Trump and the Trade Policy of a Free Society

Abstract

Donald Trump has stated that he is in favor of free trade, but that he wants it to be fair. He has said that, if elected president, he would renegotiate NAFTA and other trade deals that he views as unfair to the American worker. When Ford recently announced that it would move a portion of its manufacturing facilities to Mexico, he stated that the cars made at that Mexican facility would be hit with a 35 percent tariff if Ford tried to sell them in the United States. He has stated on numerous occasions that he would slap a 30 percent tariff on the importation of Chinese products unless the Chinese quit engaging in unfair trade practices. Trump has pointed to the trade deficit the United States runs with several countries as an indication that the United States is getting a raw deal on trade, and he has vowed to reduce the trade deficit.

The alleged problems Trump points to are not new. Such problems have been discussed by economists and pundits for more than a hundred years. The solutions Trump proposes also are not new, for the most part. Both the alleged problems and the proposed solutions rely heavily on utilitarian economic analysis. As is often the case, the utilitarian analysis used can be faulty, as Bastiat pointed out in the 1840s. Then there is the fact that all utilitarian analyses are structurally deficient.

This paper discusses some of the issues Trump and others have raised, analyzes them from the utilitarian perspective as well as an alternate (and better) perspective, and arrives at some policy recommendations.

The paper also includes a bibliography of more than 100 articles about trade, with links that will take the reader to the article.

Keywords: Trump, trade, fair trade, protectionism, trade deficits, antidumping, Mexico, China, trade agreements, NAFTA, TPP, Trans Pacific Partnership, bibliography

JEL Classification: F1, F13, D23, D63, F1, K1