President Trump Is Staggeringly Ignorant When It Comes to Tariffs and the Trade Deficit

Trade is no doubt, a complicated issue. Various countries have their laws, regulations, tax structures and more that have to get reconciled with multiple other nations. It is the reason why there is a World Trade Organization — a body that can resolve disputes between trading partners. But there are basics as well.


Donald Trump cannot even get the basics right. And while he continues to lead us down the destructive path of a trade war, he continues to raise the bar on his level of ignorance about tariffs. It’s stunning that a person with an economics degree from Wharton can think in such bumbling ways and can lead one to ask, “How much did Fred Trump pay for Donald’s degree?”

If there has been one consistency in Donald Trump’s lifespan, it’s been the notion the United States is continuously getting “ripped off” by other countries. Trump sees everything through a lens of winning and losing. That’s why he get’s so animated about the trade deficit and yells about how much we’re “losing” to other countries. For some reason, Trump cannot fathom the idea of two nations sharing mutual benefits with one coming out ahead more. He sees trade deficits like they’re a utility bill. If our trade deficit with the fictional country Krakatoa is $5 billion, Trump thinks we’re writing a check at the end of the year to the King of Krakatoa for $5 billion.

That’s not how it works. That’s why Trump’s recent statement where he said the United States would save money if it stopped trading is so vapid. Scott Lincicome had something to say about that:

Mr. Trump is right that “without trade, we could have piles of money,” Mr. Lincicome said. “But we’d have no food, clothing, housing, etc. So the money would be worthless, unless you swam in it like Scrooge McDuck or something. Throughout history, autarky means poverty, not wealth.”


Simply put, the United States relies on trade as part of the economic engine that keeps us going. Contrary to Trump’s idiocy on the issue, trade enhances the livelihood of Americans. It does not hurt us.

Another aspect of his ignorance of trade deficits comes from his statements about their impact on GDP. He says trade deficits slow growth in the United States which is astoundingly wrong. Tim Worstall, a fellow at the Adam Smith Institute in London, has a terrific rundown of how Trump and his trade advisors are bastardizing trade deficits in how they relate to the calculation for GDP. Be sure to read it. 

On tariffs, he’s just as ignorant. He was tweeting about it this morning:

If the tariffs were “working big time,” Trump wouldn’t have had to turn to a Democratic Depression-era bailout program to help farmers (i.e., multi-billion dollar agribusiness companies) recover from the very tariffs he claims are working.

He also doesn’t seem to comprehend that China and other countries are not going to pay the tax. American businesses and consumers are getting stuck with the bill. In other cases, producers cannot sell their goods, leading to artificially wholesale falling prices which have to be made up on the other end by the consumer. Thus far, the impact has mostly affected the business world. But the bill will come due for consumers. Some appliance prices have shot up already. Toyota said people would see higher sticker prices for cars. Prices will increase for consumer electronics. People will pay more for clothing and other items.


Nothing good will come from Trump’s trade ignorance. As long as he believes a trade deficit represents, and invoice and tariffs get paid by the country hit with them and not American citizens, he’ll continue down this path. And all he’s going to do is destroy whatever economic benefit the country got from the tax cut package.

Winning? Nope.


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