Mark Twain said that free traders win the arguments but protectionists win the votes. The arguments in favor of trade are compelling because mutually beneficial exchange is fundamental to all of economics. We specialize in and sell the things we do best, and trade for (buy) what others do best. The gains to both parties in the trade occur whether we are buying and selling within our communities or trading with people in other states or in other countries. We specialize in the things in which we have a “comparative advantage.”
Consider what it means to have a trade deficit. I have a surplus with my employer. I sell my services to him and buy little or nothing from him. I have a deficit with everyone else — restaurants, clothing stores, etc. — since I buy from them but don’t sell them anything. Are these people taking advantage of me? Of course not. They are doing the work, I am getting the goods and services, and I pay for them.
The United States has a surplus with some countries and a deficit with others. We also have a deficit overall. Is that bad? Not really, as the other countries, as a group, are doing the work, and we are getting the goods. And we are trading, in exchange for those goods, our dollars, stocks, bonds, real estate, and other assets. The only problem might be that if the other countries stopped selling to us and we had to do the work ourselves, we might think life had gotten tougher.
In any event, the cause of a deficit overall is not some unfair practice such as high tariffs, but our desire to live beyond our means. Government budget deficits are, in most cases, the cause of trade deficits.
Why do protectionists “win the votes,” as Twain claimed? It’s because if we move from a closed economy to trading with other countries, imports will cause some businesses in the United States to fail and some workers to lose their jobs. The gains to U.S. consumers in the form of lower prices and/or better products are spread out broadly, but the losses are highly concentrated. The relatively small number of potential losers have a great incentive to lobby against trade, but the large number of potential winners are less likely to notice their gains since the gain per person is fairly small.
Because of the political difficulties of moving to freer trade, it’s taken the world decades of negotiations to gradually reduce trade barriers and arrive at the system of somewhat free trade that much of the world has enjoyed —– until now. The Trump Administration is seeking to reverse this. It’s not clear that there is much political pressure to move in this direction, since we are closing, rather than opening, our access to foreign goods. Why then, does Trump want to impose tariffs?
Some have said that it’s just a threat that allows bargaining. The administration has claimed drugs coming across the borders as an emergency to justify imposing tariffs.
It’s increasingly clear that Trump thinks that the United States is better off if we produce everything ourselves, or at least balance trade exactly with every other country. I suspect that Mark Twain understood comparative advantage. Alas, our current President does not.
RICHARD DOUGLAS
Associate professor emeritus of economics, Bowling Green State University
Bowling Green
First Published March 28, 2025, 4:00 a.m.
