Kindergarten Arithmetic 101: Analysis of the Trade Debate

One mish reader stands out. He offers a real world example of what happens when trade collapses.

Kindergarten Arithmetic 101

If Trump extends his wall to cover the entire border, instead of just the one shared with Mexico, and then bans or punitively tariffs every single good that uses steel as an input, recursively, as well; he just may succeed in driving up the domestic price of final goods, to the point where both nominal labor compensation and nominal raw materials prices can be increased at the same time.

In doing so, he will ensure that not a single American made product of any kind, will be internationally competitive over time. This is exactly what the Latin American import substituting “structuralists” did, back in the 50s and 60s.

The above analysis from reader "Stuki" is obviously correct.

Disappointingly, there is debate over the obvious. And that's not the only flaw of economic illiterates.

Mathematical Explanation of Deficits

For a mathematical explanation of trade deficits, please see Trump's Tariffs Show He's "Clueless About Trade".

Mike "Mish" Shedlock

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Daaron; I agree. The future belongs to those with the brightest minds and ideas. Intellectual property is very important. But Trump looks at complex problems and can only see simple solutions, which actually make things worse. He thinks things like “steel good”, Mexico bad, tariffs good, Canada bad.


The problem with most anti-protectionist screeds is that they emphasize goods. Protecting intellectional Rights is just as important as the US is the intellectual properties leader of the world. The cost of focusing only on goods and not include intellectual costs is in excess of a trillion dollars per year.


Kinuachdrach said “Maybe this time the tariffs will result in more investment in the US, more jobs created, more people working, more taxes paid. Maybe !”
In 2002 Bush imposed steel tariffs and eliminated 200,000 manufacturing jobs in the US. The definition of insanity is trying the same stupid thing over and over, but expecting different results.
I am not American. Yet even I feel sorry for workers currently employed in US manufacturing. This policy will be another disaster, if implemented.


The problem is that we can’t have our cake and eat it too. We can’t put up barriers and think that the other side will just lay down and take it. Instead of prosperity when we put up not-well-thought-through trade barriers, the most likely result is going to simply be that other countries will put up barriers against us in return, and then everyone loses. And this is not a new concept. Perhaps Trump should read this little-known book called “The Wealth of Nations”... oops, I forgot, he doesn’t really care much for reading.