Posted on 04/04/2025 5:41:44 AM PDT by karpov
Believing that a country is in bad shape if it imports more goods than it exports — i.e., if it has a trade deficit — is, in most cases, a harmless error in reasoning. It’s the sort of thing that seems to make sense at first glance, but any halfway decent economics professor can train it out of students in one or two lectures.
That error in reasoning becomes harmful when the person who believes it is the president of the United States, and he is willing to claim emergency powers to act on it unilaterally. That’s what Donald Trump has done with his executive order to raise tariffs on virtually every country on earth.
As a share of the economy, the executive order is likely the largest peacetime tax increase in U.S. history. In nominal terms, it’s the largest tax increase, period. And it comes without any input from Congress. In fact, it effectively overturns USMCA, CAFTA-DR, and the twelve bilateral free trade agreements that Congress has approved. On Tuesday morning, the Dow Jones Industrial Average opened down over 1,100 points, or about 2.6 percent, in reaction to the news, while the tech-heavy Nasdaq collapsed around 800 points, or 4.6 percent.
Trump claims extraordinary powers to impose these tariffs on the basis that the trade deficit is a national emergency. He claims to be helping U.S. manufacturing firms, but groups such as the National Association of Manufacturers oppose the tariffs, probably because about half of U.S. imports are inputs for domestic production.
Even Joe Biden, under intense pressure from his progressive supporters, did not declare a national emergency for climate change. There’s about as much evidence that climate change is a national emergency as there is that the trade deficit is one, so expect the next Democratic president to waltz right through the door that Trump has opened.
Speaking of old, wrong Democrats, Dick Gephardt in his wildest dreams probably never imagined the protectionist spree that Trump has wrought. The White House claims to have calculated the “tariffs charged to the U.S.A. including currency manipulation and trade barriers” for nearly every country.
These numbers are far in excess of the tariffs that countries impose on U.S. goods — because the formula used to calculate them has nothing to do with tariffs. Instead, it is the trade deficit divided by the amount of imports. The tariffs levied are either 10 percent or half of that trade deficit ratio, whichever is higher. If the U.S. has a trade surplus with a country (and the U.S. has a trade surplus with over 100 countries), it is set at 10 percent automatically.
In effect, it’s a 10 percent minimum tariff for all imports, with many top U.S. trade partners facing much higher rates. There’s no consideration given to alliances. Taiwanese goods are taxed at 32 percent, South Korean goods at 25 percent, and Japanese goods at 24 percent. Venezuelan goods, on the other hand, are only taxed at 15 percent, and Iranian goods face the bare-minimum 10 percent. The U.S. has a trade surplus with Iran, in large part because they face economic sanctions due to their malign behavior, and so we do very little business with them.
Take a country like Costa Rica, for example. The U.S. goods trade deficit with Costa Rica accounts for less than 0.2 percent of the total U.S. goods trade deficit, so even if you think trade deficits are bad, it’s basically irrelevant. Some of the top imports from Costa Rica include products such as bananas and coffee, which are hardly grown at all in the U.S. because of geography. But now, because of Trump, Americans will be taxed at 10 percent for buying Costa Rican bananas and coffee.
Perhaps most galling is the 17 percent tax rate levied on Israeli goods. Israel is party to the longest-running U.S. bilateral free trade agreement, in effect since 1985. There were almost no Israeli tariffs on U.S. goods to begin with, but as a gesture of goodwill earlier this week, the Knesset abolished the few remaining tariffs. The truly “reciprocal” response would have been for the U.S. to eliminate all tariffs on Israeli goods, but Trump’s policy was never about reciprocity; it was about his sincere and mistaken belief that tariffs are good.
If trade deficits were inherently bad, we’d expect poor countries to have trade deficits and rich countries to have trade surpluses. In the real world, there’s basically no relationship, which is why economists don’t pay much attention to it. The United Kingdom, Japan, Egypt, and Uganda have trade deficits; Australia, the Netherlands, Russia, and Angola have trade surpluses.
Even if it were true that the trade deficit is bad, higher tariffs won’t necessarily reduce it. They reduce the amount of imports, but they also reduce the amount of exports, as companies shift their focus from abroad to the protected home market. The order says that if the trade deficit isn’t reduced, the president can continue to raise tariffs until he is satisfied. No specific target is named.
The last thing that worked to substantially reduce the U.S. trade deficit was the Great Recession, because a bunch of people lost their jobs and couldn’t afford to buy as much stuff as normal. You probably remember that as a bad time, but if trade deficits are truly national-emergency-level terrible, then the 2009 reduction in the trade deficit should have been great news.
Trump likes to frame his trade policy as “commonsense.” To treat allies worse than enemies and raise taxes on consumers and businesses at a time when the cost of living is a major concern is anything but commonsense. Trump’s mistaken beliefs about trade have been a constant since the 1980s, but now they have been combined with an enormous grant of power, and Americans will pay the price.
'In the run up to threatened new tariffs, a new Marquette Law School Poll national survey finds 58% of adults think tariffs hurt the U.S. economy, while 28% say tariffs help the economy and 14% say they don’t make much difference. Slightly more than half of Republicans, 52%, think tariffs help the economy, but 58% of independents say they hurt the economy, as do 89% of Democrats.
The public is increasingly skeptical of how the economy will fare, in terms of inflation, in response to President Donald Trump’s policies generally. A majority of adults, 58%, think Trump’s policies will increase inflation, 30% think his policies will decrease inflation, and 12% think they will have no effect on inflation. Among Republicans, 62% think the policies will decrease inflation, a decline from 70% in late January and from 76% in December. Only 16% of independents think inflation will decrease, compared to 26% in January and 28% in December. Ninety-two percent of Democrats say Trump’s policies will increase inflation, an increase from 85% who said that in January and 82% in December.'
Source: https://www.marquette.edu/news-center/2025/marquette-law-school-national-survey-finds-public-skeptical-of-tariffs-inflation-trends-positive-on-nation-s-direction.php
First ths is NR so it is not worth reading. Second, major national entities organizing around the economy and national security are globalist. They made their fortune sending manufacturing overseas and investing in overseas manufacturing capabilities. Their bread is not buttered by making America great again or making our citizenry healthy and prosperous again.
I just finished watching Season 3 of “The Crown”.
Great Britain was laid low by trade deficits of 107 million pounds [over an unspecified period]. That adjusted for currency, inflation and population would be ~$15 billion [over an unspecified period].
Princess Margaret charmed LBJ for about $1 billion [1967 dollars] to keep GB afloat.
We are in far worse shape than 1967 Great Britain.
The tariffs are going to stay. I trust a President with his full mental faculties maling hus iwn decisions light years more than one with dementia allowing his Godless staff to run things.
National Review. 😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂
National Review? I thought they were on a cruise somewhere.
I did not get past the first two paragraphs as it shows how ignorant the article is and will be....
Why impose a 10% tariff on Singapore? Singapore does not impose any tariffs on the US.
any halfway decent economics professor can train it out of students in one or two lectures.
******
How about proving it with facts, not haranguing students with your biased opinion.
Hey NR. If I ever got into a position where I had some disposable income or assets to put into the stock market I might be a tad more worried. What I do see, however, that threat of imposing tariffs have already had good net effects with other countries.
What a load of crap. The first line gives the stupidity all away. I was going to rebut it, then saw it was National Review, and a rebut is pointless.
Above all it shows capital that the political interests of the nation, which include a stabile middle class and a national identity, are more important than the narrow interests of the investor class.
The grifting business & investor class, who only know how to earn money by lowering wages and importing goods, might have to learn how to actually run a business.
Take a country like Costa Rica, for example. The U.S. goods trade deficit with Costa Rica accounts for less than 0.2 percent of the total U.S. goods trade deficit, so even if you think trade deficits are bad, it’s basically irrelevant. Some of the top imports from Costa Rica include products such as bananas and coffee, which are hardly grown at all in the U.S. because of geography. But now, because of Trump, Americans will be taxed at 10 percent for buying Costa Rican bananas and coffee.
**********
Listen, doofus, how many automobiles, or even washing machines do you think are available manufactured or not in Costa Rica? Literally all machines have to be imported, and there is a 30-40% tariff on importing, so the market in Costa Rica is essentially closed or reduces to US products or products coming from the US.
NR stays right on message. Surprised they didn’t embed a “George Prescott Bush, 2028” ad in the text somewhere. /s
NR is always against all things American. Always. Sad to see they have fallen so far.
I got through the first line of the first paragraph, then decided to view the source.
Kind of like reading something on FR, stopping a few lines in just as you are being hooked, and realizing it is the Babylon Bee.
But the National Review is not riding its strength of its satire like the Babylon Bee, or the intellectual clarity of American Greatness with VDH. This article is riding the strength of its stupidity from the Left.
I will argue that tariff declarations will be rescinded on a case by case basis given adequate justification
There is a time element involved
National Review have always been gatekeepers for allowable conservative thought in America and the time they had any influence has long time passed
Ah yes, National Review. Otherwise known as “Orange Man Bad!” Magazine.
L
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