- Trade makes everyone richer.
- Tariffs make the country applying them poorer.
- The fact that the US government is doing something stupid does not mean you have to join them.
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Trade for beginnersFebruary 3rd, 2025 |
 13 comments to Trade for beginnersLeave a Reply |
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– But you must remember that in Canada’s case, we combine a healthy stream of Trump-hatred with an overarching look-down-our-nose superiority complex about “those violent Americans and all their naughty guns”. So our Prime Minister whose popularity is rapidly sinking to single digits, and certain other skunk-at-a-garden-party provincial Premiers, will eagerly tap-into the prevailing anti-American / TDS tit-for-tatism to cynically pander for votes. “WE’LL show THEM – HAH!!!”, while turning a blind eye to the fact that this is a game America and its new President can play so much better than we can.
After all, it’s just a whole lot easier than actually addressing the problem. Canada do the right thing? – drive out criminal gangs making narcotics for export that are illegal here too, and bust the human traffickers that too often are moving child sex-slaves? “Trump said he wants us to do that – HELL NO, eh?”
Agree with the OP.
All taxes are evil.
Taxes imposed for a purpose other than raising government revenue are extra-evil.
Tariffs are no different from other taxes in this.
“Trade makes everyone richer” – if it is following the Law of Comparative Advantage then YES.
The Law of Comparative Advantage is, basically, “you are good at making this – and I am good at making that, let you make and export to me what you are good at making, and I will make and export to you what I am good at making”.
This thinking of the Classical Economists is quite true – but it has got nothing to do with the modern situation.
In the modern situation imports are not paid for by exports – they are “paid for” by fiat currency, “Pounds”, “Dollars” and so on – basically they are “paid for” by Moon Beams and Magic Pixie Dust.
Trotting out Free Trade arguments as if we were still using real money (gold, silver or some other commodity) does not grasp that we are NOT using real money – we are using fiat (command, order, whim) money – we are NOT paying for imports with exports – we are “paying” in fiat money – which is not sustainable.
Adam Smith, Ricardo and all the other free trade economists were NOT talking about a situation in which honest money and honest finance (honest banking – as in lending out Real Savings not Credit Bubble blowing) had ceased to exist.
By the way – people can be better at making everything and still benefit from trade, as trade allows them to concentrate on what they are best at making (paying for the imports with the exports of what they make) – hence “comparative” advantage.
But the present situation has got nothing to do with that – the present situation (“economy”) has got no connection with the sane world that the free trade economists were writing about. The present “economy” is not sane – and its insanity can not be sustained.
I have written for quite some time how President Trump will get the blame for an “economic collapse” that was inevitable – but it is worth repeating it, the present system (so called “economy”) is utterly insane, and can not carry on.
Money must be a real commodity that people choose to value, before and apart from its use as money, lending must be from Real Savings (the actual sacrifice of consumption) – not credit expansion, and imports must be paid for by exports (not endless fiat money).
Then, once these conditions are met, you can talk about the arguments for free trade.
What if we’re willing to trade some riches for other benefits? I’ve given up money in my life in exchange for quality-of-life enhancements. How is this different? Are dollars your only measure of value?
Tariffs are only bad when America does it. Boo f*cking hoo.
I suggest you research the tariffs and sneaky regulatory barriers to free trade among European and Scandinavian countries.
Certainly China is not playing the Free Trade game.
Apparently, tariffs can be used successfully to alter another nation’s behavior.
Mexico just gave in, and will put forth effort into guarding its Northern border. Tariffs on Mexico are suspended. Trudeau spoke to Trump this morning, and they have another call scheduled for this afternoon. I wonder why?
Economists don’t really get tariffs.
– And yep! – as I said above – looks like Canadians will get to enjoy our virtue-signalling, and not a lot else.
I can think of three people in the world that it’d be seriously stupid to piss-off, and all three of ’em are named Donald J. Trump…
A reminder which I shouldn’t have to make: Ricardos comparative advantage arguments for free trade work(ed) when (if) there was no significant freedom of movement in capital, technology of key personnel. Not our world then. So the maths of tariffs get quite complicated and ambiguous quite quickly when you leave Economics 1.01.
Paul Marks, the background conditions of trade are never ideal. Even in times before central banking insanity, there have been no end of excuses for the “Free trade is fine in theory but cannot work in this mad world” argument. That simply ties us up in knots.
The proper response to your point is not tariffs, sovereign wealth fund grabs of property, more intervention, etc. The alternative to perma-Keynesianism is not and should not be protectionism and autarky.
Michael Taylor: A reminder which I shouldn’t have to make: Ricardos comparative advantage arguments for free trade work(ed) when (if) there was no significant freedom of movement in capital, technology of key personnel. Not our world then. So the maths of tariffs get quite complicated and ambiguous quite quickly when you leave Economics 1.01.
The problem with this claim is that whenever someone makes money by trading with A or B, and invests that money and puts it new use (that’s how capitalism works) this can be attacked as somehow distorting “comparative advantage”. I don’t think the conclusion is right: When people around the world focus on doing what they do best, there is, one hopes, an endless quest for capital to be deployed where it can make the highest return, accelerating this process. I don’t see it as a negative for the CA case on the Ricardo basis.
That said, it is preferable, in my view, to have stable money than volatile forex rates.
Michael Taylor, the claim that mobile capital undermines the Ricardian argument for CA and hence free trade has also been contested. See here from Don Boudreaux.
CONSUMPTION imports must be paid for by exports – not by endless borrowing or by creating fiat “money” from nothing.
Those people who deny this may think they are following the Classical Free Trade economists such as Adam Smith – but they are not.