Trump promises to slam a 100-percent tariff on [Update:] imported cars made in Chinese-owned factories in Mexico. He announced this not to a group of prospective car buyers but to a group of car makers. So what else is new? Car buyers, who outnumber the well-organized car makers but are not themselves organized, would have to pay more for cars they do not want if Trump got his way. That's the point.
This is America first? No, it is not. It is "An Interest Group Whose Votes I Want" First versus everyone else. That's always the case with protectionism. Stopping consumers from buying whatever they want helps some (in the short term) at the expense of the rest. Calling the favored group "America" is self-serving special pleading. Trump's good at that. He thinks he knows better than you.
Trump is just another special-interest-pandering politician. Many people are fine with that because they misunderstand markets and dislike foreigners. But as Adam Smith taught us long ago, the wealth of a nation is determined by the people's free access to the world's products and not by how much they are cut off from those products. We produce to consume. We don't consume to produce.
David Friedman cleverly points out that cars can be produced in two ways: the old-fashioned factory way and by, say, growing grain, loading it on ships headed to, say, Japan, and welcoming the returning car-laden ships. Both production methods are legitimate, and which one prevails should be left to free people making choices in a spontaneously ordered marketplace. Trump obviously never learned about the law of comparative advantage.
7 comments:
I agree with what you are saying, however how does a country address countries that are hostile to the USA like China. Are we not setting us up down the road as China uses their profits to undermine our country? Just how much does China buy from us? I suspect it’s not a balanced trade. Free trade with friendly countries yes. Those hostile no?
Is China hostile?
China is hostile in that the state controls production, and can therefore produce any given item at any given cost it chooses. Therefore, Chinese cars specifically, are not constrained to any actual market prices for materials and labor. They can, and will undercut us until they drive us out of business. Personally, I would like to see China cut off completely. We pay more, but their system of government fails.
That's weird. Offering us stuff at attractive prices is a hostile act. I hope I run into hostile people more often.
Yeah, Trump is awful. I struggle to understand economics, but compared to him I'm a PhD. And pandering to an "us vs. them" mindset brings out the worst in people, and in a nation.
The fact that (to me at least) he's waaaay better than the other guy is depressing.
China is not hostile to us. China has been unfairly smeared by our ruling class that wants to instigate conflicts in which they and the arms industries and the intelligence industries profit at our expense. And that's to say nothing of the millions of people who suffer and die as a result of American foreign policy. It's sickening to those of us who see what's really going on.
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