About the author
Mark Perry Tweets
What’s New on AEI
Sign up for AEI Today
WSJ readers school Trump on trade, tariffs, consumers and deficits
View related content: Carpe Diem
1. “American Consumers Last” Trade Policy:
I was an economist for the Labor Department and a member of the Carter administration’s Footwear Task Force Committee. The committee was charged with honoring President Carter’s campaign promise to grant import relief to American shoe producers. The tone of the committee meetings was always distinctly protectionist. Never, not even once, did we hear from shoe consumer interests. As the process was winding down, I asked the committee when we would hear from consumer interests? The third person in the Office of the Special Trade Representative chain of command looked at me and said: “Van Cott, when are you going to realize that you’re out of sync here? We don’t give a damn about U.S. shoe consumers?”
~Professor emeritus T. Norman Van Cott (Ball State University)
2. What Tariffs Can and Can’t Do.
Trade policy can only create winners and losers, not eliminate trade deficits. If Mr. Trump is determined to reward specific groups such as Western Pennsylvania steel companies and workers, he will likely be successful, but only at the cost of the economy and his presidency.
~Jim Kroger (Cleves, Ohio)
3.Trade Deficits vs. Budget Deficits
President Trump is chasing the wrong deficit. He mixes up trade deficits (when imports exceed exports) with budget deficits (when government spending exceeds taxes, increasing the national debt). Trade deficits do not contribute to budget deficits. The opposite is true.
With America’s twin deficits, economists find one-third to one-half of trade deficits result from budget deficits. If President Trump truly wants to cut trade deficits, instead of tit-for-tat trade policy, he needs to rein in government spending. President Trump should fear budget deficits, not trade deficits. To paraphrase Martin Feldstein, the fundamental cause of a trade deficit is that the U.S. as a whole is spending more money than it makes. Here’s hoping President Trump’s tariff folly is simply “negotiating bluster,” and that the administration seriously tackles entitlements.
~Professor emeritus F. Melese (Naval Postgraduate School)
Bonus: Venn diagram above. (ht/GiveMeFreedom)