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joecavalry

Will Trump solve the U.S. trade deficit?

Article -
https://www.cnbc.com/2018/06/04/trump-ultimately-wants-a-world-with-no-trade-tariffs-white-house-advisor.html

MayCaesar

There are very few cases even in theory when introducing tariffs improves the economy in any way. In general, tariffs are only effective at breaking international foreign state-funded monopolies. For example, if China invests trillions dollars into producing a new brand of cars that holds up to foreign competitors, and sells them far below their production value, then China in theory can destroy all other brands (that, without a heavy support from their home states, cannot beat the price of the Chinese cars) and take over the market, becoming an international monopoly. In such a case, introducing tariffs for Chinese cars will break the monopoly, and while it does harm the American customers short-term (as they are forced to buy more expensive cars than they otherwise could), long-term it makes sure that Chinese government cannot hijack the market and will be forced to play by the rules of the open market, if it wants to maintain presence on the American market.

This is obviously not the case with Trump's tariffs on raw materials, and his argument is a usual protectionist stance that does not work in practice. There is a difference between trying to break up international monopolies, and trying to support domestic producers whose business models are less effective than those of fair foreign competitors. The former is the sad necessity; the latter is a populist anti-economical idea that ponders to certain population sub-groups, but does not address any relevant economical issues and only maintains the status-quo where the incompetent domestic enterpreneurs are not forced to improve and innovate and can continue with using outdated ineffective business models without losing profit.

Maybe Trump does want the world without tariffs, but he surely does not seem to know how to arrive to that state of the world.