Free trade is bad — for some people — but good for most. Protectionism is good for some, bad for most. But those profiting from it know it, and reward politicians catering to their special interests. While most who get screwed don’t even realize it.
For most of U.S. history, Democrats opposed protectionism as a scam benefiting a few at the expense of the many. But then they lost their way on this, pressured by unions in certain industries.
Republicans were traditionally the protectionist party, at the behest of business interests. In the late 20th Century they saw the light and plumped for free trade. But that turns out to have been an aberration, and now “populist” protectionism scores cheap political points from voters who don’t know better.
Leaving free trade an orphaned idea. And it’s happening worldwide, populists and special interests ganging up together everywhere to hobble free trade.
Adam Smith centuries ago observed that if another country can sell us widgets cheaper than we can make them ourselves, we should buy theirs, and put our efforts instead into producing stuff where we enjoy our own “comparative advantage.” Economist David Ricardo showed how every nation benefits by doing this, making the whole world richer. And during most of the past century, such free trade globalization hugely boosted world living standards, lifting literally billions from poverty. Now tragically we’re turning away from that.
It’s true that some jobs can be protected from being “shipped overseas” by keeping out cheaper competing foreign goods. But then consumers pay more. Competition in a free market forces producers to accept the lowest possible prices, with most of the potential profits actually captured by consumers. And if they’re allowed to buy cheaper foreign imports, they have more to spend on other things. Which creates jobs. So “protectionism” does not mean more jobs overall.
Then too, some “protected” goods are raw materials used by other businesses. When protectionism makes those inputs costlier, prices must rise, hurting in turn anyone buying the end products. When Trump imposed tariffs to keep out cheaper foreign steel, a study reported by The Economist calculated that this cost users of steel (like auto companies) $650,000 for every steel job “saved.”
And remember the controversy over NAFTA, a free trade deal with Mexico and Canada? We did lose some jobs to Mexico. But it made Mexico much more prosperous — enabling Mexicans to buy more stuff from us. Again creating more U.S. jobs. A richer Mexico is good for America.
Trump’s tariffs and trade wars were idiotic policy that hurt America. He was obsessed with our trade deficit — the excess of imports over exports — as if that somehow makes us poorer. But (per Adam Smith) it really shows how much we’re taking advantage of the economic bargains on offer. We’ve run a trade deficit every year since 1975 and we’re still the world’s premier economic powerhouse. (And the trade deficit actually grew by nearly 25% under Trump.)
Meantime Trump cast his Chinese tariffs — a tariff is a tax on imported goods — as costing China money. One of his biggest lies. In fact it was American consumers paying, because of course the tax amount gets added to an item’s price on store shelves.
Now Trump is doubling down (tripling, actually), promising 10% tariffs on all imported goods (raised from a current 3% average). It’s been calculated this would cost U.S. households $2000 annually on average. But the whole world would suffer from this further blow to the free trade ethos that improved living standards for billions.
Just one more way in which another Trump presidency would be catastrophic.
Unfortunately the Democratic party can’t call out this economic madness because it’s complicit. The very words “free trade” are now politically toxic, so President Biden has pretty much retained Trump’s tariffs. And his “green” agenda centers upon protectionism in one guise or another, full of government subsidies and tax breaks to coddle chosen U.S. businesses, with “made in America” requirements to keep out imports of gizmos that might (Heaven forbid) be cheaper — and thus more efficient at climate mitigation. It’s a bass-ackward approach that shoots itself in the foot (if I may mix anatomical metaphors).