Ex-President Trump has revealed his economic plans for a potential second term. Central to this is a 10% universal tariff on all imports and even a larger tax on imports from countries he doesn’t like, including Mexico and China. Unfortunately, he believes this results in ‘free’ tax money into the US Treasury but ignores the fact that prices will rise by 10% or more under his scheme. Hence, it is effectively a tax on consumption, paid for by US consumers.
In Addlestone, James comments on the foolishness of such a measure. “From my understanding of Political Economy, Adam Smith, John Stuart Mill, and David Ricardo foresaw the economic damage that inevitably results from restraint of trade.”
In the Historical Background section of Magdalene, the third novel in the series, I note that John Maynard Keynes was the lead UK delegate at the Bretton Woods Conference held in New Hampshire in July, 1944. Although WWII had not yet ended, the Allies believed they had victory in their sights and wished to devise a strategy for post-war reconstruction. Keynes was the prime architect of plans to increase world trade. This included the formation of the World Bank and the International Monetary Fund. The goals of the IMF were to achieve what economists call the ‘gains from trade’ whereby countries specialize in the production of products for which they might have only a comparative, but not necessarily, an absolute cost advantage. The benefits flowing from this analysis was attributed to David Ricardo in papers he published in 1817.
Keynes’s view was that the IMF’s role was to promote international trade. Trade had stagnated during the post-WWI period, dropping by more than 50% from their pre-1914 levels. Countries raised tariffs and imposed quotas and embargoes, all in a futile and self-defeating attempt to protect domestic producers. Keynes argued that fixed but periodically adjustable international exchange rates, were crucial to promote trade so buyers and sellers could know what they would pay or receive in any transaction.
Trump, Tariffs, & Free Trade
