Mises Wire

Mr Trump, Tear Down These Trade Barriers

The Trump administration’s latest attempts to continue this trade war with China have now reached a level beyond comprehension and will only hurt American and Chinese consumers in the process. The consequences might be much more disastrous for America if China dumps their U.S. Treasuries, causing a devaluation in the U.S. dollar, subsequently forcing the Federal Reserve to raise interest rates to crippling levels.

During an interview in July with Dr. Murray Sabrin, Professor of Finance at Ramapo College in New Jersey, he states, “Trade is the lifeblood of civilization. Barriers to trade reduce living standards and create international tensions and have led to major conflicts throughout history. Tearing down trade barriers therefore would allow the global economy to flourish and ease tensions around the world.”

“Mr Trump, tear down these trade barriers,” says Dr. Sabrin who was recently endorsed in July by former congressman and three-time presidential candidate—one of the most respected libertarians—Dr. Ron Paul. Dr. Paul also shares Dr. Sabrin’s sentiments about the damaging effects of Trump’s tariffs and sent a letter to the president in March asking him to withdraw his proposed tariffs.

It wasn’t enough with Trump’s initial tariffs on Chinese manufactured goods and the retaliatory tariffs imposed by China in return, now the president wants to threaten tariffs on all $500 billion of Chinese imports.

As reported by Reason in June 2018, this all began during the hype of Trump’s presidential campaign when his constant rhetoric bashing America’s bad trade deals prompted top Republicans such as Marco Rubio and Ted Cruz to place the national dialogue on “fair” trade instead of “free” trade.

Trump now feels obligated to follow through with his political rhetoric and implement his trade war, while Congress stands down and does nothing, despite the evidence that demonstrates poor economic outcomes through the tariff practices Trump is engaging in.

Some would hope that Trump’s tariffs talk is nothing more than just a negotiating tactic but a trade war has most certainly begun and the only ones that will be hurt in the end are American and Chinese consumers. Protectionism only begets more protectionism, leading to a race to the bottom, harming only businesses and consumers.

The Trump administration has thus far imposed $34 billon in tariffs on China, along with tariffs on steel and aluminum imports from the EU, Canada, and Mexico. Trump could fulfill his $500 billion tariff threat and the American citizens that are not necessarily supporting the tariffs, but blindly supporting the president, will have a rude awakening once the reality manifests in the long term for the economy.

The tariffs presumably would help certain industries like steel but the products that are manufactured using steel would be more expensive so American consumers would turn to foreign imports for cheaper alternatives, which will only hurt our economy.

China has imposed tariffs mainly on America’s agricultural products such as orange juice, soybeans, fish, pork, dairy, cotton, beef, produce, sorghum, nuts, and rice. However, the goods made in China that Trump wants to impose tariffs are on are everything from industrialized machinery for paper, meats, and glass products to bulldozers to boat motors to helicopters. It’s clear which country has superior manufacturing capabilities.

“This only demonstrates America is low on the manufacturing totem pole,” says Dr. Sabrin and “what we export to China is much less valuable than what China exports to us because the U.S. has ceased to be a major manufacturing economy.”

We can’t get cheap manufactured goods anywhere else like we do from China, but China can get agricultural products from anywhere they want from farmers in foreign markets.

These agricultural tariffs will be less competitive in the Chinese markets as opposed to other global competitors so China will buy fewer agriculture products from the U.S., which will have a negative impact on American farmers and businesses that rely on those farmers’ products.

U.S. farmers are doubly impacted by these tariffs not only when they take a hit with Chinese tariffs on their agricultural products, but also when their Chinese imported farm equipment comes attached with Trump’s tariffs, which raise additional costs for them to do business.

The other point of weakness for the US lies in the US’s immense foreign-held debt.

Currently, the national debt is $21 trillion dollars, of which foreign partners hold $6.2 trillion, and of that $1.18 trillion is held by China alone.

Dr. Sabrin warns, “This U.S. debt to China could be used in a trade war against the Trump administration.” If so, the Chinese could decide to sell off their Treasury holdings and watch the dollar tank, while other countries could follow along. If this happens, the Federal Reserve would be compelled to raise interest rates, escalating a decline in the American economy. The smart move by the Trump administration and Congress would be to reduce trade barriers immediately and withdraw these detrimental tariffs.

image/svg+xml
Image Source: iStock
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute