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The Donald TKOs International Trade: The Hypotheti...

The Donald TKOs International Trade: The Hypothetical End of all U.S. Free Trade

President-elect Donald Trump is certainly no stranger to radical policy ideas and even less so to extreme statements. In a polarized era, this seems not to have damaged his political career too seriously: Trump soared to his current position in large part due to nationalistic rhetoric and an over-the-top commitment to building that wall. His self-imposed obligation to secure America’s borders has produced endless soundbite-friendly vows to deport all illegal immigrants and “bomb the shit” out of ISIS, to name a few. Running parallel to his securitization rhetoric was his undeviating attack on the nation’s free trade agreements. I imagine that most people involved in the political process have caught one of Donald’s rants about NAFTA being the ‘worst trade deal ever.’ Mr. Trump’s overall critique is: “We need fair trade. Not free trade.”

I’m proposing the off-chance possibility that Trump loses his winning temperament and doesn’t make the ‘great deals’ he has intended on delivering. Let’s imagine Trump quickly reacts to his failed trade deals by pushing directly past protectionist, anti-free trade legislation into isolationist, anti-all trade legislation. Here, we will prophesy which American macroeconomic trends will come out of The End of United States’ involvement in the Global Economy. Ambitious, I know.

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Voters rally behind Trump’s protectionist policies. (Photo: businessinsider.com)

This article is not an entirely original idea; economist Austine Idris wrote a book (here) about the elimination of international trade, where the “extinction of comparative/absolute advantages and disadvantages will end international trade.” Basically, as nations – first-world and third-world alike – innovate, any production advantages (among commodities) supplying the incentive to trade will eventually become obsolete. Of course, this is not an immediate possibility. Greenland is not yet technologically advanced enough to produce much besides exorbitant amounts of ice. Nonetheless, I include the idea to place  in your mind the concept of international trade running its course. But I digress.

Current (main) advantages of global trade:

The biggest reason countries trade internationally with each other is to increase national and global efficiency. By specializing in what specific countries produce the best (a.k.a. comparative advantage) based on the optimization of its natural resources, everybody can independently “do what they do” best. Additionally, small-scale countries can produce a small number of goods very efficiently and reap the benefits of a large-scale world economy to provide goods of all types for their domestic consumers. International trade also achieves international co-operation and communication, increased consumer benefits, and an overall higher standard of living.

(Photo: cheatography.com)

Comparative advantage in a nut shell. (Photo: cheatography.com)

Okay, now let’s understand these points from the “Make America Great Again!” perspective. In 2015, American exports totaled about $1.51 trillion, while American imports amounted to about $2.309 trillion. If we erased all imported goods from our national supply, the result would be an almost guaranteed increase in prices of most goods, depending on how much of the total supply is imported. Here’s one example of a big effect: about a quarter of our oil is imported. Without a full 25% of our oil supply, the price of oil would rise dramatically, and national economic production would slow down drastically (at least in the short run). A more relatable example: almost every individual part in your iPhone is produced abroad, in places where the abundance of low-price labor allows cheap mass production of these parts. Without the availability of foreign priced labor, the new iPhone 8 is going to cost you an arm and a leg more than your iPhone 7 did.

From the export side: pretty much every exporting industry would lose access to the entire global market, reducing profits for the companies and the consumers, as firm and household profits are interdependent. The absurd stockpile of supply would cause prices to plummet, disastrously affecting the revenues of these exporting companies. One big example: the food industry. The USA is the top food exporter in the world, and the pileup of internal food supply would drive down food prices down to almost nothing. Millions upon millions of Americans would lose their industrial jobs as there is no market to actually sell to.

Everybody thinks that a blackout of all international trade is a disaster domestically, right? The short-run national economy would collapse because we would have way too many of some goods at unsustainably low prices, and too much of other goods at unsustainably high prices. Adding to America’s issues would be the sociopolitical effects of every country in the world loathing Trump’s isolationism. This reckless, out of control termination of foreign relations could not easily be repaired.

Trump's headstrong protectionist policies could very well start a dangerous trade war. (Photo: money.cnn.com/)

Trump’s headstrong protectionist policies could very well start a dangerous global trade war. (Photo: money.cnn.com/)

I would like to loop back around to Irdis’ concept of innovation crowding out comparative advantages. Since the possibilities in this article are endless, what if, in the long run, the USA put its brightest and best to the task of establishing the USA as the global productive powerhouse of all material goods? I mean, established firms in the states would already have the capital to produce the output, and we don’t necessarily need imported raw goods (bearing in mind the diverse landscape of the 50 states). I reckon that by distributing needed materials into a diverse system of newly introduced technologies, the national equilibrium supply for contemporary goods could be met by strictly onshore production. If this were the case, the factor markets for strictly American jobs would, even if slowly, eventually come back (bringing along stabilized national living conditions with it). And sure, this may presuppose Socialism, but wouldn’t self-sufficiency be nice?

Although this approach might be a pretty roundabout way to achieve autonomy from crummy terms of trade, it may have a silver lining. In this hypothetical, the possible ending of the world as we know it could provide a new future: a future where we work for decades to try and make lesser versions of what we can already trade for, but a new future nonetheless. I’ll let you, the reader, decide in what light to see this.


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