TRUMP’S ECONOMICS

Trump’s ignorance of the simplest economic principles is dumbfounding.

If you know that Trump should not be imposing tariffs, but reducing them, and that a trade deficit does not mean that you are subsidizing the country with a trade surplus, then you don’t need to read any further.

You’re an American living in Detroit, and you find the seventies muscle car of your dreams. It’s in Canada, but that’s no problem. You go over to Windsor, and agree on a price of forty thousand dollars. When you get back into the U.S., American customs says there is a twenty five percent tariff, and you are forced to pay an extra ten thousand dollars to your own government. In spite of the facts, Trump, who says his favorite word is tariff, believes it’s the Canadian that pays the ten thousand dollars. Trump thinks tariffs are a tax on Canadian exporters – it is a tax, but it’s American importers that pay the tax.

And it gets worse. Suppose the Canadian buys a ten thousand dollar boat in Detroit, and takes it back to Canada. The result of these two transactions is the U.S. trade deficit with Canada has gone up by thirty thousand dollars. Trump sees this as the U.S. subsidizing the Canadian economy. All that has happened is the American got a forty thousand dollar muscle car and the Canadian got a ten thousand dollar boat and thirty thousand U.S. Dollars which he can spend any way he wishes. There is no subsidy of any kind – it’s simply a win-win trade.

Check out my post on free trade - a 3 minute read
https://www.rationalselfinterest.com/post/free-trade