That’s what we’ve got going on this week. Trump speaks highly of some accomplishments; removing the United States from the Paris Climate Agreement, and the TPP. He then spoke of renegotiating and potentially removing the United States from NAFTA. While I don’t mind removing the country from international political collective agreements (although, one promising free trade isn’t the worst collective agreement I could imagine), I can’t help but notice all of these moves enable the opportunity for the creation of tariffs. With the introduction of NAFTA in 1994, many tariffs were removed and were dissolved in the years following. The same can be said for the TPP, as with its introduction, came removal of trade tariffs. Tariffs prohibit exports by way of taxation, and that is a market intervention.
In this address Trump makes statements like the following:
“Foreign nations got rich at America’s expense – and many special interests profited from this great global theft of American wealth.”
Our products are the best, no one has products as good as the united states, that’s why you have to pay taxes to get them…? This approach is not truly free trade, and similar approaches have historically led to significant negative results, like the price shocks that sparked the Irish potato famine.
“And as we continue to fight for American workers and industry, it won’t be long before we see the Made in America label proudly displayed on thousands of new products all across this great land and exported all around the world. ”
And proud Americans will pay the difference created from the government restrictions that will make the above statement possible. Many companies take production work elsewhere because it’s more financially beneficial to do so. Restricting the ability for businesses to do this creates higher production costs. Companies will respond by raising the prices of their products, and the market responds to the higher prices as a result.
If President Trump truly wanted to bring prosperity to America, he would do all he could to enable free trade. Intervening in the market with government policies, taxes, or restrictions will only lead to economic issues.