The Trump administration has pursued a high tariff policy, reversing the movement to lower trade barriers around the world. The justification for this policy is the presence of trade deficits with other nations. However, what if US trade deficits don't matter?
President Trump has invoked the ancient fallacies of mercantilism in fashioning his protectionist trade policies. We will find that mercantilism is just as harmful today than it was hundreds of years ago when it first became Britain‘s national policy.
Despite arguments from President Trump and his supporters, there is no such thing as an “optimal” tariff. If anything, Americans have the upper hand in trade because they can run large trade deficits due to the status of the US dollar as the world‘s reserve currency.
As the progressive left and the anti-trade right merge their arguments, the current political atmosphere is quickly turning into a witch hunt. Unfortunately, we know that these situations don't end well.
Any government deploying this so-called policy tool is trespassing upon property rights. As a result, human beings are in a word: dehumanized.
Oh, I know, you aren’t really against free trade per se. You just demand a “level playing field.” Demanding a level playing field for international trade is a complete waste of time.
Mainstream economists have been obsessed with finding “optimal” tax rates, and Nicholas Kaldor‘s 1940 formalization of the “optimal” tariff is no exception. Austrian economists, however, know that there is no such thing as an “optimal” tax, given the harm taxation causes.
The Trump White House has enacted tariffs in the belief that other countries are “cheating” by enacting tariffs against US goods and “manipulating” their currencies. However, with the US dollar being the world's reserve currency, the US has engaged in dollar manipulation through inflation.
Although politicians, pundits, and the media claim that a trade deficit is harmful to a country, the reality is much different. In a free economy, individuals interact with each other in mutually-beneficial exchanges. As Murray Rothbard noted, free exchanges do not produce winners and losers.
Murray Rothbard believed that the right to engage in voluntary exchange has long been understood as a natural right, not just a good, practical idea. Tariffs and other trade barriers violate that right.
