Roll over David Ricardo, former White House Chief Strategist Steve Bannon, says a trade war is great for America’s Main Street, even if Wall Street doesn’t like it. “Ask the working people in Ohio, Pennsylvania and Michigan about Wall Street. Wall Street supported and cheered on the export of their jobs. To hell with Wall Street if they don’t like it. It’s time somebody stood up to them and Donald Trump is the perfect guy. Wall Street is always short term. Trump is trying to protect the beating heart of American capitalism — our innovation,” Bannon told Reuters in a telephone interview.
While Bannon frames the trade war as a class fight. However, Ricardo’s idea of comparative advantage, demonstrated the benefits of international specialization of international trade. His free trade argument put Britain on the course of exporting manufacturing and importing food in the 19th century.
So, to use Bannon’s bluster, America innovates, while China’s labor creates the fruit of those innovations cheaper to the benefit of U.S. consumers, including those living in Ohio, Pennsylvania and Michigan.
Bannon blathered on,
It’s full throwdown. Trump has planned this out for a long time. He led with the smart things, forced technology transfers. It’s obvious the Chinese have no real response to this. I think they played completely into his hands. By putting tariffs on agricultural products and avoiding addressing the technology questions they’ve shown once again they consider us nothing more than a tributary state.
Unfortunately, a full throwdown doesn’t end with just trade harming consumers. Ludwig von Mises explained that Trump’s tactics are nothing new.
History is a struggle between two principles, the peaceful principle, which advances the development of trade, and the militarist-imperialist principle, which interprets human society not as a friendly division of labour but as the forcible repression of some of its members by others.
Brannon acts like Trump’s tariffs will benefit working people when, in fact, it is just the opposite.
Murray Rothbard explains,
Tariffs and various forms of import quotas prohibit, partially or totally, geographical competition for various products. Domestic firms are granted a quasi monopoly and, generally, a monopoly price. Tariffs injure the consumers within the “protected” area, who are prevented from purchasing from more efficient competitors at a lower price. They also injure the more efficient foreign firms and the consumers of all areas, who are deprived of the advantages of geographic specialization. In a free market, the best resources will tend to be allocated to their most value-productive locations. Blocking interregional trade will force factors to obtain lower remuneration at less efficient and less value-productive tasks.
To make Rothbard’s point, Trump’s 25% tariff on 1,300 goods include, raw materials, construction machinery, agricultural equipment, electronics, medical devices, and consumer goods.” No American consumer will escape paying higher prices on something.
In 1930 Senator Reed Smoot and Representative Willis C. Hawley were able to pass into law an act raising U.S.tariffs on over 20,000 imported goods, helping put the Great in Great Depression.
Making America Protectionist again will turn out to be anything but great.
