have been too busy arguing about unimportant nuance.

    The founders KILLED people, in violation of the NAP, because it was the common sense way to go about obtaining their freedom. Thank God they did! You people crack me up. You want to adhere rigidly to principles at all the wrong times, even when the net result will in fact be losing more freedom than if you'd just done the common sense thing. It's mind boggling.

    PS For anybody with actual autism out there, sorry... But it is a perfect way to describe the way purist libertarians think/behave. I think a lot of them are literally on the spectrum honestly, but for you saner autists out there no ill will intended!

  • vek||

    And one more thought: We lost almost every single line-em-up-and-shoot-at-each-other battle of the Revolutionary war. However we constantly won small engagements and bled the British dry by using tactics that were considered unscrupulous at the time. Who won that war again? Was it worth it? Yes. Now those tactics are considered normal and fine because they simply make tactical sense.

    Conservatives and libertarians have got their asses kicked for more than half a century because they have tried to maintain useless moral high ground on a lot of issues. Meanwhile the left has used dirty, and VERY effective, strategies to take over. They have destroyed the country because of the autism of conservatives and libertarians.

    Sometimes giving up on a lesser principle to secure a greater principle is worth it. It ultimately results in more net good principles existing in the world. Anybody who can't get that is dense. People like that are to a large degree why America has been destroyed by leftists.

  • MJBinAL||

    Trump believes in no tariff, no subsidy free trade. He also however recognizes that it has to be bilateral. Since no nation we deal with is willing to do it, no tariff no subidy free trade is not going anywhere.

    All those who think we should unilaterally eliminate all tariffs and let everyone else tariff as they please are not living in the real world.

    What Trump has said is, "drop your tariffs against us or I will raise tariffs against you." In short, he would prefer all the tariffs go away, but isn't going to allow it to be one sided.

  • vek||

    So Trump offers EXACTLY what libertarians should actually want... All the other leaders go "LOL. We're not really in favor of free trade! We like slanting our markets against foreign competition like everybody else dummy! LOL"

    And somehow this makes Trump the one doing something bad??? I fail to see the reason in that Reason.

  • JunkScienceIsJunk||

    So Trump offers EXACTLY what libertarians should actually want...

    Well that depends. In the sense that libertarians want the entire world to adopt libertarianism, sure. But most libertarians are against forcing their philosophy on other countries (and on our own country). Tariffs, by definition, are force. As happy as I am that Trump exposed these leaders as anti-free trade, his trade war is a bad idea and is directly in violation of everything libertarians hold dear. You can't be a libertarian and suspend libertarianism at will.

    It's also highly unlikely to work to any appreciable extent. And once implemented, it's hard to go in the reverse direction. Because government never met a tax it didn't like.

  • vek||

    You can argue that it may or may not work in the current context, but I'm quite confident we could have made China buckle 20 years ago. And we should have. We could do it again today if we REALLY wanted to, but the cost would be far higher for us now that we're so dependent on them for goods. Which is why we should have done it 20 years ago instead when it wouldn't have cost us shit because we didn't import much from them.

    You're simply wrong that you need to 100% adhere to principles at all times, even if it means you lose out on achieving your principles to a greater degree. Sometimes doing this is simply suicide. This is why purist libertarians never get anything done, and never will. EVER.

    For instance there are a million scenarios in which adhering to the NAP in a potentially violent situation would be idiotic and suicidal. In a post apocalyptic scenario one might be wise to err on the side of caution and simply cap a sketchy looking character if the context in which you meet them means there's a 99% chance they mean to do you harm. Maybe you cap an innocent person 1 out of 100 times, but you'll be alive still, and on net you'll have shot a bad guy 99 of those 100 times. Net positive you see, even though there is that negative in there too. Things CAN be weighed and balanced, and if there is a net positive with the negative it can be worth it.

  • Mark22||

    The president's smart call to eliminate not only tariffs but also subsidies complicates his complaint about Canada's tariffs on American dairy products because the U.S. dairy sector is massively subsidized by the federal government.

    Nope, sorry, that argument doesn't work. For example, I think we should get rid of Social Security, but I'm still forced to pay into it and I still intend to take the benefits out of it. Likewise, as long as the EU has tariffs and subsidies, the US is forced to have the same when dealing with the EU.

    The EU tried to demonstrate that a bunch of nations could get together and all drop subsidies and tariffs between them, but that backfired because they couldn't make labor mobility work and because the organization charged with enforcing the rules turned into an unaccountable authoritarian super-government.

  • thesafesurfer||

    I would like to ask the author, Mr. Bailey, to publish the comments from leaders of any nation on the planet that embraced President Trump's proposal to eliminate all tariffs?
    I would also like to ask Ronald to point out in errors in this statement, truly free trade gives equal access to the participants to each other's markets.
    The United States gives foreign companies far more access to the American market than American companies receive in foreign markets.
    Mr. Bailey advocation of "free trade" completely ignores the fact that free trade does not exist.

  • Colossal Douchebag||

    Someone's been listening to Larry Kudlow.

  • flashgordon||

    Trump is a really smart guy and he has a BA from Wharton at Penn, a school with a real emphasis on Economics and Finance. Some of the comments about the money supply from Trump are the best I've ever seen from a politician other than Phil Gramm. Trumps' ideas on the Middle East were very Reason'y (it's a waste of resource, stay out and let them kill each other). Since he was elected he hasn't followed his Middle East strategy as much as we libertarians would like. I'm not saying Trump is a nice guy, I'm saying he's not a stupid guy.

  • Michael Cook||

    One of the consequences of the USA running trade deficits with nearly every other nation in the world is that those nations then use their dollar stockpile to (1) help the USA finance its national debt or (2) buy fixed property in America like houses, land, commercial buildings, or movable property like artwork or other collectibles, or (3) buy up our businesses.

    This leads to funny consequences when we get in a trade war because Trump wants to change things. The Europeans are recently going to punish us for our new tariffs on their steel and aluminum by putting a large new tariff on American whiskey and bourbon.

    This tax will mainly fall on Jim Beam, which makes a large variety of bottled spirits. Jim Beam, however, is no longer American-owned. It was already bought out by Europeans. . .

  • Michael Cook||

    Free Trade is like Free Love--a seductive ideal that tends to result in cults where those of weaker minds are exploited by those with a knack for political control.

  • swampwiz||

    Regarding the tariff on milk that Canada imposes, the USA imposes a defacto tariff in the form of farm subsidies to dairy farmers based on how far they are from the ideal location to farm that: Wisconsin.

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