Over the past several months I’ve been told many times, in many different ways and places, that I and other free traders are “unrealistic” and that Trump – who’s an alleged master of the art of the deal – will make Americans richer through his hard and skillful bargaining. Such claims are nonsense. Here’s a letter to a recent correspondent who falls for Trump’s economically ignorant assertions about trade:
Mr. Nolan McKinney
Like many others, you assert in your e-mail that Trump’s promise (as you describe it) “to bargain hard with foreign governments” over trade issues means that Trump is more “realistic” than free traders such as myself. With respect, I believe that you’re mistaken on two different levels.
First, free trade does not require a president (or any other government official) to bargain with foreign governments. Free trade requires only that the government stop interfering with citizens’ economic decisions. Period. Whatever bargaining is to be done is left to each individual. With free trade, you’re free to strike with foreign suppliers or customers whatever deals you find attractive, while I’m free to do the same even if the terms of my agreements differ from the terms of your agreements. And so even if I prove to be a dud at bargaining, my poor bargaining harms only me and has no effect either on the bargains that you strike or on your economic well-being.
Second, to the extent that Trump succeeds in his ‘hard bargaining,’ he’ll make us poorer, not richer. What Trump means by ‘hard bargaining’ is that he’ll be steadfast in keeping the goods that we Americans are allowed to buy from foreigners to a minimum, while arranging for the goods that we send in exchange to foreigners to be at a maximum. That is, in his quest to bargain hard to reduce our imports and to increase our exports, Trump will try to arrange for us to sacrifice as much as possible and to receive in return as little as possible.
It would be as if you hire Trump to bargain for you with an auto dealer and Trump then ‘successfully’ arranges not only for you to pay double the sticker price but also for the dealer to remove from the car as many amenities as possible. While Trump would no doubt beat his chest and boast of his mastery of the art of the deal, you’d discover that, realistically, you’ve been hoodwinked and made poorer by such ‘hard bargaining.’
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030