“One minute the narrative is that we’re going to use these “reciprocal” tariffs to negotiate tariffs down to zero—so we’re doing this to actually increase free trade in that case—the next, we’re hearing about how other countries have taken advantage of us by selling us so much cheap stuff and we have to bring all our factories back to the US. These are mutually exclusive goals.”
If you listen to how the admin defends this (from the treasury and commerce secretaries), this isn’t entirely contradictory. They believe that the persistent trade imbalance has less to do with U.S. over-reliance on imports and more to do with foreign export barriers that are levied on U.S. goods (though they cite both obviously). Lutnick spent by far the most of his TV time on Thursday complaining that foreign nations don’t buy enough of our beef, rice, and automobiles because of tariff and non-tariff barriers they erect on trade. So there is a world where this holds together - lower tariffs overall, trade imbalances that are closer to neutral, overall a more vibrant U.S. export economy and manufacturing base, but continued gains from specialization and worldwide trade.
The question of their execution and competence is a whole other matter. It looks grim.
It feels like he is trying to enrich his social circle. At this point, I’m not even sure he has the Republican Party in mind. He will pull this tariff back and act like it never happened.
I don't agree with the idea of comparative advantage being the case for free trade in all cases. The book 'Against Free Trade' lays this out well: if you have a comparative advantage in grapes and just focus your economy on making more grapes, then in the long term you end up way behind people who decided to not focus the economy on grapes.
However the broad tariffs on everyone aren't focused on trying to reshore manufacturing as much as they are just a general war on trade. If the market goes down this will end his or Vance's hopes of re-election. If that is the case he needs to understand that the best he can do with his administration is to do as much damage as possible to leftist institutions in the time he has left. That might be what America needs - but it would fly in the face of his ego. Dark times ahead either way
Thank you for articulating this very well. My work is tangentially related to trade policy, and the lack of economic knowledge of protectionist Trumpists is astounding.
I'll add that reciprocal tariffs should also take subsidies into account, alongside the set tariff rates, but the tariffs Trump put out don't bear that reality at all. The tariff rate formula is absolutely ridiculous, only an overworked and massively unqualified intern using ChatGPT could have came up with it—not the U.S. Trade Representative!
It is time the right figurea out what their direction will be after Trump, unless we want a President Newsom.
You need to read Ian Fletcher's book Free Trade Doesn't Work. Or at least the recent Tree of Woe's and The American Tribune's articles here on Substack.
I disagree with this. Trump has been sporadic in his announcement of tariffs, sure. But protectionism has been a Paleoconservative policy from the beginning, and is aimed at creating a more blue collar, masculine workforce that will create a 'counterveiling power' to Wokeism. Wokeism flourished when blue collar labor declined.
It's a win-win. If it doesn't spur a domestic manufacturing boom, it will at least close the budget deficit and lessen the number of cuts needed. Tax cuts combined with tariffs will spur the domestic economy and mean even when domestic manufacturing increases and tariff revenue declines, the tax cuts will have paid for themselves.
Trade deficits are largely the result of other countries using slave labor to produce their products. We have become addicted to this slave labor, undercutting the growth of our own economy and innovation. In the end we buy everyone’s crap, and they’re too poor to reciprocate, so our industries hollow out.
This is not a sustainable arrangement. We exploit foreign labor and their tycoons exploit American markets. Tariffs are a way out of this.
We should be automating and make ourselves far more self-sufficient, and our allies should be the same so they can buy our stuff. Otherwise everyone’s pie gonna shrink and wealth inequality will continue, destabilizing countries ever further.
I used to be a believer in the free trade gospel along with the comparative advantage logic. But what was once an interdependent relationship that helped both sides, now only helps the elites of both sides. We can do better.
I’d like what to see what happens if we change the dynamic. I couldn’t care less if the markets crash or whatever. Let these investors try their luck with Chinese AI and see how far they go. This is all short term. In the long term, we might actually improve the whole framework of our economy and yes, get better deals from our trading partners.
As I said in the post: This is just an argument for welfare. If your complaint is that "the elites" make too much money and I guess aren't giving enough of it to poor people in third world countries (why must I give a shit about that all of a sudden?), argue for that position directly. Make the case for wealth transfers from the US to people in poor countries.
There are also some really broad and inaccurate assumptions in this post, such as the implication that we aren't automating enough (automation is at least as much a culprit for the decline in manufacturing jobs as globalism is, if not more--the US still manufactures plenty of stuff, we just don't use as many people to do it), or the idea that this is some kind of brave new experiment that hasn't been tried before. No, people actually have tried this stuff before, believe it or not we have quite a lot of history to explore if you'd like to go and research how being an economic island that refuses to trade with anyone usually works out. One example that exists in the real world right now is North Korea.
You don't think I have a comparative advantage over Joe the Plumber in, let's say, writing political slop on Substack? And that he doesn't have a comparative advantage over me in plumbing?
You don’t run a trade deficit as an individual (I’m guessing, I don’t).
Running a persistent personal trade deficit would be the equiviliant of constantly spending more then you bring in and borrowing on credit in ever greater quantities to finance it. You’re arguing for the equiviliant of a spending splurge using “buy now pay later”. If you knew someone in your personal life living that way you would have an intervention.
There are people that do that and we don’t look on it kindly.
No, I'm just arguing for free trade. If you think there's too much access to easy credit in the US, and that we (and by "we" I am referring to our government most of all) are spending too much money that we don't have, well, I don't know that I'd disagree with that. But it's a separate issue from tariffs. If you think the infinite money printing is a problem, then let's have a debate about infinite money printing. Tariffs, at least these tariffs being rolled out in this fashion, are stupid and destructive with or without an infinite money printer involved.
The argument being made is that we don’t have free trade.
That the trade imbalance, which doesn’t make a lot of sense as an economic result (capital should flow from developed to developing nations, not the other way around) comes about because other nations have tariffs on us. Some of these come in the form of actual tariffs, but some come in other forms. The Chinese yuan peg is a big one for instance (purposely undervaluing one’s currency by government diktat). Others through capital and investment controls. Others through regulations.
Nearly all of East Asia has pursued mercantilist policy for decades. Back in the 1980s Reagan had the plaza accords which forced the Yen to double in value! He also put quotas on Japanese autos and the reason you have Japanese auto plants all over the sunbelt today is to get around those quotas.
Rather then litigate each individual item (people have been talking about the Chinese savings glut for twenty years) it basically declares that the a huge trade imbalance is de facto evidence of trade restrictions by the other party.
It's really pretty simple. Most countries charge us tariffs, far higher than we charge them. We're just evening the playing field. There will be growing pains. There always are, but these tariffs are ultimately a good thing.
Did you not read the post? We are NOT evening the playing field, we are upping the ante massively. The tariffs Trump put out are not reciprocal at all.
“One minute the narrative is that we’re going to use these “reciprocal” tariffs to negotiate tariffs down to zero—so we’re doing this to actually increase free trade in that case—the next, we’re hearing about how other countries have taken advantage of us by selling us so much cheap stuff and we have to bring all our factories back to the US. These are mutually exclusive goals.”
If you listen to how the admin defends this (from the treasury and commerce secretaries), this isn’t entirely contradictory. They believe that the persistent trade imbalance has less to do with U.S. over-reliance on imports and more to do with foreign export barriers that are levied on U.S. goods (though they cite both obviously). Lutnick spent by far the most of his TV time on Thursday complaining that foreign nations don’t buy enough of our beef, rice, and automobiles because of tariff and non-tariff barriers they erect on trade. So there is a world where this holds together - lower tariffs overall, trade imbalances that are closer to neutral, overall a more vibrant U.S. export economy and manufacturing base, but continued gains from specialization and worldwide trade.
The question of their execution and competence is a whole other matter. It looks grim.
It feels like he is trying to enrich his social circle. At this point, I’m not even sure he has the Republican Party in mind. He will pull this tariff back and act like it never happened.
I don't agree with the idea of comparative advantage being the case for free trade in all cases. The book 'Against Free Trade' lays this out well: if you have a comparative advantage in grapes and just focus your economy on making more grapes, then in the long term you end up way behind people who decided to not focus the economy on grapes.
However the broad tariffs on everyone aren't focused on trying to reshore manufacturing as much as they are just a general war on trade. If the market goes down this will end his or Vance's hopes of re-election. If that is the case he needs to understand that the best he can do with his administration is to do as much damage as possible to leftist institutions in the time he has left. That might be what America needs - but it would fly in the face of his ego. Dark times ahead either way
Thank you for articulating this very well. My work is tangentially related to trade policy, and the lack of economic knowledge of protectionist Trumpists is astounding.
I'll add that reciprocal tariffs should also take subsidies into account, alongside the set tariff rates, but the tariffs Trump put out don't bear that reality at all. The tariff rate formula is absolutely ridiculous, only an overworked and massively unqualified intern using ChatGPT could have came up with it—not the U.S. Trade Representative!
It is time the right figurea out what their direction will be after Trump, unless we want a President Newsom.
You need to read Ian Fletcher's book Free Trade Doesn't Work. Or at least the recent Tree of Woe's and The American Tribune's articles here on Substack.
I disagree with this. Trump has been sporadic in his announcement of tariffs, sure. But protectionism has been a Paleoconservative policy from the beginning, and is aimed at creating a more blue collar, masculine workforce that will create a 'counterveiling power' to Wokeism. Wokeism flourished when blue collar labor declined.
It's a win-win. If it doesn't spur a domestic manufacturing boom, it will at least close the budget deficit and lessen the number of cuts needed. Tax cuts combined with tariffs will spur the domestic economy and mean even when domestic manufacturing increases and tariff revenue declines, the tax cuts will have paid for themselves.
No bruh we need to find a conservatism that appeals to elite human capital.
Trade deficits are largely the result of other countries using slave labor to produce their products. We have become addicted to this slave labor, undercutting the growth of our own economy and innovation. In the end we buy everyone’s crap, and they’re too poor to reciprocate, so our industries hollow out.
This is not a sustainable arrangement. We exploit foreign labor and their tycoons exploit American markets. Tariffs are a way out of this.
We should be automating and make ourselves far more self-sufficient, and our allies should be the same so they can buy our stuff. Otherwise everyone’s pie gonna shrink and wealth inequality will continue, destabilizing countries ever further.
I used to be a believer in the free trade gospel along with the comparative advantage logic. But what was once an interdependent relationship that helped both sides, now only helps the elites of both sides. We can do better.
I’d like what to see what happens if we change the dynamic. I couldn’t care less if the markets crash or whatever. Let these investors try their luck with Chinese AI and see how far they go. This is all short term. In the long term, we might actually improve the whole framework of our economy and yes, get better deals from our trading partners.
As I said in the post: This is just an argument for welfare. If your complaint is that "the elites" make too much money and I guess aren't giving enough of it to poor people in third world countries (why must I give a shit about that all of a sudden?), argue for that position directly. Make the case for wealth transfers from the US to people in poor countries.
There are also some really broad and inaccurate assumptions in this post, such as the implication that we aren't automating enough (automation is at least as much a culprit for the decline in manufacturing jobs as globalism is, if not more--the US still manufactures plenty of stuff, we just don't use as many people to do it), or the idea that this is some kind of brave new experiment that hasn't been tried before. No, people actually have tried this stuff before, believe it or not we have quite a lot of history to explore if you'd like to go and research how being an economic island that refuses to trade with anyone usually works out. One example that exists in the real world right now is North Korea.
Comparative advantage is a myth tho
You don't think I have a comparative advantage over Joe the Plumber in, let's say, writing political slop on Substack? And that he doesn't have a comparative advantage over me in plumbing?
You don’t run a trade deficit as an individual (I’m guessing, I don’t).
Running a persistent personal trade deficit would be the equiviliant of constantly spending more then you bring in and borrowing on credit in ever greater quantities to finance it. You’re arguing for the equiviliant of a spending splurge using “buy now pay later”. If you knew someone in your personal life living that way you would have an intervention.
There are people that do that and we don’t look on it kindly.
No, I'm just arguing for free trade. If you think there's too much access to easy credit in the US, and that we (and by "we" I am referring to our government most of all) are spending too much money that we don't have, well, I don't know that I'd disagree with that. But it's a separate issue from tariffs. If you think the infinite money printing is a problem, then let's have a debate about infinite money printing. Tariffs, at least these tariffs being rolled out in this fashion, are stupid and destructive with or without an infinite money printer involved.
The argument being made is that we don’t have free trade.
That the trade imbalance, which doesn’t make a lot of sense as an economic result (capital should flow from developed to developing nations, not the other way around) comes about because other nations have tariffs on us. Some of these come in the form of actual tariffs, but some come in other forms. The Chinese yuan peg is a big one for instance (purposely undervaluing one’s currency by government diktat). Others through capital and investment controls. Others through regulations.
Nearly all of East Asia has pursued mercantilist policy for decades. Back in the 1980s Reagan had the plaza accords which forced the Yen to double in value! He also put quotas on Japanese autos and the reason you have Japanese auto plants all over the sunbelt today is to get around those quotas.
https://en.m.wikipedia.org/wiki/Plaza_Accord
Rather then litigate each individual item (people have been talking about the Chinese savings glut for twenty years) it basically declares that the a huge trade imbalance is de facto evidence of trade restrictions by the other party.
It's really pretty simple. Most countries charge us tariffs, far higher than we charge them. We're just evening the playing field. There will be growing pains. There always are, but these tariffs are ultimately a good thing.
Oh boy.
Did you not read the post? We are NOT evening the playing field, we are upping the ante massively. The tariffs Trump put out are not reciprocal at all.