“Recession” is a relative concept. For instance, when the U.S. economy contracts such that Americans merely tighten their belts, hundreds of millions around the world face starvation.
If you doubt this, consider the global implications of the U.S. mindlessly going into lockdown mode in 2020. Not only was economic contraction as a virus mitigation strategy completely bonkers, the World Food Programme estimated at the time that 285 million in the world’s poorest parts were rapidly heading toward starvation.
It’s worth thinking about as those who should know better defend the Trump tariffs. Individuals like John Lott are saying that since the tariffs didn’t cause “inflation,” and since a worthless number like GDP is signaling economic growth, the so-called “experts” got Trump and his economic program wrong. The speculation here is that Lott could be persuaded to rethink his adamancy about the genius of all things Trump.
Still, let’s start with “inflation.” This column has said all along that tariffs have nothing to do with the rising prices that people mistake for inflation as is; as in if you’re paying 30% more for a television made in Japan, you have fewer dollars to buy other goods. As for GDP, it’s most effective as a backwards indicator of economic health. The view here has always been that you don’t argue against economic errors with easily twisted statistics, rather you argue with logic.
Looked at logically, the Trump tariffs would be awful even if it were true (it’s not) that the economy hasn’t skipped a beat. And that’s because imports always and everywhere improve us precisely because work divided always and everywhere improves us. Jobs aren’t taken as Lott and other Trumpists imply, jobs are happily divided around the world on the way to surges of production. Thinking of it all in Adam Smith terms in the 18th century, or Henry Ford in the 20th, the more work is divided across a growing number of hands and machines, the exponentially more production. Smith saw the previous truth in a pin factory, while Ford produced cars for the multitude based on the same logic.
Which is a long way of saying that whatever the undeniable prosperity we’re enjoying stateside right now, it would be even greater if Trump’s “negotiation” hadn’t involved injuring the American people with tariffs, but instead the President telling the world that the U.S. would soon be going to zero on all foreign goods after a vote by Congress, and that a failure for the rest of the world to follow us to zero would cause non-U.S. parts of the world to fall even further behind the richest country on earth. Talk about negotiation!
No doubt the U.S. economy thrives with tariffs, but prosperity is an American given. The better argument is that the U.S. is all about freedom, including freedom to transact with and work alongside the rest of the world. That’s what rich countries do, that’s a major reason why the U.S. is so rich, so why on earth would we tax freedom and prosperity as a way to not always convince other countries around the world to cease damaging their own people?
After that, let’s never forget that when the U.S. is growing, the rest of the world is eating. And that’s not because of handouts in most instances, but due to the happy fact that the world’s greatest corporations (and the U.S. has the world’s greatest corporations) get that way by globalizing the production of their genius. In short, let’s feed the world abundantly as a consequence of eating like kings stateside.
Originally posted to Real Clear Markets.
