international trade and tariffs

• all discussions about tariffs that begin with “trump” will be about politics not economics

• tariffs existed and were imposed before Jan 2025 but few paid attention or cared much about them

• tariffs are a bad idea for every country

• many ways to measure burden of tariffs; none “best”

  • nominal rates simplistic and not consider “real” burden

  • consumer price impact: burden on consumers from higher price; includes “pass-through” impact if importers, producers, or retailers absorb some of the tariff

  • effective rate of protection: benefits to domestic producers

  • trade restrictiveness index: distortion effect upon trade

international trade policies

• interpreting international trade policies

  • political logic: promote interests of leaders or political parties and tend to ignore wider human costs

  • economic logic: focus on impact on human actions in markets

• if it is “folly” for a family, cannot be good for a country

  • a mother/father seeks what is best for her/his family

• unilateral free trade is better that protectionism

  • free inflow of imports regardless of trading partners actions

  • “reciprocal” tariffs are foolish, self-inflicted wound

• voluntary trade is moral action and leads to just outcome

• unjust to interfere with people wishing to use result of their own labor to trade for what other people produce

• balance of payments: international trade and capital flows

  • trade deficit and net capital inflow (capital account surplus)

  • trade surplus and net capital outflows (capital account deficit)

• us dollar is global “reserve currency”

  • US$ is global standard of value and means of exchange → primary component of foreign exchange reserves

  • global trade depends on quantity and quality of US$

• US tends to be net capital importer → trade deficits with some/all trading partners regardless of others’ policies

• economic logic: zero or lower tariffs for ALL countries

public policies and trade

• trade imbalances: political issue, not economic problem

  • political realities differ from human realities

  • countries or society is imaginary/artificial construction

• tariffs are a tax that raises costs on domestic consumers and producers (i.e, costs more to buy from “best” source)

• political logic as a basis of exclusionary trade policy

  • violates utilitarian logic of most benefits for most people

  • violates rule of law by creating privileges

  • ignores full economic consequences

  • encourages destructive nationalistic tendencies: its great to be patriotic and have love for your country, but its not okay to be a nationalist

premises behuind trade wars

“trade war is a political not economic response”

• individuals and companies trade, countries dont

• governments start wars, not individuals or companies

• war → destruction for both sides lose (negative-sum result)

• trade: teamwork and peaceful, voluntary exchange → both sides win (positive-sum outcomes)

• retaliation is a foolish, losing strategy thta harms own odmetic consumers and producers

• trade deficits not bad, trade surpouses not good

internarional trade

• magical outcomes of trade

  • voluntary exchanges

  • increased size of markets → greater profits

• conseuqienves of trade

  • engine of eocnomic growth and increased speecializtion

  • increased wealth and rising living standards

  • promotes progress in broadest sense

  • privdes economic support for others to buy

  • leads to greater inncome inequality

• free and open trade is moral and leads to “just”outcomes