There are several things that alarm or annoy me about President Donald Trump’s trade war. Here are the three most troublesome:
First and foremost, I’m concerned for U.S. farmers and consumers worldwide. The Trump tariffs have cut into U.S. ag exports and threaten to hurt consumers worldwide. Yes, as I’ve heard many times from some Agweek readers, other countries, especially China, are cheating. Yes, as I’ve heard many Agweek readers say, let’s be optimistic that things work out in the end.
But there’s no denying the economic pain that farmers and consumers are feeling already. If you think “Trade wars are good and easy to win” – if you think the Earth is flat and the center of the universe – you’re confident the pain won’t last long. If you think trade wars are bad and impossible to win, you’re as worried as I am.
The trade war annoys me because of the partisanship attached to it. Some people support it simply because President Trump launched it, while others oppose it for the same reason. These partisans don’t seem to care about facts or the issue itself; as far as I can tell, they’re merely using it a club to bash each other. Farmers and consumers deserve better; we need better.
My other big gripe with the trade war is the level of economic illiteracy it reveals. Earlier this year, I wrote a column about the silliness of labeling salt as non-GMO; salt doesn’t have genes, so of course it hasn’t been genetically modified. That column lamented the low level of scientific literacy, or degree of scientific knowledge needed to make productive daily decisions, that many Americans possess.
Our collective economic literacy, or the degree of economic knowledge needed to make productive daily decisions, isn’t much better. The level of ignorance – and I stress that ignorance does not mean stupidity – is especially high about comparative advantage, a sort of economic Holy Grail.
A simple example:
Country A and Country B both raise wheat and make bicycles. Country A is a lot better at growing wheat and a little better at making bikes. It has an absolute advantage in both wheat and bikes and has a comparative advantage in wheat. (Compared to Country B, it’s better at raising wheat.)
Comparative advantage causes the two countries to specialize and increase efficiency. Country A focuses on wheat and Country B focuses on bikes, with the two countries trading bikes and wheat. Doing so allows them to produce more wheat and bikes combined than than they could alone. The higher production leads to lower prices, benefiting consumers in both countries.
Comparative advantage has a downside. In this hypothetical example, bicycle makers in Country A lose sales to imports from Country B, while wheat farmers in Country B lose sales to imports from Country A.
So, yes, there are losers – wheat farmers in Country B and bike makers in Country A – in this example. But the gain for the winners – wheat farmers in Country A, bike makers in Country B and consumers in both countries – more than offset the pain.
Magnify this simple example a thousandfold, with multiple products and countries, and you begin to understand how comparative advantage affects the world in mostly positive ways.
Scientific and technological advancements often are credited with the huge, ongoing improvements in the everyday lives of people around the world. And, yes, those advancements are essential. But don’t overlook the importance of comparative advantage and the overall beneficial international trade it fosters.
I won’t argue with anybody who complains that some countries are cheating in international trade. But if you complain too long and too much – if you ignore or overlook the immense benefits of comparative advantage and international trade – your scientific illiteracy or political partisanship, or both, may be showing.