Our Dear Leader has decided that the way to extend what is left of his legacy is by declaring a trade war on allies and foes alike……but what does this do to our national security?
The US has a military advantage around the world……if so then what will these trade wars do to that advantage?
Is the United States undermining the foundations of its military advantage by initiating trade wars with most of the known world?
The connections between trade and innovation are complicated, but generally speaking freer trade tends to generate more technological innovation than autarky, although much depends on the specific legal and structural conditions under which trade is conducted. During the Cold War, the United States derived immense military advantage from the global trade system that it constructed. This trade system tied the world’s most powerful economies to the United States with private and public binds, and also ensured that American producers would find consumers. While the system had drawbacks (exposure to international shocks, limitations on national economic policy) it provided a sounder basis for long-run economic growth than the autarkic policies undertaken by the Soviet Union and its Eastern European subject states.
Alright let’s say that you agree with Dear Leader’s stand on trade wars and tariffs……can we justify tariffs from a national security point of view?
Economists nearly unanimously support open and free trade among nations.1 The arguments for free trade are not new, dating back at least to Adam Smith’s famous book An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 and David Hume’s series of essays, On Commerce and On the Balance of Trade in 1752. Free trade increases wealth in a nation by promoting the division of labor, thereby increasing the quantity of goods and services in the economy. This increased division of labor benefits people in two main ways. First, it expands the range of goods and services available to people. For example, many spices that are not native to the United States would be unavailable without international trade. Second, it allows people in a nation to buy goods of a given quality that are made more cheaply—that is, produced with fewer or cheaper resources. In short, free trade allows people to minimize their own use of scarce resources to achieve their desired ends.
Let me hear what my readers think……both pro and con on tariffs are welcome.