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We know that Democrats will reflexively oppose anything Donald Trump proposes without offering any concrete or reasonable solutions to the nation’s problems.  Many conservatives believe that Trump Derangement Syndrome is real and that many of our acquaintances on the Left are certifiably nuts.  That may not always be fair, but that is what many on the Right side of the political spectrum believe is the case.

However, Trump also faces considerable criticism (sometimes justified) from the Libertarian Right and from remnants of the Conservative Right.

Perhaps their most significant criticism of Trump comes from his use of tariffs in trade policy.

Libertarians believe tariffs are a tax and are generally opposed to taxation. They also share a belief in the free market with Conservatives. Voluntary trade among individuals, corporations, and nations is good. The theory of comparative advantage holds that consumers benefit most when there are no restrictions on trade and when those who can produce the best goods at the lowest cost are free to do so. Their output is then sold without restriction or limitation by the government.

Like any other exchange form, both sides benefit from trading and believe they are getting an advantage.

Tariffs are a form of central planning, a form of governmental interference in the functioning of the market.  That interference, though, can take forms other than tariffs.  Examples would be state subsidies for pet industries, import quotas, cheap state-supplied finance, artificial regulations about quality, safety, or the environment, and currency manipulation to gain a competitive advantage.

So, we share with Libertarians many of their instincts for free markets and the efficiency and innovation that free people, acting voluntarily, can produce in either a local or international marketplace.

Where we differ is in our understanding of the current trade environment and how it operates in reality.

We don’t live in a world of free trade; we live in a world of managed trade. We live in a world where tariffs and a complex edifice of non-tariff barriers mix with arcane trade agreements. We operate in a world where governments and international organizations are knee-deep in regulating trade and rigging it for their own advantage.

Most governments engage in tariffs and all of the above violations of the principles of free trade. Yet, strangely, this regime somehow got labelled “fair trade.” This allows any Trump modification of the present system to be labeled a “violation of the principles of free trade.”

As we have pointed out before, suggesting the current trade regime as “free trade” is pure fantasy. It is the equivalent of the debate tactic of constructing a “straw man” that can then be effectively demolished by the earnest-sounding Libertarian. Here is a recent statement from the Wisconsin Libertarian Party. 

“The Libertarian Party of Wisconsin (LPWI) believes that free trade is fair trade. Trade wars only hurt consumers. Costs of production, including tariffs, are passed down until there is nobody else to pass it down to, and the consumer bears that burden. Inflation will never get under control if we continue to artificially inflate goods.”

Well, Wisconsin is known as “the cheese state”, Green Bay Packer fans are cheeseheads, and their state auto license says “America’s Dairyland.” So, quite arbitrarily, we will discuss dairy products.

To simplify this, we will discuss “free trade” in dairy products across the “artificial border” with Canada.

Small amounts of dairy products can be sold in Canada without tariffs.  However, Canada limits imports via a quota system.  Anything sold over the relatively small quota is subject to huge tariffs.

Milk sold above the quota has a 270% tariff charge, cheese 245%, and butter 298%.

In what kind of fantasy world could one consider this free trade?  What does the Libertarian Party mean by “all trade is fair trade”? If you sell above the quota, the tariff is so high as to preclude any transaction.  In what world could this be considered “fair?”  Or, if China sells us goods produced with slave labor, are we supposed to think all trade is fair trade?

They say trade wars hurt consumers.  Fair enough, but so do quotas that cause prices to triple!  Yet, we hear no peep objecting to Canadian policies regarding US dairy production.  ONLY Donald Trump violates the “principles of free trade.”

As to the assertion that tariffs create inflation, we have debunked this before.  Absent an increase in money and credit, tariffs rearrange spending but don’t create new money, the root cause of chronic inflation. The USA’s economic history shows that during high tariffs between 1870 and 1914, the country had steadily declining prices and inflation.  Besides, where are the passionate essays about how Canada screws its consumers by banning US dairy products?

That is what is so odd about this whole topic. Many argue from a theoretical position without regard to the actual reality on the ground. 

The arguments are often one-sided and, frankly, anti-American.  Only our sins get attention.

Some also argue that the US must lead on free trade and that we must lead by example, regardless of what others do. We are supposed to do this for “the world,” or for the free market,  irrespective of the damage it does to us. We should keep our tariffs low while others keep theirs high. Critics say being mistreated is good for our consumers. Yes, it may benefit consumers in the short run, but it comes at the cost of many jobs, our industrial base, and national security.  Maybe some consumers don’t feel so good when they lose their jobs and industry.

Libertarians, followers of Ayn Rand, typically don’t advocate altruism or the US sacrificing itself to the ephemeral “world order,” but lately, they seem to be implying that.

For example, suppose a US auto company wants to sell to the European Union. In that case, a 10% tariff plus a nontariff charge (a value-added tax) averages 21.6% for a total additional charge of almost 33% on importing a US-made car.

If a European auto company wants to sell in the US, there is a 2.5% tariff. There may be a local sales tax on a purchase, which averages about 7% in the US. So, basically, it is 10% versus 33%.

In what fantasy world is this “fair trade”?  All trade is fair trade when Europe charges three times what we do, effectively pricing US cars out of their market?

Now, given the rubble of Europe for about 20 years after World War II, trade concessions could be justified.  But today, the argument is not supportable.

Also irritating is the rhetorical positioning in the discussion.  Any challenge to the current managed trade regime, with its manifest unfairness, is an “assault on free trade”. Any change for a better deal for the US is positioned as an attack on the principle of free trade and an egregious assault on all that is good.  No attention has been paid to the current regime and its violations of free trade doctrine. Nothing is said about the assault on US goods taxed at 33%. What an insult to the ideal of fair trade is the present system.  But only America is at fault, and only Trump is at fault for having the temerity to question current arrangements.

Here is a novel idea.  Instead of the US raising tariffs to match our competitors, how about them lowering their tariffs to match ours?  Reciprocity can run both ways.  And if free trade is the preferred system, and we agree that it is, how about our foreign competitors be held to the same philosophical standards they have for Trump?  Want to avoid a trade war? Lower your tariffs.

I would love to see Wall Street Journal editorialists and Libertarian evangelists go after most of our trade partners and ask them to drop their trade barriers for the benefit of free trade.

What are the odds you think that will happen?  Sadly, with TDS infecting so many, the odds remain rather low.

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