The Steep Costs of Trump Expanding Tariff Power Under Section 301

Section 301 wasn't supposed to be a presidential blank check. Yet that's increasingly how it has been used. The latest lawsuit challenging the Trump administration's latest tariffs argues that the statute doesn't authorize this latest round of import taxes. The courts will sort out that legal question in due course.

But the lawsuit highlights a broader problem: Section 301 has steadily evolved from a targeted enforcement tool into an increasingly elastic source of presidential tariff authority in which the president can impose tariffs because "the president said so." If every trade dispute can justify sweeping tariffs, then the statute's limiting principle has largely disappeared.

Congress enacted Section 301 as part of the Trade Act of 1974 to combat unfair foreign trade practices. It authorized the president to respond when another country maintained discriminatory policies that burdened U.S. commerce, using targeted retaliation to encourage reform and open foreign markets. In other words, Congress designed Section 301 to function like a scalpel, not a sledgehammer.

Section 301 was built around leverage. The idea was to impose costs on foreign governments until they removed unfair trade barriers. That logic begins to break down when tariffs become untethered from the specific conduct they're supposed to address.

The Competitive Enterprise Institute has observed that recent Section 301 actions often feature expansive investigations, weak causal links, and tariffs extending far beyond the industries connected to the alleged misconduct. The result is an increasingly flexible statute capable of supporting almost any desired tariff outcome.

The Cato Institute adds that these measures appear less focused on correcting unfair trade practices than on preserving a preferred tariff policy. In that sense, trade enforcement risks becoming a rationale rather than the objective. Once almost any international grievance can justify sweeping import taxes, Section 301 stops functioning as a narrowly tailored trade law and starts looking like an open-ended delegation of Congress's tariff power.

The mismatch between the alleged harm and the proposed remedy is another sign of how elastic Section 301 has become. Even accepting the administration's claims about forced labor, the Cato Institute analysis also finds that the amount of trade plausibly affected is a tiny share of overall commerce (see below). Yet the response is not a narrowly tailored correction of a specific distortion; it is a sweeping tariff regime affecting trillions of dollars in imports. When the remedy is significantly larger than the underlying problem, it starts looking less like trade enforcement and more like economic punishment.

Perhaps the courts will conclude that the statute permits this approach. But if Section 301 can be stretched to accommodate virtually any broad tariff program, its limits become difficult to identify. And when the limits of a delegated power become impossible to identify, the delegation itself deserves a closer look.

The concerns surrounding Section 301 are not limited to statutory interpretation or presidential power. They also involve the very real economic costs created by expanding tariff authority. According to the Penn Wharton Budget Model, Section 301 tariffs alone are projected to cost Americans approximately $1.05 trillion over the next decade. Those costs do not vanish at the border. They are absorbed by businesses and consumers through higher prices, increased input costs, and disrupted supply chains.

The National Taxpayers Union notes that adding the costs of Section 232 national security tariffs brings the total burden of these tariff policies to roughly $2.2 trillion over ten years. That is a significant economic consequence flowing from executive decisions that increasingly rely on broad interpretations of existing authority. Tariffs may be imposed by presidents, but their costs are paid throughout the economy.

Section 301 was never meant to be a blank check for presidential tariff authority. It was designed to address specific unfair trade practices, not serve as a legal scavenger hunt for whatever tariff justification an administration can find. The courts may decide whether this latest theory passes muster, but Congress should make clear that Section 301 is not an all-purpose authorization for presidents to impose taxes whenever they want. 

If Congress does not reclaim its tariff authority, the executive branch will have expanded power to tax the American people into higher prices, distorted markets, and fewer protections. I thought that this country was founded on a war in which Americans fought against unfair taxation. History does not repeat itself, but it's amazing how it rhymes. 

The Trump Administration's Latest Protectionist Trick: Call All Foreign Trade "Unfair"

Modern prosperity relies heavily on international trade. No one single country, even one as resource-rich as the United States, produces everything its citizens want or need. The premise of international trade is that people specialize in what they do well and exchange with others who specialize in something, else, and do so across international borders. It is through international trade that countries prosper. From food and clothing to smartphones and automobiles, international exchange allows producers to reach global markets while consumers gain access to goods that would otherwise be more costly or scarce. 

Yet last week, the Trump's Office of the United States Trade Representative (USTR) claimed that foreign exports are inherently unfair by saying "U.S. trading partners producing more goods than they can consume domestically...displaces existing U.S. domestic production." By redefining imports as evidence of unfairness, the argument treats the presence of foreign goods as a problem rather than a benefit. This view of economics and trade misunderstands the purpose of trade and risks harming the very Americans it seeks to protect. 

Imports Are Benefits, Not Punishment

A common mistake in the Trump administration's line of thinking is that is treats nations as if they were corporations competing for market share. Under this "logic", every import is portrayed as a concession to foreign producers while exports are celebrated as national triumphs. This narrative might be effective for political optics, but bears little resemblance to how markets actually function. 

This misunderstanding largely stems from the mistaken belief that the economy is a fixed pie in which one country's gain must come at another's expense. In reality, trade expands the pie by allowing individuals and businesses to specialize in what they do best and exchange with others who do the same. Trade allows both sides to become better off because each is exchanging something they value less for something they value more. By expanding opportunities for specialization and exchange, international trade increases overall prosperity rather than simply redistributing a fixed economic pie. 

The Protectionist Redefinition

Calling foreign exports inherently unfair is not an economic argument so much as it is a bastardization of the word "fair." In traditional trade policy debates, unfair trade practices refer to specific policies that distort competition, such as subsidies and state-owned enterprises. As imperfect as it arguably is, it is why a World Trade Organization exists. The Trump administration throws out that entire framework out the window. What is going on is that the administration is asserting that the act of selling goods to Americans is suspect if the seller happens to be located outside of the United States.

It is absurd because this approach eliminates the need for evidence or analysis. The argument uses circular logic in which foreign exports are declared unfair simply for being foreign exports. Such "reasoning" turns market competition into exploitation, success into cheating, and consumer choice into economic wrongdoing. Any successful foreign business can be labeled as "unfair", thereby making the fairness argument meaningless. It is an approach that replaces serious economic analysis with farcical economic nationalism. 

What is more is that this logic mirrors the rhetoric behind "Buy American" or "buy local". If purchasing foreign goods is harmful, then presumably Americans should only buy domestically produced goods. But why stop there? With that same logic, it should be wrong to buy goods and services from another state rather than one's own community or neighborhood. Taken seriously, this reductio ad absurdum "logic" collapses when applied consistently. Economic progress has always depended on the widening the scope of trading partners. Restricting trade based on geography does not create wealth. It merely limits the ways in which prosperity can flourish.

Making America Pay Again

This protectionist mindset is framed as a way to shield American workers and industries from "big, bad foreign competitors." In reality, protectionist measures like tariffs impose broad costs onto the U.S. economy. Tariffs reduce competition and restrict supply, which results in higher consumer prices, fewer jobs, and lower economic growth. What is framed politically as sticking it to foreign countries ends up being a tax on the everyday American. 

Those higher costs ripple throughout the broader economy. Consumers pay more for finished goods, while American businesses pay more for imported components and raw materials that they rely on to produce their own products. In many industries, these inputs are essential to maintaining competitiveness. By raising their costs, protectionist policies ultimately make American firms less productive and less able to compete both at home and abroad. 

Those Who Trade Together Stay Together

Trade does not merely affect prices; it shapes the broader strength of the nation. Declaring foreign exports unfair and erecting trade barriers risks weakening the very economic foundations that sustain U.S. competitiveness and strategic influence. Driving up costs for American firms leaves them less capable to compete in the global economy. A strong economy is a prerequisite for a strong national infrastructure and robust national security, and protectionism undermines both. 

These costs extend beyond domestic production. They also damage alliances and global relations. Tariffs and other protectionist policies often push allies into the arms of rivals, thereby diminishing national security. At the same time, these measures slow domestic production and reduce the efficiency of U.S. firms, which undermines the critical base for U.S. infrastructure and security. In other words, this approach risks making the country less secure, less innovative, and less influential on the global stage. 

Old Trade Fallacies Make a Comeback

Declaring foreign exports "unfair" substitutes political rhetoric for analysis. By assuming that imports are evidence of wrongdoing, the argument ignores the principles that make international trade beneficial: specialization, voluntary exchange, and consumer choice. This is just the latest manifestation of the same idiotic reasoning behind "Buy American' or "buy local" campaigns: restricting trade based on geography or origin does not create prosperity; it limits it. The zero-sum logic of protectionism is fundamentally at odds with how markets work. 

The consequences of these policies extend much beyond economic theory. These protectionist measures raise costs for consumers, increase inefficiencies for businesses, and undermine the strategic and economic advantages of maintaining robust global trade relationships. Far from protecting Americans or making America great again, these measures punish them, reduce prosperity, and weaken the U.S.' ability to adapt in a competitive world. If the U.S. government treats all foreign goods as guilty by default, the ones who will lose bigly will be the American people. 

Is the Reign of the U.S. Dollar Coming to an End?: Assessing the Future of Global Reserves

Tariffs notwithstanding, the United States has fiscally been in such a tumult in recent years. Last month, the credit rating agency Moody's downgraded the United States from Aaa to Aa1. This downgrading is significant for two reasons. One is that the United States is the largest economy in the world. The second reason is that Moody's is the final major credit rating agency to downgrade the United States below its top credit rating. Much like with Fitch's downgrade in 2023, Moody's cited long-term debt issues fueled by the mandatory spending. Moody's anticipates that the United States' fiscal performance is to deteriorate at a faster rate relative to other highly-rated sovereigns. 

This got me thinking about a major topic related to all this mess. The United States dollar (USD) is the most held currency in global reserves. However, that clout has been declining over the years (see above). International Monetary Fund (IMF) data show that at the end of 2024, 58 percent of foreign exchange reserves are USD. Contrast that with the dollar being 65 percent a decade earlier. How legitimate is the concern that the percent of dollars in foreign reserves will continue to decline over time?  We should first ask what could replace the dollar as the primary global reserve. 

• Chinese yuan (人民币). China has the second largest economy and is continuing to grow, hence why it is a main contender. However, as long the Chinese central bank (中国人民银行) has exchange rate regime (currency manipulation), capital controls, and institutional weakness, the Chinese yuan will not be a global currency reserve. 
• The euro. The European Union rivals that of the United States and has political stability. However, it has internal economic issues that I have critiqued since 2010 and have done so since then (see here, here, and here). It is not only the lack of a common treasury or a unified European bond market, not to mention that its capital markets are inadequately integrated to muster the assets necessary to become a global leader. As a research paper from the European Commission points out, the euro zone crisis last decade resulted in the downgrade the credit rating of various European countries, thereby strengthening the dollar (Arroyo, 2022). 
• Other currencies. The Japanese yen, Korean won, Australian dollar, Canadian dollar, and British pound lack the scale and liquidity to pull it off. The BRICS countries cannot cobble together a currency basket to rival the U.S. economy because of the structural challenges that do not make their countries' central banks robust. 
• Digital and blockchain alternatives. This option could have potential in the future. However, given current regulatory hurdles and the fact that these alternatives are still relatively nascent, they are not viable options, certainly in the short-term.

There is still no viable contender to step in and replace the U.S. dollar in the short-term. The United States remains a large, powerful economy that accounts for 26 percent of the world's GDP with rule of law and investor confidence. Because it takes a lot of time, money, effort, and political willpower to change currencies, there is inertia vis-à-vis the network effects that are in the U.S.' favor. The U.S.' market for Treasury securities remains large and liquid. The dollar is still the dominant currency choice for international trade transactions because the dollar is so entrenched in global trade and finance. That being said, it is clear from the Moody's downgrading that the U.S.' fiscal situation is untenable and it is looking like there is a lack of political will to change things. 

In July 2024, the CFA Institute surveyed nearly 4,000 global financial professionals. Not only did 77 percent of respondents find that the U.S.' finances are unsustainable, but nearly two thirds had the professional opinion that the U.S. will lose its global reserve status (52 percent in a marginal way and 11 percent in a material way). It was also interesting to see the reasons that respondents thought this would happen. Debt was number one, followed by a downright default (see below).

What does this mean for the global reserves system? Going back to the CFA Institute survey, what the respondents believed to be the most likely systems to replace the dollar would be a multipolar currency system, a digital currency, and hard currency (e.g., gold). If I were to speculate, I would say the system is becoming more multipolar and there will be an emergence of digital currency in global reserves. I believe that the dollar's prominence will remain in the short term but also decline gradually, much like it has in the past couple of decades. The fiscal cliff is not imminent, but it is the direction in which the United States is heading.

What came as a result of the COVID pandemic and the lockdowns has taught me to be more humble with my educated guesses, especially when prognosticating beyond a year or so. What I can say with certainty is that that more the United States government avoids meaningful fiscal reform and adds on deficit spending, the more that dollar will lose its dominance. The question simply will be a matter of how much dominance is lost, what will take its place, and how ugly of a process it will be.

Trump's Non-Reciprocal "Reciprocal" Tariffs Are Chasing a Nonexistent "Trade Deficit" Boogeyman

Last week on April 2, what Trump dubbed "Liberation Day," Trump declared that "April 2nd, 2025, will be forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again." As the title of this piece indicates, I would argue that what he did could very well be a day that forever lives in the infamy of U.S. history. 

Trump announced a two-tier trade policy: 1) a baseline import duty equivalent to 10 percent on all goods entering the U.S., and 2) so-called "reciprocal" tariffs on 90 countries that are generally equivalent to half of what he purports other countries are imposing on the United States. From Trump's telling, he is using these tariff rates to offset what other countries are allegedly implementing. He even pulled out a chart during his "Liberation Day" speech to illustrate the point. The reason I facetiously put "reciprocal" in quotes throughout is because what Trump claims about other countries' tariff rates and using corresponding reciprocity is false. 

During his April 2 speech, Trump pulled out a chart that supposedly listed tariff rates that other countries were imposing on the United States. As you can see from World Trade Organization's database, they were not tariff rates. Rather than identify the tariff rates, what his economic team did was divide the trade deficit by imports for each country. This ratio represents the extent to which the United States has a trade imbalance with a given country. 

Setting aside for a moment those are two distinct percentages, Trump's take on trade imbalances is that they are bad because he views them as a metric of unfair trade practices and "cheating" the United States. You would have thought we would have left mercantilism in the dustbin of history back in the 18th century, but here we are. I refuted this silly notion that "trade deficits are evil" back in 2017 when he was first toying with the idea. Here were my summary points back then: 

1. There is more to an economy than just the trade balance. 
2. A country running a trade deficit is not just throwing away money. It acquires goods and services that improves consumers' lives, creating a mutually beneficial relationship between the two countries. 
3. The United States ran a trade deficit for decades and its economy grew just fine. 
4. The trade deficit is not a good metric of economic health. 
5. Even if the trade deficit were an issue, the focus would need to be on savings, investment, and capital flows, not trade flows. 

None of this matters to Trump because he is recklessly trying to emulate President William McKinley, the original Tariff Man. Trump imposed a baseline 10 percent import duty (read: tax) on those who had lower rates, but overall imposed tariffs based on this trade imbalance ratio, not the other countries' actual tariff rates. He then divides the trade imbalance ratio by half to get at the new effective tariff rates on each country because he thinks he's a benevolent businessman giving a half-off discount. 

To recap so far, we already have two main issues. The first is that the rationale for implementing these tariffs is baseless because trade deficits are not the evil Trump makes them out to be. He is willing to unravel the global economy because he does not have a clue of how international trade works. I buy a lot of groceries from the grocery store, but they never buy anything from me. I run a trade deficit with my grocery store, but that does not mean I am harmed by the grocery store. Quite the opposite! That money I spend helps ensure I am fed. Even if Trump's depiction of trade deficits were somehow accurate (to reiterate, he is way off), it does not matter because tariffs do not have a statistically significant impact on trade deficits (Furceri et al., 2019). The reason for that is tariffs disincentivize both imports and exports alike. And guess what? All trade by definition is reciprocal because both parties mutually benefit. Trump's tariffs will interfere with that reciprocity, which brings me to the second issue. 

Even if Trump were right about trade deficits, he did not present other countries' tariff rates, but rather the size of the trade deficit that each country has with the United States. He lied about the tariffs being reciprocal by presenting junk math. If you look at the tariff data collected by Cato Institute, you will see significant discrepancies between what the White House claims and what is the actual tariff rate. The chart from economist Justin Wolfers below shows how low the tariffs of major U.S. partners has been prior to the "Liberation" Day spectacle. 

The excuse of reciprocity is nothing but a smokescreen to increase tariffs to 22.5 percent, which is a tariff rate that has not been this high in the United States since 1909. You can put lipstick on a pig and it is still a pig. No matter how Trump talks up tariffs and no matter how much he tries to cut tax rates elsewhere, he is still calling for a major tax increase because tariffs are taxes. 

I wish Trump would look in the mirror when it came to harmful trade practices. While the U.S. has had a relatively low average tariff rate prior to "Liberation" Day, the United States has had plenty of non-tariff trade barriers, including subsidies, quotas, "Buy American" restrictions, protectionist regulatory systems (e.g., baby formula regulations), and the farkakte Jones Act. When adding up these interventions, much like the independent Global Trade Alert has, the United States has actually contributed more trade interventions to the global market than any other country. 

When looking at the Right-leaning Heritage Foundation's Economic Freedom Index, it would explain why the United States ranks 69th in the world when it comes to trade freedom, which is a lower ranking than Canada, France, or Germany. That means if he were to make it truly reciprocal, he would have lowered tariffs for nearly 70 countries because those countries have better trade policy than the United States. If Trump actually cared about trade reciprocity or trade fairness, he would be decreasing U.S. trade barriers, not increasing them. 

Another thing that gets me is that in the Executive Order, he goes on about how the effects of the trade balances include "reducing opportunities for domestic manufacturers to expand, and in turn, leading to lost manufacturing jobs, diminished manufacturing capacity, and an atrophied industrial base." From the sound of this rhetoric, you would think that the U.S. manufacturing industry would be ecstatic about Trump's tariffs. So why did the National Association of Manufacturers (NAM) say earlier this week we need to brace for the tariffs? Here is what NAM had to say shortly before the tariffs were announced: "The high costs of new  tariffs threaten investment, jobs, supply chains and, in turn, America's ability to outcompete other nations and lead as the preeminent manufacturing superpower." 

And if this is so great from America, why did the Dow Jones drop 1,600 points in response to Trump's tariff announcement? The stock market is not a crystal ball about economic performance, but it does generally track with what major corporations expect future profits to be. This makes sense considering that 30 percent of S&P 500 companies derive their revenue from overseas operations. This is to say that neither do major corporations outside of manufacturing believe Trump's assertion that major wealth is going to pour into the United States as a result of these tariffs. The lack of support from those who Trump claims to be helping with these tariffs should give Trump great pause.

Trump's Auto Tariffs Won't Help U.S. Manufacturing, But They'll Make Cars Much More Expensive

Trump is driving the American people crazy (myself included!) with his trade war, pun intended. Last week, Trump announced that he is imposing 25 percent tariffs on automobile and automobile parts imports, which took into effect yesterday. Per the White House's fact sheet announcing the tariffs, Trump believes these tariffs are a national security issue since "excessive imports [are] threatening America's domestic industrial base and supply chains." In his fantasy world, Trump believes that the tariffs will simply encourage manufacturers to bring production back to the United States. Give me a break! There will not be a revival of the manufacturing that the United States experienced in the 1950s because as I explained during Trump's first term, those days are long behind us.

In addition to believing the tariffs will boost manufacturing, Trump also believes that tariffs will make America great again, a claim that has been refuted multiple times here at Libertarian Jew. Whether it is under the guise of national security, fighting the War on Drugs, helping out small businesses, or fighting trade deficits, I have been shaking my head wondering what gives with Trump's trade war. So what makes Trump's latest tariffs especially harmful to the auto industry?  

Let's say that it is not a coincidence that General Motors' stock fell six percent after Trump's announcement about the automobile tariffs. And if tariffs are so good for automakers, why is Auto Drivers America, the largest trade association for U.S. automakers, denouncing the tariffs? Trump is not going to boost manufacturing or improve domestic supply chains because Trump does not grasp how supply chains work for the auto industry. As this table from the Cato Institute below shows, automobiles are not strictly manufactured in the United States. More than half of the content of what many would consider "an American car" consists of foreign parts. 

Some brands will be harmed more than others with these tariffs, but the harm in the auto industry will be widespread. And it is not as if these manufacturers could shift manufacturing to the United States on a dime even if they wanted to. That is not how capital-intensive industries such as this one work. Given how integrated the global market for automobiles is, it should not come as a surprise that these tariffs will increase automotive prices for U.S. consumers. Fragmenting the global supply chain will lead to more inefficiencies, which will contribute to the higher costs. Speaking of which.....

In its 2024 report, the International Trade Commission calculated that a 25 percent tariff on automobiles would decrease imports by 70 percent while increasing average vehicle prices by 5 percent. The chief economist at Cox Automotive, which is the world's largest automotive services and technology provider, had told the New York Times that these tariffs would make the average vehicle $3,000 more expensive, whereas the National Taxpayers Union estimates that these tariffs will increase the average vehicle price by over $6,500. Depending on the model of the car, Anderson Economic Group puts the estimates in a range from $4,000 to $12,000 per vehicle. 

This also means cutting back on automobile choice. To compensate for higher costs, automakers could cut back on various features or even stop selling affordable models. Cox Automotive also projects that there will be 700,000 fewer automobiles than initially estimated because of Trump's trade volatility and the trade war he initiated. That does not exactly sound like helping out the 7.3 million Americans working in U.S. auto manufacturing, now does it? 

What Trump does not understand is that it was freer trade vis-à-vis the North American Free Trade Agreement (NAFTA) that made the automobile industry great, not protectionism. After all, the import quotas that the Reagan administration put on Japanese automobiles in the 1980s had the same unfortunate result, whereas automobile production took off after NAFTA (see chart below). 

Since Mexico is a major participant in the manufacturing of U.S. automobiles, these tariffs (along with Trump's trade war generally) could also push Mexico over into recession territory. Trump cannot coax the automotive industry into bringing its manufacturing back to the United States. What Trump's latest stunt will do is cause supply chain delays in the auto industry, limit automobile choice, undermine his own trade agreement, USMCA, from his first term (which will erode trade relations with other countries because it shows that he can go back on his word), and make cars more expensive. This goes to show that Trump's tariff does not make America great again, but rather really screws over the American consumer. 

Trump Cannot Fight Trade Deficits with Higher Tariffs, Nor Does He Need To

Since the beginning of his second term, Trump has been more gung-ho on tariffs than he was during his first term. Not only did Trump threaten tariffs on U.S. allies Mexico and Canada under the guise of fighting fentanyl, but he implemented 25 percent tariffs on steel and aluminum. A couple of weeks ago, Trump passed an executive order for reciprocal tariffs. Trump stated that he needed these reciprocal tariffs to deal with the trade deficit, which Trump claims threaten the economy and national security. Too bad for Trump that tariffs do not help with the trade deficit. According to the Peterson Institute for International Economics (PIIE), countries with higher tariffs have higher trade deficits. 

Why is this the case? Tariffs lower imports. This decrease in imports lowers demand for foreign currency, which in turn appreciates the dollar (Furceri et al., 2019). What does that end up doing? Making American exports more expensive for foreign consumers, which lowers sales. Plus, when there are retaliatory tariffs in play, the initial tariffs increase the cost of U.S. exports, which have the potential to cost more jobs at home, much like we saw with the tariffs from Trump's first term. 

None of this addresses the reality that trade deficits are not a bad thing. Trump bemoaned the trade deficit during his first term in office. In reply, I criticized Trump and explained why we should not be worried. In addition to laying out the description of the macroeconomics of trade deficits, I pointed out how a trade deficit can improve our quality of life and how the U.S. economy grew considerably in spite of running a trade deficit since 1975. There is more to an economy than trade balance, not to mention that the trade balance is not a sound metric for economic health. Ultimately, it does not matter whether Trump is imposing tariffs because of national security, fighting the War on Drugs, or because of trade deficits. Tariffs are not the solution. 

Biden Blocking Nippon's Acquisition of U.S. Steel Undermined National Security Instead of Improving It

In December 2023, Japanese steelmaker Nippon Steel offered to buy U.S. steelmaker U.S. Steel at a 40 percent premium on its stock price. Nippon Steel even offered unprecedented veto power over the merged entity's future U.S. plant closure decisions to allay Biden's concerns, but it was not enough. It also did not matter that 98 percent of the U.S. Steel shareholders approved the $14.9 billion deal in April 2024 or that Biden's Committee on Foreign Investment in the United States (CFIUS) could not find a national security threat from the acquisition.  Biden decided to block the proposed acquisition last week anyway. Why? Biden believes "there is credible evidence" that Nippon Steel "might take action to impair the national security of the United States." Biden does not actually state what credible evidence might exist. That reason for that is because there is no credible evidence. 

As I pointed out in my April 2024 analysis on the acquisition, the acquisition would not have harmed the United States' national security. Forget for a moment that Japan has been a military ally to the U.S. since the 1960s or that Nippon Steel already operates numerous steel plants in the United States. The Pentagon only needs about 3 percent of domestic steel production. Rather than looking to hinder steel production, Nippon Steel was looking to inject money into capital investments ($2.7 billion, to be precise) to produce steel in the United States. The steel industry needs new technology and innovation, which the U.S. has now been deprived of due to Biden's decision. 

Third, the Pentagon does not procure steel from U.S. Steel, making the national security argument all the more tenuous. More to the point, I illustrated how the acquisition could actually help with national security. By making U.S. Steel more efficient, the acquisition could have bolstered the U.S.-Japanese alliance. Here are a few additional points to consider on how Biden actually made matters worse:

• U.S. Steel was unprofitable for most of the past fifteen years. Even if the Pentagon procured steel from U.S. Steel, how exactly does allowing for a steel producer to continue flailing help national security?
• The Right-leaning Hudson Institute, which is known for its national security expertise, concluded in its report on the Nippon Steel-U.S. Steel proposal "that this proposed transaction would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount."
• As the authors pointed out, Japan is the leading foreign direct investor in the United States. The Nippon Steel acquisition was meant to be a sign of goodwill to bolster that alliance. 
• Nippon Steel's injection of capital would have better empowered the United States to withstand the dumping of excess Chinese steel into U.S. markets. 
• Economic and industrial competitiveness is what has historically been helpful to U.S. national security. Strengthening the U.S. steel in the capacity, quality, and cost-effectiveness that would have come with the U.S. Steel acquisition would have put the U.S.' national security on better footing in the future. 
• In December 2023, the bipartisan Select Committee on the Chinese Communist Party recommended that Japan be added to a whitelist of allies to received fast-track investment approval precisely because Japan has been such a good ally (see page 32 of the report). That hardly sounds like the consideration one would give a national security threat. 
• Blocking the acquisition contradicts the Biden administration's own articulation of national security assessments. As the Atlantic Council brings up, this precedent could "justify interventions into transactions for broader economic competitiveness reasons or to favor domestic political allies." No kidding! Biden caved into the influences of steelmaker Cleveland Cliffs, much like Biden acquiesced to the American Federation of Teachers with school closures in the pandemic era (see p. 415 of this House Oversight Committee report). This sort of politicization has the real potential to undermine national security in the future.
• The acquisition could have helped advance such elements of national security as friend shoring and de-risking from China. 

The aforementioned arguments should make it evidently clear that Nippon Steel acquiring U.S. Steel is not a national security threat. By Biden erroneously labeling it one, it makes it more difficult for allies and partners to trust the United States, which also undermines national security because it erodes trust in the U.S.' allies while abusing the law out of political gain. Giving into these protectionist instincts to prohibit the investment and operation in the U.S. also means less foreign investment which, you guessed it, undermines national security. Economic logic are legal arguments go to the back burner when politicking is involved. Biden has tarnished his political career and made his reputation more disgraceful by making the national security of the United States worse off with his decision to block the acquisition. 

Trump's Tariff Plan Would Harm Small Businesses and the Voters He Claims to Want to Help

Like any other presidential candidate, Donald Trump is trying to pander to as many people as he can so he can win the presidential election. He wants to appear pro-business by lowering the corporate tax rate. It is certainly better than Kamala Harris' proposal to hike the corporate tax rate. He is also trying to appease the working class with a tax exemption for tips and a tax break for overtime work, neither of which are good ideas. There is one policy idea where Trump thinks he is protecting domestic industries while simultaneously helping out everyday Americans by keeping their jobs here: high tariffs. Specifically, he wants to impose a 10 percent tariff on all goods and a 60 percent tariff on goods from China. You can read my critiques of the universal tariff and the Chinese-specific tariff for yourself, but I will be repeating some of those arguments here today. 

As an analysis published last week from the Brookings Institution illustrates, there are multiple costs to firms. Any firm that sells imported goods will be scrambling to receive an exemption from the government. Unfortunately for small- and medium-sized enterprises, it is the largest enterprises that are best poised to receive the exemptions. Not only that, it is the larger firms that can better absorb the costs of tariffs. Because as much as I hate to burst Trump's bubble, it is not the other country that pays the tariff, but it is the domestic country (in this case, the United States) that pays. It is the consumer of those goods that pay. That can be an everyday worker, but it can also be a business that uses imported goods as an input of their business. On top of the administrative costs, Trump is going to cause greater strain on supply chains. 

Because tariffs increase the price of doing business, it means that production is depressed and employment drops, especially for imports from countries that decide to retaliate against the United States with tariffs of their own. How bad would the impact to employment be? According to a Tax Foundation analysis of Trump's tax proposals, it would cost 674,000 jobs. The Tax Foundation found that the tariffs would also reduce the GDP by 0.8 percent in the next decade. If Trump increases the universal tariff from 10 percent to 20 percent, that would decrease the GDP by 1.3 percent. 

In addition to jobs, what would it cost the everyday American? Looking at research from the Peterson Institute, the average household would lose $2,600 if Trump implements the tariffs and the permanent tax cuts from the Tax Cuts and Jobs Act (TCJA), which, as you can see below, would hit the poorest households the hardest in terms of percent of after-tax income.

I have been critical of Trump's tariff proposal since before he entered the White House. Why? You can read this primer from the Cato Institute on tariffs if you want, but we saw what happened with Trump's tariffs during his first term: a GDP reduction of 0.21 percent, wage reduction of 0.14 percent, a net loss of 166,000 jobs, and costing the average household $831 a year. To think these were the effects of tariffs that were much smaller. The impact of larger tariffs that would affect nearly 10 times the amount of trade would, as already illustrated, be even more harmful. 

If Trump takes his tariff plan seriously and succeeds in implementing it, it will be the worst tariff plan since the Smoot-Hawley Tariff Act of 1930, which not only reduced the GDP by 3 to 5 percent (Bernstein, 2008), but also caused other countries to retaliate and reduce their imports by an average of 28-33 percent (Mitchener et al., 2021) to the point of spiraling the U.S. economy into the Great Depression.  So there are geopolitical ramifications in addition to the economic ramifications. 

But let us bring it back to the economic aspects. Tariffs cost everyday workers their jobs, decrease  their personal income, lower the GDP, and have the cost of the tariff ultimately passed to the consumers by making goods and expensive more for all. Through his "America First" shtick, he will make this country poorer by making it more expensive to do business and burden the everyday consumer. You would think we would have learned are lesson from the Smoot-Hawley Tariff Act or even when Trump implemented his tariffs. I truly hope that lesson sinks in for whoever is in the White House in 2025 because if not, it will be the American people that pay the price. 

Why Free Trade Is Good for National Security

One of the aspects that has made the United States a prosperous nation was its embrace of freer trade. In spite of becoming an economic powerhouse, the question of national security has been intertwined with free trade. Even Adam Smith recognized that national security could arguably be an exception to the free trade norm. 

Those who advocate for these protectionist or neo-mercantilist policies on the national security argument assume that we as a nation should have economic independence and self-sufficiency. This self-sufficiency, which is known as autarky, would allow us to have necessary supplies to fight or keep the economy going in the event of wartime. If autarky was such an easy and viable option during wartime, then blockades would be pointless. Yet blockades are an effective military and economic tactic precisely because that economic self-sufficiency is not feasible in practice. Tangentially, this zero-sum mentality explains why economic nationalists erroneously worry about trade deficits.

But I digress because I have to question the dichotomy between free trade and national security. It is instances such as these that make me feel despairingly about national security becoming a guise for such subpar economic policy as tariffs. But maybe I should not despair. This research paper from the American Institute for Economic Research (AIER), entitled A Free, Prosperous and Secure America, made me think that trade and national security are not such rivals. 

Much like with the "environment versus economy" argument, the two do not need to be at war with one another (pun intended). Rather, freer trade could improve national security. The AIER paper makes two arguments. One, enhancing economic growth allows the United States to resource its national security needs effectively. Second, it facilitates (but does not guarantee) more peaceful relations between other nations. While I was reading the AIER paper, I came across a research paper from the American Security project highlights five benefits of free trade to national security (Day, 2014): 

1. Signaling commitment to allies: Not only does the free trade with the country show a favorable relationship, but that it symbolizes commitment. While free trade agreements are not perfect, they are still better than having soldiers in another country. 

2. Secure access to military technology: By using comparative advantage, militaries can keep production costs low and within budget. Free trade also helps ensure a diverse, stabler market in case a certain region experiences instability. Contrary to what nationalists believe, renationalizing international supply chains does not increase a country's resilience in the wake of severe disruptions (e.g., Bonadio et al., 2020).

3. Promoting global stability: As we have seen during the Great Depression, the oil crisis in the 1970s, and the 2007-08 global financial meltdown, not working together economically causes more instability. As I am fond of saying, "Those who trade together stay together." Why? Because with established economic ties and cross-border investment, they are less likely to metaphorically shoot themselves in the foot by going to war. This article from Law & Liberty highlights the "substantial empirical evidence indicating that growing trade between nations lowers the odds of serious military conflicts with other countries." 

4. Setting a free trade precedent: The ball really got rolling after World War II with the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (GATT). Setting this precedent will allow for more stable and predictable trade relations and investment opportunities, which also stabilizes national security. 

5. Enhanced global influence. In the 21st century, we measure power by military strength (hard power) as much as we do economic prowess, the latter of which is a form of soft power. Whether it is economic, social, or cultural in nature, soft power lends international legitimacy to a country. As developing countries continue to economically develop, the United States contributing with soft power can develop more stable relations, thereby solidifying the country's national security for decades to come. 

Example to Counter Protectionism. I could select multiple examples, but I will select President Trump using Section 232 to impose tariffs on steel. I criticized the tariffs in 2017 because there was no national security rationale and I was right to criticize the tariffs. It turns out that the Section 232 steel tariffs have done a bad enough of a job that raw steel production sank to a level lower than when the tariffs were imposed. In the meantime, the numerous amount of goods and services that require steel have gotten more expensive thanks to Trump's tariffs. I pointed out this past May how Trump's steel tariffs lowered export growth, decreased the GDP, caused a net loss of 75,000 jobs, and increased consumer prices because U.S. consumers were the ones who paid the price for Trump's folly. This example serves to show the overall trend of how protectionism harms the economy while doing nothing positive for national security (or even harming national security).

Conclusion. Since the days of ancient Greece, there has been government interference in trade policy. There are certain countries that are not going to play nice or adhere to the standards set in international relations, as is the case with China. Geopolitical rivalries do exist and there are times in which at least some benefits of trade have to be traded off for national security considerations. As this article from Econlib shows, many of those arguments are flimsy and tenuous. 

As such, it is generally true that freer trade is better for national security. It is a benefit of free trade we can add to the list of benefits along with the economic arguments, moral arguments and social welfare arguments. While I do not see either presidential candidate or either major political party in the United States clamoring for freer trade, I do hope that we get ourselves out of this protectionist rut so that we can implement international trade policy that is both good for the economy and national security. 

France Was Already Struggling with Government Spending. The Uncertainty with Macron's Snap Elections Did Not Help.

With French President Emmanuel Macron losing his grip on political power, he decided to disband the French Parliament and call for a snap election. Not only did his political party Renaissance lose a significant amount of seats earlier this month, but a loosely established coalition of the Left, the Nouveau Front Populaire, gained enough seats to hold a plurality. The Right-leaning party, the Rassemblement National, underperformed. Needless to say, this has thrown French politics into a frenzy. If you think that is unrelated to how the French economy fares, you would be wrong. Last week, the International Monetary Fund (IMF) released its Article IV Consultation for France in which the IMF analyzes the state of the French economy. Guess what the report revealed? This little gem:

"Heightened political fragmentation and rising policy uncertainty domestically could delay fiscal consolidation and reform efforts, weighing on confidence and raising fiscal risks. Social tensions could also materialize...Over the medium term, deepening geoeconomics fragmentation could expose France to trade and supply disruptions, increased protectionism, and rising input costs, lowering potential growth (IMF, p. 10)." 

This is not to say that everything was going swimmingly in the French economy and Macron's decision for a snap election made the economy topsy-turvy. Yes, the credit rating agency Moody's brought up similar concerns as the IMF, mainly that fiscal consolidation is unlikely to happen because of the new Left coalition in power. Its government spending was already on an unsustainable track, a point I made in 2014 which I chided France for its debt-to-GDP ratio and in 2018 when I illustrated how France's welfare spending is out of control.

It is not only a point I have made while blogging. It was a point made when credit rating agency Standard and Poor's downgraded France's credit rating from AA to AA- in May 2024 because France's deficits increased higher than anticipated, thereby driving the debt-to-GDP ratio. Standard and Poor's is also anticipating that interest payments will increase from 3.3 percent in 2023 to 5 percent in 2027, which is a major issue both for government solvency and quality of life for everyday citizens.

France's economy was struggling due to the COVID-19 pandemic, the energy crisis as a result of the war in Ukraine, and an underperforming economy in 2023 (IMF, p. 12). There are also increased spending pressures on pensions and retirement, which I commented on while  In 2023, commending Macron in 2023 for raising the retirement age for Social Security because French spend in Social Security is off the charts, even by European standards. 

While there seems to be some stabilization and recovery of the economy, it is not enough to bring down France's debt-to-GDP ratio. Whether France's economy stabilizes or ends up being successful remains to be seen. What is foreseeable is that much like with the United States, the extent to which France can get its government spending under control will play a major role on what that economic future looks like. 

Latest China Tariffs Show That Biden Can Be as Protectionist as Trump

Before becoming President, Joe Biden criticized President Trump's tariffs on China. He said that "we're going after China the wrong way” with a trade war. Shortly after becoming president, Biden implemented import quotas on steel. He kept many of Trump's tariffs intact and has managed to collect more in tariffs than Trump did. And if that were not enough, Biden imposed a series of new tariffs this Tuesday, including: 

• Steel and aluminum, from 0-7% to 25%
• Semiconductors, from 25% to 50%
• Electric vehicles, from 25% to 100%
• Batteries and components, from 0-7% to 25%
• Medical syringes and needles, from 0% to 50%

Last month, I illustrated how Trump's 60 percent tariff on China would be tantamount to economic foolishness. In another piece I wrote last August, I showed how Trump's tariffs caused such economic harm as lower employment, reduced GDP, and lower wages. I specifically pointed to how Trump's Section 301 tariffs reduced U.S. real income by $1.4 billion per month (Amiti et al., 2019), which is notable since Biden is using Section 301 to justify this latest round of tariffs. 

What compounds the inanity is that the Biden administration's United States Trade Representative released a report about how harmful Section 301 tariffs are on the same day that he announced that he was going to increase tariffs under Section 301, which would suggest hypocrisy or a lack of situational awareness. If you want to read more analysis, you can read what the Tax Foundation, Reason Magazine, Competitive Enterprise Institute, and American Enterprise Institute, published on Biden's latest tariffs. 

What I can say is this. Biden calling his tariffs "strategic" does not change the economic reality that tariffs harms consumers and the economy as a whole, which is illustrated by this research brief from the Tax Foundation. It is clear that electing Trump would cost billions through his trade war. Much like with Biden’s erroneous take on shrinkflation or attempting student loan "forgiveness," it is a reminder that election brings out ideas that make for better politics than they do better policy. If we do not want to feel the economic pain of tariffs, Congress needs to take back the power it has given to the executive branch to regulate tariffs. 

Reflecting on the Moral Case for Globalization

For President Donald Trump, it is about "Make America Great Again." French politician Marine Le-Pen believes that there is not a "Left or Right", but that the real fight is between "patriots and the globalists." For these nationalistic politicians, there is an intention to malign globalism by maligning the globalist elitists and making those who are opposed to them do not care about their nation's citizens. It is the "us versus them" and zero-sum mentalities that make up the mindset of the more nationalistic and protectionist elements in the Western world's politic. 

This theme and reality came up when I was reading a Cato Institute essay that was published last week: The Moral Case for Globalization. I enjoyed reading the essay because it acted as a reminder of why I am in support of freer trade, borders, and expression of ideas. But first, a definition of what globalization is. As the essay's author, Cato Institute scholar Tom Palmer, explains, "Globalization is the relatively free movement of people, things, money, and ideas across national or political borders." Greater globalization means reducing or removing state-enforced restrictions on these voluntary exchanges. Ultimately, "a consequence of increasing globalization is an increasingly integrated and complex global system of production and exchange." 

The principles of exchange for mutual advantage are vital for liberty. As Palmer points out, "There is evidence that our commonly accepted norms of morality emerge from trade, which established the importance of legitimate expectations and reputations, both of which are necessary fort he emergence of law and morality. Morality itself is a product of exchange, and the more trade, generally the more humane a society is." 

There is also a consequentialist argument the author makes, mainly that reducing barriers to trade, travel, and other forms of exchange across borders "have been spectacularly positive for the world's poor, as wages have increased, jobs have become safer, and the use of children for labor has plummeted. Increasing wealth, in turn, is strongly connected to improving health, and the global spread of improvements in medicines and technologies has improved health outcomes even in regions that have not participated as much in the exchange of goods." Earlier this month, I wrote about how more free trade results in reduced poverty domestically and internationally, so this does not surprise me. 

There are other benefits that Palmer mentions, including greater ability to preserve other cultures and traditions, as well as greater reduction in war democracy and peace become more salient norms. To echo the author's conclusion, "The world is better when barriers to free and voluntary cooperation are reduced. The world is better because of globalization." It is difficult not to come to this conclusion after reviewing the data across multiple topics. 

My 1,000th blog entry was dedicated to why I am libertarian from ethical and consequentialist lenses, which includes the importance of globalization. Allowing more people to be freer, healthier, happier, and more prosperous seems like a noble goal, which is why advocating for removing those barriers that stifle voluntary and mutually beneficial exchange has been a major theme of this blog. For more information on the benefits of globalization, you can view the video from John Stossel released earlier this month debunking globalization myths or you can read the list of selected essays below. 

• The Case for Globalism (American Enterprise Institute)
• Defending Globalization (American Institute for Economic Research)
• Food Globalization Puts Food on Your Plate (Cato Institute)
• Globalization: A Race to the Bottom or the Top? (Cato Institute)
• Globalization Creates a Global Neighborhood, Benefiting All (Cato Institute)
• The Globalization of Ideas Enriches the World (Cato Institute)
• Globalization: A Tinfoil Hat-Free Critique (Foundation for Economic Education)
• In Praise of Capitalist Globalization (Foundation for Economic Education)
• In Defense of Globalization (International Monetary Fund)

Biden Should Keep His Protectionist Nose Out of Nippon Steel's Acquisition of U.S. Steel

In December 2023, U.S. Steel Corporation (U.S. Steel) announced that Nippon Steel was going to acquire U.S. Steel. Nippon Steel (Nippon) is currently the fourth-largest steel producer worldwide and would become the third largest post-acquisition. What should be a simple business transaction in the private sector has been sucked into the politics of an election cycle. 

In March, President Biden expressed his opposition to the acquisition by saying that U.S. Steel is to remain in the United States. A day later, Nippon Steel announced that there would be no plant closures or layoffs in the United States as a result of the acquisition. Of course, that did not stop Biden from visiting the United Steelworkers Union headquarters last week. After Biden vowed that U.S. Steel would remain in the United States, U.S. Steel's stock price dropped. Contrast this to when stocks soared after U.S. Steel announcing the deal in December. Here are some facts about this acquisition that Biden would prefer to ignore:

• U.S. Steel is not what it used to be. President Biden might have some nostalgia about the good ‘ole days, but U.S. Steel has waned in its influence. In its heyday, U.S. Steel produced 40 percent of the world's steel. Now it is the 27th in world output and 2nd in U.S. output with 11.2 million tons of steel last year. At its peak, U.S. Steel employed over 340,000 employees. Now, that employment figure is at 15,000, representing a 96 percent decline from its peak. It is the 652nd largest company in terms of market capitalization, which is less than 1/100th of its size in 1901 as a proportion of the overall economy. Why? It was a combination of mismanagement and government interventions (e.g., import restrictions, subsidies, "Buy American" procurement preferences) that the U.S. government used to prop up U.S. Steel. 
• Japan is a friend and ally. Japan is not a hostile power, certainly not like China. Quite the opposite! Japan and the United States started developing their military relationship with the Treaty of Mutual Cooperation and Security in 1960. The fact that Japan is not the economic competitor that it was in the 1980s would explain why Japanese investors have not been on the radar of the Committee on Foreign Investment in the United States (CFIUS) since the 1980s. Plus, calling Nippon Steel a foreign company is misleading because it has been operating in the United States for 40 years and already has operations across eight U.S. companies employing 4,500 U.S. employees. Blocking this acquisition would risk alienating a key economic and security partner of the United States. 
• The acquisition does not harm U.S. national security. Those making the national security argument assume that putting this steel production into foreign hands would lead to domestic shortages. This is problematic for a number of reasons: 
• One is that the Pentagon only needs 3 percent of domestic steel production. 
• Two, Nippon is not looking to close U.S. production. Nippon is injecting $1.4 billion in capital investments at the U.S.-based plants because Nippon wants to ramp up steel production in the United States. This is in no small part because Nippon wants a presence in the U.S. market and the Trump/Biden steel trade barriers are getting in the way. 
• Three, the Department of Defense does not procure steel from U.S. Steel. Even if Nippon were to move production to Japan (which we established in the previous sub-point they are not going to), it would not impact the U.S. government's ability to procure steel. 
• This acquisition can help with national security. Rather than harming U.S. Steel, Nippon is saving U.S. Steel and actually contributing to the U.S. economy. While U.S. Steel will not be domestically owned, it will still have operations in the U.S. If anything, Nippon's capital and expertise will enhance the U.S. economy by making U.S. Steel's operations more efficient (see below). Together, Japan and the U.S. can better confront China's increased dominance in the global steel market, as well as its general influence in the Asia-Pacific region, with this acquisition. 

• Impact on foreign direct investment (FDI). Foreign investment encourages other companies to invest into the United States, thereby creating more wealth and job opportunities. It is because of Nippon's capital and expertise that most steel industry experts believe that this acquisition will help U.S. steelworkers and the overall manufacturing sector. The synergy with the acquisition will improve steelmaking (see below). If this acquisition is blocked, what sort of message does that send to investors in allied countries in the future? Japan is a leading source of FDI, which helps employ 900,000 U.S. citizens at U.S. subsidiaries of Japanese-owned companies. Disincentivizing foreign direct investment would only be a shot to the metaphorical foot of the U.S. economy. 

Postscript: What should be clear is that Biden is not motivated by sound economics or national security concerns, but rather with his eye on electoral concerns. Even NPR admits that Biden is opposing the acquisition to court the unions and blue-collar workers in swing states. 

Plus, this is part of a perturbing trend of the Biden administration to block several notable mergers and acquisitions, including that of Albertsons and Kroger. One of the main premises of capitalism is that parties voluntarily enter an economic transaction that both find to be mutually beneficial, which is the case here with Nippon and U.S. Steel. Private companies should not need a slew of lawyers to gain approval from the government to engage in voluntary, mutually beneficial business deals. 

The fact that Biden thinks that a nominally Japanese corporation purchasing a nominally American corporation is inappropriate should have zero place in U.S. trade or national security policy. Much like with Biden's student loan "relief" program, Biden is putting good politics over good policy. If Biden wants to be better at economic and national security policy, he needs to go beyond a limited, domestic view and take on a broader view that entails working with allies to strengthen economic and national security ties. 

How Free Trade and Trade Liberalization Help Out the Poor Domestically and Globally

Last month, the White House released its annual Economic Report of the President. In the report, there was a chapter on International Trade (Ch. 5, p. 173). One of the interesting admissions in the report is how trade with China has improved the purchasing power, especially of lower-income Americans (p. 203). As a matter of fact, the report calculated that 68 percent of those benefits went to low-income Americans. This finding is echoed in a report from the Federal Reserve Bank of Minneapolis that was released just last week (Horwich, 2024).

The author of the Minneapolis Fed report, Jeff Horwich, says that much of the research of international trade on consumer welfare looks at the effects on a national level. Rarely is it done to see the effects of a certain demographic, such as the poor. Even so, the fact that international trade helps out low-income households both in the United States and globally does not surprise me in the least. Why is this the case? How does international trade help out the poor specifically? 

Improved quality of life with greater imports. As this article from the Houston Chrolinc brings up, it can be cheaper for a country to import goods or services than it can be to produce them. To quote the Australian Department of Foreign Affairs and Trade (DFAT), "trade expands the markets local producers can access, allowing them to produce at a more efficient scale to keep down costs." This ensures a constant flow of more goods, which can improve the quality of life and give options they otherwise would not have. 

Lower prices lead to greater purchasing power. To quote the International Monetary Fund (IMF) from 2001: "Trade liberalization helps the poor in the same way it helps most others, by lowering prices of imports and keeping prices of substitutes for imported goods low, thus increasing people's real incomes...An open trade regime also permits imports of technologies and processes that can help the poor." 

I was first criticizing Trump's obsession with tariffs in March 2016, which was before he was president. I pointed out that tariffs decreased economic welfare. Conversely, countries with fewer trade barriers had less poverty. To quote DFAT, "Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, boosting their competitiveness by reducing their production costs."

Free trade improves innovation and efficiency. The Mercatus Center mentions a good point in its brief on the benefits of free trade: "Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The results are higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities." Those wage increases help out the poor, as well. 

Postscript. As a 2015 report from the World Trade Organization illustrates, free trade creates new job opportunities for the poor, raises the real wages of unskilled labor, lowers prices of goods consumed by the poor (which means greater purchasing power), and improves access to external markets for the goods that the poor consume. All of these phenomenon aggregately improve the quality of life for the poor. 

Freer trade is vital for the poor because, as the World Economic Forum states, "Open trade is particularly beneficial to the poor, because it reduces the cost of what they buy and raises the price of what they sell." Farmers and manufacturers especially can reach a wider market when there is open trade (ibid.). As the World Bank has brought up, free trade has lifted over a billion people of poverty. The Heritage Foundation, amongst many others, has shown how greater economic freedom creates greater economic growth while lowering poverty (see below). This is a truth I detailed when showing how trade liberalization does a much better job than foreign aid at alleviating poverty. 

With the overwhelming evidence in favor of greater international trade, it does beg a question for the upcoming presidential elections. If the relatively lower tariffs from Trump's previous administration made items more expensive and made Americans poorer, what will Trump's proposed universal 10 percent tariff or 60 percent tariff on China will do to the poor both in the United States and abroad? This November's election is between a Republican whose tariffs will make Americans poorer and Bidenomics that has increased inflation in a way that has made life more expensive for the poor. And let's not forget that Biden has maintained many of Trump's tariffs. While it is clear that free trade helps out those in low-income households, it is also clear that we are in an age of protectionism, regardless of who gets elected this November. It is the everyday citizen, especially the poorer ones, that suffer because politicians on both sides of the political aisle ignore the fundamentals about the benefits of free trade.