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.
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.