Economists tend to minimize those people who are hurt in the short run by free trade, but they're hard to ignore as a political voting bloc.
House Speaker Paul Ryan recently proposed a tax plan called A Better Way: A Vision for a Confident America. Ryan’s plan to make the United States more competitive includes a tax cut for businesses, a switch to a territorial tax system, and a border-adjustment tax. A tax cut and a switch to a territorial system would be positive for the economy. On the other hand, the border-adjustment tax would work like a tariff. It would encourage inefficient domestic production, which would raise prices and reduce real output. Over the long run the BAT would not even reduce the trade deficit.
Few areas of life are as poorly understood as trade. This is remarkable because each of us engages in trade every day. We buy our groceries, clothing, electronics, etc. from other people rather than making them ourselves. If we didn’t think trade was worthwhile, we wouldn’t do it. But we do—because we know how poor we would be if each of tried to make all the things we want.
“When adversely affected minorities are politically powerful, governments often intervene with special-privilege legislation to insulate the “injured” parties from the effects of international cooperation or to give them special advantages in
The biggest news story in the world this past week has been the election of Donald Trump, and the biggest reason for his election was the vote of working class white voters in the Rust Belt states of Pennsylvania, Michigan and Wisconsin, states that had been projected to vote for Hillary Clinton. One current explanation is that these voters felt Trump better understood their economic anxieties better than Clinton – or past Republican candidates. In particular, President-elect Trump spent a lot of time during the campaign talking about trade with China and immigration.
With the Trans-Pacific Partnership heading to Capitol Hill for ratification, U.S. policymakers will weigh the proposed free-trade zone in an increasingly challenging trade environment. The strong dollar, a weaker global economy and low energy prices have all worked against the United States when it comes to trade, said Bob Hughes, senior research fellow at the American Institute for Economic Research. Today, the U.S. posted a trade deficit for the month of