Trump’s tariffs are not ‘common sense’—and they’re putting America’s credibility and ‘exorbitant privilege’ at risk

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Between economists, a wide range of opinions prevail, with one exception: embracing free trade. Countries that are trading freely produce more, consume more, and have higher income. It is not surprising that economists generally oppose the definitions, which are nothing more than a tax on international transactions. They are moderate policies-believed by countries that believe they can enhance their economies by leaving other countries worse.

A prominent advantage of populism is its doubts from experts. “This is not the way things are working in the real world.”. Experts’ claims are the cause of doubt, or even prove their falsehood. The populists prefer what “everyone” knows is true. The media is mediated by al -Shabawi what is everywhere, and that means, what is higher. For an expert who faces the challenge to respond to the scientific argument, this point is almost missing. It is not that their arguments are not convincing – they are not only the “sound sense”.

During the era of President Trump, he is It has become a “proper sense” Other countries “benefit” from the United States, and the Americans sell many goods without buying an equal amount in return. We have recently indicated Why is this the wrong concept. Over the past fifty years, Americans have bought goods from the rest of the world with almost unlimited credit line that has been extended by those countries themselves. This feature, which depends on the deep capital markets in the United States and the international currency, has long been recognized as “Excessive privilege“

Upon announcing a new tariff, Trump presented to the rest of the world a “proper sense” path to avoid customs tariffs – just a building in the United States. This, too, is a wrong idea.

The two countries are trading with each other for two main reasons. One of the reasons is the differences in technology. Some countries are simply better in making certain products. They specialize in some things instead of producing everything on their own, because the resources are invested more productive according to its technological advantages. Then they trade in their specialties with the rest of the world so that they can buy everything else that they do not make.

Another big cause is the differences in the inputs of production. The two countries differ in the endowments of human capital, material capital and land. The transfer of workers around them is difficult, as the transportation of factories and equipment is more difficult, and moving lands are impossible. But you can make intensive products where the employment is abundant-in the form of capital and land-and then the trading of products.

The real world style of the American trade deficit matches these interpretations well. The United States is good in financing investment and youth education. Italians are good in making super cars. It is not that the Americans and the Italians are not good in other things, too – they are so better in these things that they sell their specialties to the rest of the world and use returns to buy everything else.

Work is much cheaper in Asia than the United States, so we buy dense labor products such as textiles and customer service (for example, communication centers) from these commercial partners. The land is abundant in Canada and Australia, so we buy wood and livestock. We also have a lot of land in the United States, but there is a lot of human and physical capital available for every square mile and every worker, as we are more productive in making things that depend on those endowments.

Will the customs tariff encourage non -American companies to produce in the United States? In fact, Trump asks non -American companies to bring their technology to the United States and produce it with American employment, capital and land. For a world with free trade, foreign technology will attract American resources away from their best use in cooperation with American technology. Once the foreign company pays the American prices of lands, capital and work, this technology may not be the most economical way to produce it. Its products will cost more, the American economy will lead to less in general, and the income will decrease.

The stock market is consistent with our diagnosis, even if it is not “common sense”. Trump’s tariff Destruction of trillion in American wealth Because customs tariffs – taxes on international transactions – disagreement. Senerat has disappeared from the free cash flow of companies, and they do not return through higher salaries for workers as the wages of popularity. Although Trump put expectations for a painful “transition” period after his new tariff, anyone puts themselves in a foreign company shoes can understand the reason why foreign companies do not rush to the United States.

Over time, Trump will find another person who blames him for the pain in the country. Instead of giving him the opportunity, Congress must pass new legislation that controls customs tariff decisions and set customs tariffs at the minimum levels, or even better, eliminate them. This is the best way to bet on the strengths of America and restore American credibility. Perhaps this is a good instinct.

Matt Sekerke is the administrative director of SEDA experts and a major macro consultant at Hiddenite Capital Partners. Steve E. Hank Professor of Applied Economics at Johns Hopkins University. They are the authors participating in Earn (It will be released, Waili, 2025).

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