Why Economic Protectionism Is Bad (And Trump Is Half Wrong)

in economics •  last year

Protectionism helps no one.

I'm just a student. I need a first post. Hope this does well. Just some facts and opinions.

  • Tariffs distort the free market and cause cost-push inflation; raising prices because (Example) it's more expensive for Bob to grow rice in America with all the regulations and the higher cost of living than farmers in Bangladesh with no regulations and workers willing to accept lower wages. With tariffs, it would be more expensive for Bob to import labour from 3rd world countries, meaning either he'd have to produce less or raise prices.

  • Tariffs create tensions. If all the countries in the world try to screw each other over by trying to sink their economies through tariffs, wars are bound to break out. No one likes war (Except the military-industrial complex).

  • Tariffs are immoral. If the cost of doing business in 3rd world countries is too large, how does one expect to give the hundreds of millions of people in Africa the jobs they need so they can get out of poverty and their country can catch up with the modern world? With a few billion dollars of aid? I don't think so. With modern money comes modern ideals. To facilitate a trade, both parties would need to 'shake hands'. Bob would need to respect the fact that Jamal doesn't like gay people and is not comfortable with a rainbow flag hanging in his cubicle, and Jamal would need to respect the fact that if he did anything againt his gay colleagues, he would be fired and would remain in poverty.

Hence, tariffs cause death and despair. Free trade helps everyone.

Trump is half-wrong. He believes that through free-trade America is losing money. That is not the case.

In trade, there is a current account and a capital account. Trump loves to quote that the trade deficit is higher than ever. Yes, the current account deficit was and is pretty high - $481.2 billion went out of American pockets in 2016. However, the capital account had a surplus - of $481.2 billion in 2016...

Why is this the case? A current account measures the liquid changes in wealth between countries. A capital account measures the capital changes in wealth between countries. For example, if Bob buys a $20 million house in Zimbabwe, his current account will lose $20 million. However, his capital account would gain $20 million, as he now has a $20 million piece of property in his possession. This is why the balance of payments in trade always equals zero.

Thus, America isn't losing money. America is buying the world.

Atleast Trump is getting deregulation right... And Political Protectionism too...

Remember, I'm just a student, I don't know too too much about this. If you think I'm wrong or you know something more or better, leave a comment.

Don't forget to upvote, comment, upvote comments, and promote if you think it's worth it. I really want to see how far this platform can go. Thanks. Sleep tight.

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Keep working, stop paying.

Rule by force is the problem.

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