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Trump should send China flowers, not tariffs …. – Publications – AEI

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AEI Trump should send China flowers, not tariffs …. …. is the title of Hoover Institution Senior Fellow John Cochrane’s (his “The Grumpy Economist” blog is a must-read) op-ed in The Hill, see excerpt below. It’s pure economic gold, one of the best op-eds on trade I’ve read in a long time — it touches on many key important points about international trade, none of which the Protectionist-in-Chief (“Tariff Man”) and his fellow band mercantilists yet understand: What’s the long run goal? The right approach to trade is simple: zero tariffs or restrictions. Americans are free to buy from the cheapest and best supplier. Whether foreigners put in tariffs or not is irrelevant to that conclusion. Trade is no different than new companies that can produce things cheaper or better. And just as

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AEI
Trump should send China flowers, not tariffs ….

Trump should send China flowers, not tariffs …. - Publications – AEI

…. is the title of Hoover Institution Senior Fellow John Cochrane’s (his “The Grumpy Economist” blog is a must-read) op-ed in The Hill, see excerpt below. It’s pure economic gold, one of the best op-eds on trade I’ve read in a long time — it touches on many key important points about international trade, none of which the Protectionist-in-Chief (“Tariff Man”) and his fellow band mercantilists yet understand:

What’s the long run goal? The right approach to trade is simple: zero tariffs or restrictions. Americans are free to buy from the cheapest and best supplier. Whether foreigners put in tariffs or not is irrelevant to that conclusion.

Trade is no different than new companies that can produce things cheaper or better. And just as hurtful to old companies and their workers, but we generally see that it’s unwise to stop innovation. Trade between countries is no different than trade between states, and we all recognize that tariffs between states are a terrible idea.

Any money that goes to China to buy goods must — must, this is arithmetic, not economics — come back. It just comes back to a less politically favored industry. To the extent that trade is “imbalanced,” that means China works hard, puts goods on boats, and takes our government bonds in return. Would we really be better off if we worked hard, put the fruits of our labor on boats, in exchange for Chinese government bonds? Paper and promises are cheap.

If China wants to tax her citizens to subsidize goods for US consumers, the right answer is flowers, chocolates and a nice thank-you card, as you would for any gift. Even intellectual property protection is an iffy cause. Theft is bad. But if selling the technology isn’t worth the market access, US companies don’t have to do it. Moreover, much intellectual property protection is the right to just the kind of continuing profits that we bemoan at home, in the new worry about increasing monopoly. Just how enthusiastic are we about defending pharmaceutical companies’ right to charge whatever they want in the US for their intellectual property?

…..

US GDP per capita is $60,000. China’s is $9,000. The average American is more than six times better off than the average Chinese. The air in Beijing is unbreathable. For the US to complain about China hurting us is like the captain of the football team complaining that a six grader cheated him out of lunch money.

Even in the best case, tariffs and trade restrictions are zero sum — they make the US better off by making China worse off. There is no case that they increase the size of the pie. In fact they make us all worse off. Is this America’s place in the world? Would we send in the marines to take wealth from Chinese people to benefit Americans? That’s the case for tariffs.

The idea that we can use tariffs to threaten China into freer trade is dangerous. It’s hard to credibly threaten to do something that hurts us, without denying that it does hurt us, and then getting trapped doing it. It took decades to get rid of the trade restrictions of the 1930s.

MP: Amen.

Trump should send China flowers, not tariffs ….
Mark Perry

Mark Perry
Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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