Trump confused on trade wars

Dear editor: U.S. President Donald Trump is wrong when he believes persistent trade deficits are by definition a problem.

The willingness of other countries to send America more stuff than America sends back to them has meant that for most of the past four decades, Americans have been able to consume more than they produce. That is without question, a good position to be in.

This also means the U.S. owes money to the rest of the world in the form of low-yield bonds. But, the rest of the world likes holding them and Americans benefit from selling them. America could have made better use of this cheap line of credit over the years than it has. But, that is America’s problem, not the trading system.

Trump believes America’s trade deficit can be fixed by tariffs. But, studies of tariffs show, though tariffs reduce trade, they do not reliably increase the tariff-rising country’s trade balance. In part this is because as imports fall, foreigners will have less dollars and the dollar will gain in value through scarcity. A strong dollar makes America’s exports less appealing, so exports drop just as imports do and the deficit persists.

Trump also thinks tariffs will mean less unemployment in the steel sector. This is highly unlikely; for years technological innovation has made steel industry employment fall much faster than production. Steel jobs hinge more on increased end use of the metal in fabrication and manufacturing, than in actually producing the metal.

So, while increasing production does provide some immediate blast-furnace jobs that Trump envisions, it does not guarantee those jobs for the long term, but does leave quite a bit of collateral damage with trading partners.

Trump says “trade wars are easy to win”. He seems to base this on the fact that America buys more than it sells, so its trading partners have more to lose. But, although American households buy more at their local supermarkets than they sell to it, they would not be better off growing their own food. Blocked imports and broken supply-chains harm everyone.

Yet, one of Trump’s beliefs about free trade is true. The people, who voted for him, do not like it. According to Pew Research, just over half of all Americans think free trade is a good thing. But, white Americans, older Americans and lesseducated Americans all are less likely to think so.

Jon Peter Christoff West Kelowna