Sunday, 12 August 2018

“Don’t buy into Trumpian delusions on trade deficits” | SCMP letter

My letter as run in the print version of SCMP on 10 August 2018
Don’t buy into Trumpian delusions on trade deficits
In the world of business, one person’s gain is another’s loss, so you say in your editorial of August 6.

But that is simply not true. If I buy an apple from you I have gained an apple and you have gained some money. We have both gained. And that’s so for the vast majority of trade and commerce.

This may seem a trivial quibble, but it’s the sort of dangerously wrong thinking that informs Trump’s tariff and trade shenanigans. He believes that trade is a zero-sum game: that America “loses” when it has a trade deficit of, say, US$500 billion. It doesn’t. Its citizens have US$500 billion worth of goods.

Trump’s win-lose misconception leads him to think that tariffs are “good” and will lead to wealth. Again, false. Tariffs are a tax on Americans. There was a reason the world – at the urging of America, let’s recall – established the post-war General Agreement on Tariffs and Trade: to reduce tariffs, which increased world trade and world wealth.

I wouldn’t buy into the Trumpian delusion that trade is a bad thing unless you “win” with tariffs. That’s the same bunkum as “one person’s gain is another’s loss”.

Peter Forsythe, Discovery Bay