Trade barriers often hurt the country that imposes them more than the ostensible target. They can also lead to wars: when goods don’t cross borders, armies do. From Doug Casey at caseyresearch.com:
Justin’s note: Donald Trump may have just started a war.
If you read Tuesday’s Dispatch, you know that I’m talking about a trade war. You see, Trump just slapped a 25% tax on steel imports and a 10% tax on aluminum imports.
He did this because he wants to put American businesses first. But this plan may end up doing more harm than good. And that’s because Trump’s tough stance on trade could spark a global trade war. It could even lead to a shooting war with one of the most powerful countries on the planet.
You might find that hard to believe. But Doug Casey told me why this might happen during a recent phone call…
Justin: Doug, what do you think about Trump’s approach to trade?
Doug: Well, let me start off by saying the government should have zero to do with the economy in general, and trade in particular. No subsidies, no duties, no quotas—nothing of the sort. Most people don’t understand that import duties punish the whole country to “help” some uneconomic industry or group. At the same time, it allows them to persist in the practices that make them uneconomic.
And yes, I understand the chances of the government butting out are about zero. But it’s critical to voice correct principles, even if they’re disregarded.
Of course, Trump is correct in putting America first, as opposed to subsidizing other countries. But import duties don’t put America first. They damage it. The Smoot-Hawley tariffs were what really set off the last depression, because foreigners could no longer sell to us. That destroyed their economies, resulting in business failures and high unemployment.
Duties are always a disaster. When you have a duty on things from a foreign country, you violate all kinds of economic laws. You are, in effect, putting yourself under embargo. That’s number one.
Number two, the revenue on import duties goes to a government. It feeds the beast. This revenue makes the government bigger and stronger. So, it’s bad from that point of view as well. It always impresses me as strange when people talk about “we” in reference to the State, or the government. The State is a discrete entity—like General Motors, or the Catholic Church, or the Boy Scouts. It doesn’t care about you; it cares about itself. But, unlike those other organizations, it uses guns to enforce its will. You want to deny resources to it as a moral principle.
To continue reading: Doug Casey on the Coming War With China
