We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength. Donald Trump 2017 Inaugural Address
Chuck Todd: Senator Sanders . . . you have never supported a trade deal since you’ve been in Congress. Bernie Sanders: Absolutely right . . . Chuck, I believe in trade, but I do not believe in unfettered free trade . . . . MSNBC Democratic Debate 2016
Bernie Sanders and Donald Trump share the belief that Americans should buy fewer things made in other countries. They want Americans to buy things made by Americans. Foreign competition, they agree, is causing American factories to close, devastating both small factory towns and big cities like Detroit. So Sanders and Trump want to shield Americans from foreign competition.
(Which would, naturally, hurt foreign workers, but for reasons I have never understood we are not supposed to worry about that. Why is that? Why is an impoverished foreign person less tragic than an impoverished American?)
In any case, when it comes to trade, Trump and Sanders simply do not understand how things work. If an American can buy a 3-piece suit made in Thailand for $200, instead of a suit made in Illinois for $250, that is a good thing for the American buyer. He is better off. He now has a new suit – and he also has $50 that he would not otherwise have.
And with that $50 in his pocket, he can buy a couple of rose bushes to plant in his front yard. Because of free trade policies – because Trump and Sanders did not succeed at putting tariffs on imported Thai products – he has both a new suit AND a couple of rose bushes beautifying his front yard. He is literally richer.
And the nursery owner has sold 2 rose bushes thanks to free trade. His business is supported, and his employees have jobs. The nursery owner and his employees are richer too.
Sanders and Trump don’t see these benefits of free trade, but that is understandable. Even the people benefiting tend to overlook them. The suit buyer doesn’t walk out of the clothing store thinking “A new suit AND $50 – thank you free trade for making me richer!” And the nursery owner doesn’t think “I sold a couple of rose bushes thanks to imports from Thailand.”
But suppose Trump and Sanders get their way and the government puts a tax on imported Thai clothing – a “tariff”? What happens then?
Now that suit costs $250. So the shopper, instead of walking out of the clothing shop with a new suit and $50, walks out of the shop with only a suit. He has less. Because of the protectionist policy, he is literally poorer. And because of those tariffs, the nursery owner did not sell those 2 rose bushes, which hurts his business, and leaves him with less money to hire people.
But again, the connection to free trade is easy to miss. The suit buyer who just paid $250 instead of $200 for his suit doesn’t walk out the clothing store thinking “Curse those tariffs on Thai products! I wanted roses too!” And the nursery owner doesn’t look at the 2 unsold rose bushes in his store and think “Those tariffs on Thai imports are hurting my business!” Everyone has a hard time seeing the benefits of free trade – and seeing the harms of protectionist policies.
OK, but what about those American textile workers whose jobs are threatened by lower-priced imported clothing? What do we tell them if their factory closes? Bernie Sanders is right, it is tough to compete against someone willing to work for a fraction of your wages. The fact is, businesses may close, which happens in vibrant economies. Carriage makers closed when automobiles became popular, and candle makers shut up shop when electricity came along. But we are all wealthier with cars and electricity, even if carriage and candle makers had to find other work. The workers in that textile factory will need to find other ways to serve others, perhaps by learning new skills. They may need to move someplace where opportunities are growing. And in the meantime, maybe the government can help with temporary support and education.
The benefits of free trade, the increased wealth it bestows on millions and millions of consumers, outweigh the harms to particular industries. Putting tariffs on goods made in other countries might save some of those businesses, but it will be at the expense of making everyone poorer.