For No Reason
I don’t think it’s a particularly big stretch to say that we will look at the last two weeks as some of the most bone stupid weeks in American leadership. There have certainly been more evil or malicious decisions made by American leadership, but I’m not certain that anything’s been as perplexingly bad as what we’ve just lived through with the Trump tariffs. It’s bad enough that even Dave Portnoy, one of the dumbest guys in America today, is mad enough to identify it as “Orange Monday”.
We have, as a society, understood that tariffs are bad economic policy for a very long time, long enough that the Smoot-Hawley Tariffs are a deadpan joke delivered by Ben Stein in Ferris Bueller’s Day Off. We also understand them as one of the major factors in the worsening of the Great Depression, as illustrated in this classic chart from Charles P. Kindleberger’s The World In Depression, a copy of which still sits on my bookshelf because I never returned it to my college’s library, which I am sorry for:
To perhaps oversimplify a complicated system, trade between countries is good and if trade between countries slows down or stops, everyone’s worse off for it. It’s something that you learn in any Econ 101 class, and can easily go into more depth on if you’d like.
What the Trump administration posits is simple — what if all the stuff about trade is for eggheads and we can do better for Americans if we stop trading and start making things ourselves? I know that someone reading this might find my assertion hard to believe, so here is the President’s policy in his own handwriting, from Bob Woodward’s Fear:
This policy has also been echoed by the President’s advisors. Commerce Secretary Howard Lutnick went on Face the Nation last weekend and said that the future of American manufacturing is it being the home of millions of Americans screwing in little screws. This is economic suicide.
Best as I can tell, what the Trump administration sees with tariffs is America engaging in the kind of Import Substitution Industrialization that was popular in Latin America after WWII. To go all the way back to my undergraduate classes, the idea is that you use tariffs to make the price of something like a foreign made toaster more expensive so people will buy the domestically produced toaster, which might be of worse quality, because it’s cheaper. This makes some sense if you’re a developing economy worried about your developing industries competing with foreign goods, but we’re the largest and most developed economy in the world.
Trade works because of comparative advantage. Counties are better at producing certain things than others because of a variety of factors like skill, capacity, and costs, and they trade these goods for the stuff that they can’t produce as well. This has been the bedrock of the global economy for longer than I’ve been alive, and America has benefited greatly from it. Instead of working in factories, Americans get to work at desks and on computers, which is generally agreed to be better work if you ask Bruce Springsteen. The guys in the Trump administration? They want Americans back in the factories.
That’s the part that makes all of this so stupid for me. It isn’t just that we’re pursuing bad policy by making everything cost whatever percentage more makes President Trump feel good that day, or whatever an AI decided was the correct formula, it’s that we’re doing it towards a goal that isn’t actually good for Americans. If you’re worried about “working Americans”, you should be thinking about how to give them new skills. You aren’t going to be able to undercut the cost of labor for producing electronics in Vietnam, and you aren’t going to be able to build up the decades of manufacturing experience that exist in China today overnight. You’re just going to make Americans poorer and worse off for no reason. You’re going to piss away everything that makes America prosperous because you can’t understand how trade can be a win-win for everyone, how trade is good.
It is not any kind of stretch to say that when you’re wondering in a decade or two why you’re poorer and aren’t doing as well as you thought you’d be, you’ll be able to look at the last two weeks and have your answer. I keep bringing up my undergraduate classes because the ideas and answers that have come out of the people leading this country would get you flunked out of those classes, and you’re going to suffer because the people in charge don’t actually seem to understand how the economy works, or, more likely, don’t care about making the economy work.
