Upholding a Well-Worn Tradition

Not surprisingly, Donald Trump has followed in the infamous footsteps of his presidential predecessors in the transition from candidate to chief executive.  Invariably, every candidate for the presidency makes a whole host of promises, the vast majority of which are horrible and typically only exacerbate the problems they attempt to resolve.

 

With respect to trade, Donald Trump has adopted a position that is essentially indistinguishable from the 17th century French Mercantilism of Jean-Baptiste Colbert. It is a sure way to enrich a selected few to the detriment of the masses. At the same time, protectionism seems to superficially “make sense” to many people whose understanding of economics is not exactly the best, to put it politely (admittedly, in order to fully grasp how utterly fallacious protectionist arguments are, one has to do some reading and thinking, which is not everybody’s cup of tea). It also has a strong emotional component, as assorted foreigners are made out to be villains in its standard narrative (their “crime” consists of serving consumers by offering them win-win deals). Mainly it is a case of confusion: the ills of the fiat money system with its incessant credit expansion are erroneously blamed on free trade. [PT]

Photo credit: Gage Skidmore

 

Among the proposals, however, there is an occasional bright spot.  Yet, once elected the stupid policies are eagerly pursued while the good ones are quickly discarded.

What was somewhat unique about Donald Trump was that he was the first candidate in a long while who had a number of refreshing and much needed proposals. The border wall, “draining the swamp,” criticism of Ma Yellen and the Fed, rapprochement with Vladimir Putin and Russia, a deescalation of U.S. imperialism.

There were bad ones, too, but the good ones were enough to lead him to a smashing win over the Wicked Witch of Chappaqua.

Even before being sworn in, however, the president-elect began to downplay his most positive positions and emphasize the worst.  At the top of this list, and what Trump has been consistently wrong about since the inception of his political career, and even prior to it, has been “trade.”

 

The Benefits of Free Trade

Trump considers himself an “economic nationalist” in the mold of Patrick Buchanan.  Both, however, are simply wrong in this regard, demonstrating that they do not have a grasp of the most basic of economic principles.

The latest Trump tirade on trade was reported during his recent trip to Europe at a meeting with high-ranking officials.  Trump is reported to have lashed out at German auto makers who the President accused of being “very bad” because of the “millions of cars that they sell in the U.S.”  The Donald bemoaned, “Terrible, we’re going to stop that” and added “I don’t have a problem [with] Germany, I have a problem with German trade.”*

 

BMW M-6: You are not supposed to buy this example of German engineering prowess, citizen.

Photo credit: BMW

 

Such talk makes Trump sound like a fool.  What is “bad” about providing American consumers with first-class automobiles that they apparently want in large quantities and are voluntarily willing to pay for?  And what of American workers employed with Mercedes Benz, BMW, and Volkswagen?  What is so horrible about the jobs and income that is provided by German firms to these workers?

Instead of berating German car manufactures, Trump should direct his ire at the immigration policies of psychopathic politicians like Frau Merkel.  Candidate Trump was very vocal about this and criticized European leaders for allowing their countries to be turned into multicultural cesspools.

The benefits of free trade and the baneful consequences of protectionism have long ago been elucidated by right-thinking economists, while the historical record has shown that lands which engage in “free trade” are decidedly richer than those that do not.  That Trump could spout off such nonsense about the evils of German trade shows how far the level of economic understanding has fallen.

Not only does free trade allow for the extension of the division of labor and specialization, but it has very important non-economic fruits. When trade is unregulated, there is less of a tendency of trading partners to engage in bellicose actions toward each other.  Free trade and peaceful coexistence among nations are synonymous.  It is when trade is prohibited, skewed by governments to “protect” favored industries, tensions are created among peoples.

 

Here is one of the most famous debunkers of protectionism – Frédéric Bastiat. He was the first to give voice to the insight that free trade makes war less likely. Here he makes fun of protectionism by highlighting its fundamental absurdity: The Petition

 

Government Needs to Butt Out of Trade – Completely

Free trade does not require measures such as NAFTA or negotiated deals by politicians.  Instead, producers of one region are free to sell their goods at whatever prices or quantities to consumers of other areas that agree to buy them.  Ultimately, trade is up to individual producers and consumers in what they contractually agree to exchange, there is no need for political involvement.

Trump’s lambasting of the German auto makers, however, underscores a more fundamental problem with the U.S. economy.  America no longer produces goods that the world’s consumers desire, but instead, produces military hardware that it sells to despotic regimes which enables them to remain in power and wreak havoc on their enemies.

Predictably, this escalates tensions abroad while, domestically, the standard of living of Americans fall as scarce resources that could have been used in the production of useful consumer goods are diverted to the creation of murderous military armaments.

 

The recently deployed “Mother of All Bombs”, a conventional bomb with a yield of 11 tons of TNT. It is quite useful for killing people and destroying things. Unfortunately that is all it is good for and it’s a good bet these qualities are not exactly high on the list of consumer preferences.

Photo credit: Jim Beckel

 

Trump has repeatedly boasted about his and his appointees’ abilities to negotiate great trade “deals.”  His bashing of the German auto makers right after his multi-billion dollar arms sales to the Saudis show not only that he is clueless in regard to the immense benefits of free trade, but that he is just another adherent, like his predecessors, to the ideals of crony capitalism.

 

References:

*Tyler Durden, “Trump Slams ‘Very Bad’ Germans for Selling Millions of Cars in US: ‘We Will Stop This.’”  Zero Hedge 26 May 2017.

 

Image captions by PT

 

Antonius Aquinas is an author, lecturer, a contributor to Acting Man, SGT Report, The Burning Platform, Dollar Collapse, The Daily Coin and Zero Hedge. Contact him at antoniusaquinas[at]gmail[dot]com https://antoniusaquinas.com/.

 

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One Response to “Donald Trump is an Economic Ignoramus on Trade”

  • Kafka:

    Economics in it’s theoretical form ignores Politics. But in the real world economics is a slave to politics. There is no such thing as Free Trade between nations and never has been. It is always some form of managed trade despite the marketing label of “Free Trade”. Ceteris Paribus does not exist in the real world either, for every nation has different employment standards and different laws governing employment and investment conditions. Therefor there is never a level playing field on which this “Free Trade” myth can operate from.

    “Free Trade”, the marketing label, is a way to strip jobs and incomes from consuming nations like the U.S. and send technology and profit creation to slave labor countries.

    And I will leave currencies out of this argument.

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