If President Donald Trump’s tariffs and trade wars are so great for the American economy, then why does he have to shell out, as he did this month, $12 billion to farmers adversely affected by tariffs and trade wars?
The simple answer is of course that tariffs and the trade wars they lead to are never great for our economy, or for that of any other country. They are additional taxes — as if we needed additional taxes — on the American consumer, and no one else.
In the 19th century, when our country was still a relatively young one, tariffs were an important part of raising money for the federal government. But as Jay Shambaugh of the Brookings Institution explains, “There is a reason that the United States and all other rich nations have moved away from funding their governments with tariffs: Tariffs are a damaging and inefficient way to raise funds.” Trump’s trade war, he continues, will be disastrous for the nation’s economy: “It will hurt consumers. It will hurt the U.S.’s most productive firms. It will reduce economic growth. And, it will undermine U.S. relationships around the world.”
President Trump may be good at real estate development, but his understanding of how foreign trade works, and thus his passion for tariffs, is simply incorrect. Believing as he does that trade deficits — buying more than we sell — with other countries is automatically a bad thing, he ignores the inherent efficiencies therein: cheaper goods for American consumers. Trade deficits are neither good nor bad in themselves. And in macro-economics, they are irrelevant.
The $12 billion payout to farmers will go mostly to those who grow “row crops,” including the international powerhouse of soybeans, much of which was sold to China before Trump’s trade war with that nation. But it’s not going to help everyone in the already struggling American agricultural sector adversely affected by tariffs. Tractor maker John Deere says that tariffs will cost it $600 million in 2025.
At a press conference announcing the taxpayer bailout of farmers, Trump continued to sound delusional: “And we love our farmers,” he said. “And as you know, the farmers like me, because, you know, based on, based on voting trends, you could call it voting trends or anything else, but they’re great people.”
Farmers are indeed great people. Great people who should be allowed free trade to sell their crops to the world.
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