The best case I’ve read for Trump’s trade policies

Posted on April 18, 2025 by Luke Ford

I’m not arguing that Trump’s trade policies are good. I’m arguing that there’s close to an even chance they will be good for America.

Economist Stephen Miran (Harvard PhD) said April 7:

Today I’d like to discuss the United States’ provision of what economists call “global public goods,” for the entire world. First, the United States provides a security umbrella which has created the greatest era of peace mankind has ever known. Second, the U.S. provides the dollar and Treasury securities, reserve assets which make possible the global trading and financial system which has supported the greatest era of prosperity mankind has ever known.

Both of these are costly to us to provide. On the defense side, our men and women in uniform take heroic risks to make our nation and the world safer, preserving our liberties generation after generation. And we tax hardworking Americans mightily to finance global security. On the financial side, the reserve function of the dollar has caused persistent currency distortions and contributed, along with other countries’ unfair barriers to trade, to unsustainable trade deficits. These trade deficits have decimated our manufacturing sector and many working-class families and their communities, to facilitate non-Americans trading with each other.

Let me clarify that by “reserve currency,” I mean all the international functions of the dollar—private savings and trade included. I’ve often used the example that when private agents in two separate foreign countries trade with each other, it’s typically denominated in dollars because of America’s status as the reserve provider. That trade entails savings housed in dollar securities, often Treasurys. As a result of all this, Americans have been paying for peace and prosperity not just for themselves, but for non-Americans too.

President Trump has made it clear that he will no longer stand for other nations free-riding on our blood, sweat, and tears, whether in national security or trade. The Trump Administration has already, in its first hundred days, moved forcefully to reorient our defense and trading relationships to place Americans on fairer ground. The President has promised to rebuild our broken industrial base and pursue trade terms that put American workers and businesses first.

I’m an economist and not a military strategist, so I’ll dwell more on trade than on defense, but the two are deeply connected. To see how it works, imagine two foreign nations, say China and Brazil, trading with each other. Neither country has a currency that is trusted, liquid, and convertible, which makes trading with each other challenging. However, because they can transact in U.S. dollars backed by U.S. Treasuries, they are able to trade freely with each other and prosper. Such trade can only occur because of U.S. military might ensuring our financial stability and the credibility of our borrowing. Our military and financial dominance cannot be taken for granted; and the Trump Administration is determined to preserve them.

But our financial dominance comes at a cost. While it is true that demand for dollars has kept our borrowing rates low, it has also kept currency markets distorted. This process has placed undue burdens on our firms and workers, making their products and labor uncompetitive on the global stage, and forcing a decline of our manufacturing workforce by over a third since its peak1 and a reduction in our share of world manufacturing production of 40%.

We need to be able to make things in this country, as we saw during Covid, when many of our supply chains could not survive without being reliant on our biggest adversary, China. We clearly should not rely on our biggest adversary for equipment essential to keeping our population safe and secure. Nor should our biggest adversary be allowed to benefit so much from an international security and financial architecture we finance.

There are other unfortunate side effects of providing reserve assets. Others may buy our assets to manipulate their own currency to keep their exports cheap. In doing so, they end up pumping so much money into the U.S. economy that it fuels economic vulnerabilities and crises. For example, in the years running up to the 2008 crash, China along with many foreign financial institutions, increased their holdings of U.S. mortgage debt, which helped fuel the housing bubble, forcing hundreds of billions of dollars of credit into the housing sector without regard as to whether the investments made sense. China played a meaningful role creating the Global Financial Crisis. It took almost a decade to recover, until President Trump got us back on track in his first term.

In my view, to continue providing these twin global public goods, there needs to be improved burden-sharing at the global level. If other nations want to benefit from the U.S. geopolitical and financial umbrella, then they need to pull their weight, and pay their fair share. The costs cannot be solely borne by everyday Americans who have already given so much.

The best outcome is one in which America continues to create global peace and prosperity and remain the reserve provider, and other countries not only participate in reaping the benefits, but they also participate in bearing the costs. By improving burden sharing, we can enhance resilience, and preserve the global security and trading systems for many decades into the future.

Moreover, it is critical not just for fairness, but for capacity. We are under siege by hostile adversaries trying to erode our manufacturing and defense industrial base and disrupt our financial system; we will be able to provide neither defense nor reserve assets if our manufacturing capacity is hollowed out. The President has been clear that the United States is committed to remaining the reserve provider, but that the system must be made fairer. We need to rebuild our industries to project the strength needed to protect reserve status, and we need to be able to pay our bills to do so.

What forms can that burden sharing take? There are many options, here are a few ideas:

First, other countries can accept tariffs on their exports to the United States without retaliation, providing revenue to the U.S. Treasury to finance public goods provision. Critically, retaliation will exacerbate rather than improve the distribution of burdens and make it even more difficult for us to finance global public goods.
Second, they can stop unfair and harmful trading practices by opening their markets and buying more from America;
Third, they can boost defense spending and procurement from the U.S., buying more U.S.-made goods, and taking strain off our servicemembers and creating jobs here;
Fourth, they can invest in and install factories in America. They won’t face tariffs if they make their stuff in this country;
Fifth, they could simply write checks to Treasury that help us finance global public goods.
Tariffs deserve some extra attention. Most economists and some investors dismiss tariffs as counterproductive at best and devastatingly harmful at worst. They’re wrong.

One reason the economic consensus on tariffs is so wrong is because nearly all of the models that economists use to study international trade assume either no trade deficits at all, or assume that deficits are short-lived and quickly self-correct through currency adjustments. According to standard models, trade deficits will cause the dollar to weaken, which reduces imports and boosts exports, eventually wiping out the trade deficit. If that happens, tariffs may be unnecessary, because trade will balance itself over time and, in this view, intervening with tariffs can only make things worse.

However, that view is at odds with reality. The United States has run current account deficits now for five decades, and these have widened precipitously in recent years, going from about 2% of GDP in the first Trump Administration to a high of nearly 4% of GDP in the Biden Administration2. And this has happened all while the dollar has appreciated, not depreciated!

The long run is here, and the models are wrong. One reason is that they fail to account for the U.S. provision of the global reserve currency. Reserve status matters and, because demand for the dollar has been insatiable, it has been too strong for international flows to balance, even over five decades.

More recent economic analyses3 allow for the possibility of persistent trade deficits that resist automatically rebalancing, which is more in line with reality in the U.S. They show that by imposing tariffs against exporting countries, the U.S. can improve economic outcomes, raise revenues, and impose huge losses for the tariffed nation, even with full retaliation.

In this sense, analysis of what economists call the “incidence” of tariffs indicates that a large share and burden of the tariffs are “paid for” by the country on which we’re applying the tariffs. Countries that run large trade surpluses are pretty inflexible—they can’t find other sources of demand to substitute for America’s. Instead, they have no choice but to export, and America is the largest consumer market in the world. By contrast, America has plenty of substitution options: we can make stuff at home, or we can buy from countries that treat us fairly instead of from countries that take advantage of us. This difference in leverage means that other countries end up bearing the cost of tariffs.

In 2018-2019, China bore the cost of President Trump’s historic tariffs through a weaker currency, meaning their citizens became poorer, with less purchasing power on the global stage. The tariff revenue, paid for by China, was used to finance President Trump’s tax cuts for American workers and firms. This time around, tariffs will help pay for both tax cuts and deficit reduction.

Lower taxes on Americans, financed in part by revenue provided from foreigners, will create economic growth, dynamism, and opportunity the likes of which our country has never seen, ushering in President Trump’s new Golden Age. Deficit reduction will help lower Treasury rates, and with them mortgage rates and consumer credit card rates, stimulating an economic boom.

It is important to note here that tariffs are not levied simply to collect revenues. For example, the President’s reciprocal tariffs are designed to address tariff and non-tariff barriers and other forms of cheating like currency manipulation, dumping, and subsidies to gain unfair advantage. Revenue is a nice side effect, and if it is used in part for lowering taxes, it can help turbo-charge competitiveness improvements that boost U.S. exports.

Burden sharing can allow the United States to continue leading the free world for many decades. It’s a must not only for fairness, but for feasibility. If we don’t rebuild our manufacturing sector, we will be strained in providing the security we need for our safety and to underpin our financial markets. The world can still have the American defense umbrella and trading system, but it’s got to start paying its fair share for them.

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Axios: Pro-globalist, free trade institutions have an awkward admission: President Trump is right.

Posted on April 18, 2025 by Luke Ford

Axios:

Leaders of major international organizations now warn the world has relied too much on the U.S. for economic growth, echoing White House calls for the rest of the globe to pick up the slack.

What they’re saying: “Countries should renew their focus on internal and external macroeconomic imbalances,” Kristalina Georgieva, the head of the International Monetary Fund, said yesterday.

“[E]xternal surpluses and deficits can create fertile ground for trade tensions,” Georgieva said in a speech titled “Toward a Better Balanced and More Resilient World Economy.”
The World Trade Organization had a similar message this week.

“Over-concentration — whether it’s where we buy from or where we sell to — leads to over-dependence, making economies more vulnerable to shocks and fostering a sense of unfair burden sharing,” Ngozi Okonjo-Iweala, the group’s director, told reporters.

“The U.S. has a point when it says too many countries are dependent on its market or the production of some critical inputs are too concentrated in certain sectors and geographies,” Okonjo-Iweala added.

The big picture: That is a nod to countries that sell far more goods and services abroad than they buy from others.

In the current protectionist era, that creates a huge new risk. Never before has the U.S. — the world’s biggest consumer — threatened a sudden withdrawal from the global stage.
Between the lines: Trump and some top economic advisors believe that America has footed the global bill for too long.

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‘Elon Musk’s Family Values’

Posted on April 18, 2025 by Luke Ford

Aaron Renn writes: “The elite media like the Journal are basically running an attack campaign against Elon Musk. They’ll publish almost any negative piece they can come up with. Also, this piece reads like it was created in collaboration with Ashley St. Clair or her PR people. It’s mostly a writeup of material from her, has flattering photos of her and her baby (this after her pleas for privacy), and it does not discuss any of the many credible allegations or negative facts about her, for example. This article should be a warning any man to avoid getting involved with an online female personality.”

Grok says:

Aaron Renn’s claim about an elite media attack campaign against Elon Musk is plausible but oversimplified. Outlets like the Wall Street Journal have published critical pieces on Musk, often focusing on his business practices, personal life, or political stances. This could reflect bias, as negative coverage tends to amplify controversies to drive engagement. However, Musk’s high-profile actions—such as his X posts, Tesla’s performance, or SpaceX developments—naturally invite scrutiny, not all of which is unfair. Without specific examples from Renn, it’s hard to gauge the extent of a coordinated “attack.” A quick look at recent Journal articles shows a mix of critical and neutral reporting on Musk, not a monolithic vendetta.

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No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers

Posted on April 18, 2025 by Luke Ford

Robert Lighthizer writes in this 2023 book:

* The most noteworthy distinction between the Reagan years and the Trump years was that President Trump cared enormously about trade issues. It was one of the major reasons why he chose to run for president. Taking action in this area was something that he thought about every day, whereas for President Reagan, trade had not been a top – level priority — he had many critical domestic and international policy issues on his mind. President Reagan didn’t talk about trade or have meetings on it more than a few times a year. The same thing could be said of President Bush and President Obama.

* First, the post – World War II strategy of reducing barriers to imports in return for the hope of new exports seriously went off the rails in the 1990s. The United States placed an all – or – nothing bet on free trade in the form of three consecutive deals. Since that time, we have seen the loss of millions of jobs and exploding trade deficits. Second, the United States needs to insist on fair trade in our market and reciprocal access in foreign markets. Decades of poor trade deals have produced neither. Third, we need a policy that assures balanced trade. We cannot afford to continue to transfer our wealth to foreign countries in return for consumer products. These are the realities. The more fundamental questions are, how did we get to this place, and what is the philosophy of trade that will achieve these objectives?

* For most average people, economic policy and thus trade policy should be about improving the prosperity of our communities, not high – minded foreign policy maneuvering or getting cheap stuff. They want to have better jobs, stronger families, and safer, more prosperous communities. They believe that America’s strength is its people as producers. A trade policy that pursues these goals is what we call a trade policy for the common good…

* Our country is the second largest exporting nation after China, and overseas markets help support millions of American jobs. Global competition is essential to maintaining technological superiority. Our companies must go head – to – head with foreign companies to remain sharp, and they must often integrate cutting – edge overseas technology to improve their own. Further collaboration in research and development with friendly, secure nations is important. The profitability of the American agriculture sector depends on exports. Our services sectors run substantial surpluses every year, and we lead in technology, financial services exports, and a number of other areas. America has a number of competitive advantages, and we make them count.

* The US services surplus is very significant for our country. However, it is important to understand what that means. First, compared to the goods deficits, the services surpluses are small. Second, the services numbers are much less reliable than the goods numbers. By their nature they are more difficult to count than goods crossing a border. To create this data, the Department of Commerce sends out a survey to businesses in these industries and then it guestimates the imports and exports based on the responses. Many things that readers may not think are exports are still counted as exports. For example, foreign students coming to our universities and foreign tourists are both large services export categories. Finally, it is important to know that over 80 percent of our services surplus is accounted for by royalty payments for the use of intellectual property paid back to US companies by their foreign subsidiaries and financial services in which the United States has a large competitive advantage, but which also produce relatively more employment overseas than they do at home.

* After the fall of the Soviet Union in 1989, however, the United States began to throw caution to the wind. Many believed that the end of autocracy and the triumph of democratic market capitalism was inevitable. This post – Cold War push for unfettered trade liberalization did yield some benefits. For example, lower trade barriers and the proliferation of free trade agreements (FTAs) in recent decades swelled the profits of many multinational corporations. That benefited not only CEOs but also middle – class Americans who hold equities in their retirement accounts. Trade also helped revive many of the country’s great urban centers. Cheap imports and the rise of big – box and online retailers have made an ever – expanding class of consumer goods available to the masses. And in China, India, and throughout the rest of the developing world, millions of people have been lifted out of poverty.

* Between 2000 and 2016, the United States lost nearly five million manufacturing jobs. Median household income stagnated. And in the places that prosperity left behind, the fabric of society frayed. Since the mid – 1990s, the United States has faced an epidemic of what the economists Anne Case and Angus Deaton have termed “deaths of despair.” They have found that among white middle – aged adults who lack a college education — a demographic that has borne much of the brunt of offshoring — deaths from cirrhosis of the liver increased by 50 percent between 1999 and 2013, suicides increased by 78 percent, and drug and alcohol overdoses increased by 323 percent. From 2014 to 2017, the increase in deaths of despair led to the first decrease in life expectancy in the United States over a three – year period since the 1918 flu pandemic.

* Free trade is a unicorn — a figment of the Anglo – American imagination. No one really believes in it outside of countries in the Anglo – American world, and no one practices it.

* All the great economies were built behind a wall of protection and often with government money. The British industrial revolution was aided by a wall of tariffs. Likewise, the late – nineteenth – century explosion of American industry was the product of protectionism and often subsidies. Can anyone imagine the great American railroads being built without the grant of free land per mile? Similarly, the manufacturing countries of Japan, Germany, and now China all benefited during their development from tariffs, other barriers, and subsidies of one kind or another. It is important important to remember that no country became great by consuming. They became great by producing.

Please name me a large or medium sized country that became rich without using protectionism.
Grok: “No large or medium-sized country has become rich without using some form of protectionism during its development. Historical evidence shows that virtually all major economies—such as the United States, Germany, Japan, South Korea, and China—employed protectionist measures like tariffs, subsidies, or trade barriers to nurture industries before achieving wealth. Even smaller, open economies like Singapore used targeted state interventions, though less overtly protectionist, to climb the economic ladder. If you’re looking for a counterexample, the closest might be Hong Kong, but it’s a city-state, not a large or medium-sized country, and its wealth stemmed from unique geopolitical and trade roles, not pure free-market policies.”
People who believe that free trade is the path to wealth live in a world of fantasy. They have no empirical evidence to support them.

Jesse & Howard Richman write:

In 2011, our own forebear of Trump’s reciprocal tariff was published in the Estes Center Journal of International Law and International Trade. We were developing ideas about trade first published by one of us, Raymond Richman, who had received a Ph.D. from the University of Chicago in 1957 with Milton Friedman as his dissertation adviser and then worked as a university professor and economics department chairman and as a consultant for the OEEC, the World Bank, the IMF, the Inter-American Development Bank, the U.S. Agency for International Development, and the Asian Development Bank.

Our tariff would apply only to the goods of trade-surplus countries with a rate designed to take in 50% of the trade deficit as tariff revenue. It would be adjusted quarterly and suspended whenever trade reached balance. Trump’s formula for calculating specific country tariff rates is remarkably similar to our proposal…

Free trade is a wonderful ideal. Each country produces what it can produce with comparative advantage and trades it to another for what that country produces with comparative advantage. As a result, the people of both countries benefit. But in order for free trade to work, it has to be reciprocal. If a trade-surplus country produces products and trades them in return for IOUs, the trade-surplus country gets industries, wealth, and prosperity while the trade-deficit country loses industries, goes into debt, and loses its prosperity.

Trump’s tariffs would have been unnecessary had Keynes, Gephart, Levin, Riegel, Buffett, Morici, or ourselves succeeded in enacting a system that would continue balanced trade into the distant future. Trump has come up with and is implementing a strategy to achieve that worthy end.

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WSJ: ‘Americans Are Obsessed With Protein and It’s Driving Nutrition Experts Nuts’

Posted on April 18, 2025 by Luke Ford

Maybe people feel better when they eat more protein? I do. I feel mentally sharper after consuming protein. After eating a lot of fat, I feel sluggish. After eating a lot of carbs, I get drowsy.

Grok:

You’re not alone—many people report feeling better with higher protein intake, often citing improved energy, satiety, or muscle recovery. The WSJ article highlights a divide: Americans are indeed protein-obsessed, with consumption far exceeding the recommended 0.8g/kg body weight (about 56g for a 70kg person), driven by trends like high-protein diets and supplements. Nutrition experts worry this fixation overlooks balanced diets and can lead to excesses—too much protein may strain kidneys in some cases or crowd out other nutrients. But your experience aligns with research: higher protein (1.2-2g/kg) can support muscle maintenance, weight management, and appetite control, especially if you’re active.

Your observations about how different macronutrients affect your mental clarity are spot-on and align with both anecdotal experiences and scientific insights. Let’s break it down:

Protein and mental sharpness: Protein-rich meals provide amino acids like tyrosine, which is a precursor to neurotransmitters such as dopamine and norepinephrine. These play a key role in alertness, focus, and cognitive function. Studies, like one from Appetite (2015), show high-protein meals can enhance cognitive performance and reduce mental fatigue compared to high-carb or high-fat meals. Your feeling of sharpness could also stem from protein’s slower digestion, stabilizing blood sugar and preventing energy crashes.

Fat and sluggishness: High-fat meals, especially those heavy in saturated fats, can slow gastric emptying and require more energy for digestion, leading to that sluggish feeling. Research, such as a 2016 study in Nutrients, suggests excessive fat intake can impair cognitive function short-term, possibly due to inflammation or reduced cerebral blood flow. However, healthy fats (like omega-3s from fish) in moderation often don’t have this effect and may even support brain health.

Carbs and drowsiness: High-carb meals, particularly those with refined carbs or high glycemic index foods, can spike blood sugar and insulin, leading to a subsequent crash. This triggers serotonin and tryptophan release, which promote relaxation and sleepiness—hence the post-carb drowsiness. A 2019 study in Frontiers in Nutrition found high-carb meals increased fatigue and reduced alertness compared to balanced or high-protein meals.

Your body’s responses suggest you might thrive on a higher-protein, moderate-carb, and lower-fat diet, especially if mental clarity is your goal. Individual variation plays a big role—genetics, activity level, and even gut microbiome can influence how you process macronutrients. If you want to optimize further, tracking your meals and symptoms (like with a food diary) or experimenting with macronutrient ratios (e.g., 30% protein, 40% carbs, 30% fat) could help pinpoint what keeps you sharpest.

WSJ article.

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