Ep. 189 The Truth About Trump and the Tariffs

19 May 2019     |     Tom Woods     |     10

The issue of international trade is not a simple one of a difference of opinion: Trump genuinely appears not to understand the subject. We sort it all out in this episode.

Krugman Column

Killing the Pax Americana” (May 11, 2019)

Debate Mentioned

Ep. 1131 Debate Episode: Trump’s Tariffs, Pro and Con (Tom Woods Show)

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  • https://2vnews.com 2VNews

    Tariffs, protectionism and nationalism are cronyism. They help the connected few and hurt the many.

    • Cynthiacurran

      I just thought that maybe Trump can keep the new space company jobs from outsourcing to China. Relativity a space rocket company picked Stennis space center to make its rockets by 3-d printing. Its suppose to hire 200 people in Mississippi. Think, high paying jobs leave Ca and New York for the south. Elon Musk who is non-union also has expand his rocket ships being built less in La and more in Brownsville Texas. Jeff Bezos Blue Origin is opening a rocket engine facility in Huntsville Alabama. If these jobs are not outsource. Think the south will no longer be a poor cousin and the South supports non-union company more than the North or parts of the Midwest.

      • https://2vnews.com 2VNews

        3 Cs and 1 P of Economic Growth:
        Cut Regulation, Cut Spending, Cut Taxes and Privatize
        When government tries to micromanage, government does a lot of damage.

  • Craig

    I have seen the argument

    Trade wars – a catalyst for economic crisis

    that a simple accounting identity (no economics involved)

    (Imports – Exports) =

    (Investment – Savings) + (Government Spending – Taxes)

    identifies the trade deficit with the budget deficit. According to this, irrespective of how any economic effects of tariffs may affect trade or rearrange trade flows, as long as Trump increases the budget deficit by increased spending the trade deficit will increase. That seems to be what has, in fact, happened so far.

    Is this argument correct? I don’t see any flaw in it.

    • Galgus

      Wouldn’t that be saying that if we import more than we export, we can invest more than we’ve saved and that the government can spend more than it taxes?

      That makes some sense in essentially getting outside wealth, but inevitably imports are paid for with imports. Or also with currency devaluation, as is constantly happening. That inflation and/ or the need to pay for the imports in trade at some point would be an issue, but we’d only benefit if China decided to start giving us imports for free.

      Aside that, while the US may have a trade deficit with one country, it has a surplus with others.

      Just as we shouldn’t worry about a trade deficit with our local grocery store, the US shouldn’t worry about a trade deficit with any particular country.

      • Craig

        Wouldn’t that be saying that if we import more than we export, we can invest more than we’ve saved and that the government can spend more than it taxes?

        Yes, I think that is the point. Namely, that the amount by which imports exceed exports is the increase in the amount of dollars owned by foreigners that are either sitting in bank accounts (available for investment) or invested in treasuries (borrowed for government spending in excess of taxation).

        That makes some sense in essentially getting outside wealth, but inevitably imports are paid for with [sic]imports.

        [exports?]

        I think the point is that that is not inevitable, or at least it has not happened.

        … if China decided to start giving us imports for free.

        Which is what foreign trade partners such as China have been doing to the extent that they accumulate dollar balances (as indicated by a balance of payments deficit). Right?

        • Galgus

          I meant exports, sorry.

          It seems like the worst case scenario would be the dollar losing its value to foreign governments and flooding back, exposing how much it has been devalued.

          But couldn’t spending increase without taxation rising via inflating the currency?

          It’s be harmful and, unlike free imports, there’s no real wealth backing it up, but it’s like a tax on every dollar holder.

          • Craig

            It seems like the worst case scenario would be the dollar losing its value to foreign governments and flooding back, exposing how much it has been devalued.

            I think “flooding back” is a deceptive metaphor. The dollars owned by China are not green pieces of paper stored in a warehouse in China. They are, mostly, in the form of treasury bills. That is, they remain digits on the books of the Fed. “Flooding back” would consist of those treasury bills being liquidated and the proceeds being used to buy real goods. Yes, that would expose the devaluation of the currency.

            But couldn’t spending increase without taxation rising via inflating the currency?

            Not literally. At present the treasury cannot print money and directly spend it. It has to first sell treasuries to someone to increase spending without taxation. However, if the Fed eventually buys those treasuries with newly printed money that amounts to the same thing.

            My original quandary was about whether or not the economic effects of tariffs really do not affect the trade deficit since it is entirely determined by the budget deficit (according to the accounting identity).

      • D. Maxson

        That’s ridiculous, Clintonomics and obamanomics has resulted in America becoming the biggest exporter of jobs, world wide, in history. Destroying whole communities and our tax base at the same time. If you bother to look at Americas economic history u will see that our greatest periods of prosperity, coincide with our periods of implementation of high tariffs. Look it up

  • davegrille

    Tariffs usually work poorly.