On economics, Donald Trump has no idea what he is talking about.
“But he is a billionaire! A smart businessman!” you say?
Well, he has been bankrupt a number of times.
And would be better off if he had simply invested all his money in the S&P 500.
But yes – he is a billionaire. I will give him that.
My issue, however, deals with his view on trade.
He is either bloviating nonsense or simply dangerous.
He has proposed a 25% tariff on imports from China.
Most recently, he has proposed a 45% tariff on imports from China.
The reasons for the proposed tariff includes unfair trade and currency manipulation on the part of China.
In regard to currency manipulation, I am not sure what Trump thinks that the U.S. Federal Reserve does exactly.
A country manipulates its currency, to the “benefit” of themselves?!
Of course, they are. And we do the same thing.
However, if Trump wants to be against ALL currency manipulation and endorse a gold standard – or the like – I can respect that. But my guess is that he wants no such thing.
Second, the issue implies that China is devaluing its currency to unfairly make goods cheaper, relative to the US dollar and other currencies.
This makes Chinese goods cheaper for others to buy.
But – it also makes all other goods more expensive for the Chinese to buy.
Artificially, our standard of living goes up (through cheaper goods) – while China decreases the standard of living of its own citizens (through more expensive goods).
A 45% proposed tariff on all Chinese imports is, however, the most insidious.
You realize that it would make everything imported from China 45% more expensive, right?
Do you have any idea by how much that would decrease the standard of living for the average American absent similarly priced alternatives?
I hope everyone remembers the Smoot-Hawley Tariff Act and how instrumental it was in the Great Depression.
My guess, however, is that thankfully, Trump is just bloviating before the big deal.
If elected, it allows him to go into negotiations with China threatening to end trade relations, so he can come out and say: “Hey, China has agreed to import more U.S. goods.”
Let’s hope so anyway.
We should be leading the way on freedom, free-trade, and economic sanity – not posturing against it.