Winners & Losers: The Case for America-First Trade

The year is 64 A.D. Rome burns to the ground. Orange flames pull the Palatine’s columns to the ground while smoky fingers suffocate thousands. Into this lurid scene steps Emperor Nero. He breathes deep, filling his lungs with ash, and sings joyfully as Rome burns.

Like the mad emperor, four decades of America’s political elites celebrated as America’s industry and economy were torched by global “free” trade. Thousands of factories moved abroad. Millions lost their jobs. And every American has seen the dollar’s purchasing power decline.

Despite these obvious facts, the elites refused to raise reciprocal tariffs. They justified their actions, claiming that we should be free to buy whatever we want—the government should not be in the business of picking economic winners and losers by imposing tariffs. The free market should decide.

This is nonsense for two reasons. First, both action and inaction are choices in any system that is in flux. Second, America’s government should use tariffs to choose winners—if we do not, then China certainly will.

Downstream without a paddle

Many liberty-minded conservatives reflectively oppose tariffs because they do not want the government to be in the business of picking economic winners and losers. They want to let the “free market” decide. Accordingly, they support global free trade over an America-first trade policy, which supports American business with protective tariffs. This is senseless.

Consider that any dynamic system—a system undergoing change, or that is in flux—inaction is equivalent to action. Non-choice is choice. Why? Because abstention will not preserve the status quo, it will simply permit anticipated change.

For example, pretend that you are canoeing on a stream with your children. You can paddle upstream or downstream. One of your children wants to go upstream. The other wants to go downstream. You want to remain neutral, so you tell them not to paddle in either direction.

What happens next? Of course, the canoe floats downstream along with the current. One of your children complains that you are favoring the other. You say that you did not favor either sibling—after all, no one is paddling.

Are either of the children likely to buy dad’s argument? Would mom? No. Everyone knows that rivers flow downstream, and to abstain from paddling is effectively a choice to float downstream. Non-choice is a choice, because action is required to preserve the status quo in a dynamic system. You have to paddle to stay put.

This same logic applies to tariffs. Free market types claim that tariffs are bad because the government picks winners and losers. Therefore, we should embrace free trade and let the market decide. The government should abstain from making a choice.

However, wealth is like water: it flows downwards until it finds its resting equilibrium. In a truly free global market, American businesses would universally offshore their economic production to take advantage of cheaper foreign labor costs—either that, or American wages would collapse to the global average. Over time, this will completely hollow-out America’s industries and exterminate the middle class.

Opposing tariffs—abstaining from picking winners and losers—guarantees that American industry will be losers. American workers simply cannot compete with virtually free labor in developing countries, nor can American factories make goods as cheap as heavily subsidized Chinese facilities.

President Trump is right to use tariffs to ensure American industries remain global winners, rather than the losers.

Out with the tide

Let’s set aside the logic for a moment, and turn our attention to reality. The fact is that most of America’s trading partners enjoy an asymmetrical trade relationship. In general, foreign countries are free to sell their products in America, while American companies are not free to sell their products in these foreign countries—not without significant tariffs.

For example, as President Trump noted in his speech to Congress:

India charges us auto tariffs higher than 100%. China’s average tariff on our products is twice what we charge them. And South Korea’s average tariff is four times higher. Think of that, four times higher… they do non-monetary tariffs to keep us out of their market… they are, in effect, receiving subsidies of hundreds of billions of dollars.

Foreign tariffs price out American goods from their markets. On top of this, our trade partners impose all sorts of non-monetary barriers to entry to their markets which give their industries an edge over American businesses.

China’s trade policies are delibrately crafted to take advantage of America’s free markets. Chinese businesses are given preferential access to Chinese markets, are provided with significant export subsidies, and are sheltered from prosecution for intellectual property theft, among a host of other advantages. In the end, these policies tilt the global playing field in China’s favor.

Essentially, China picks the winners. Therefore, American industry, businesses, and workers are the losers.

Thankfully, times are changing. President Trump’s America first trade policy—which includes significant tariffs on countries like China, Canada, and Mexico—is turning the tide. If we stay the course, President Trump’s tariffs will slowly but surely reshore America’s factories and revive the American dream.