John Phelan points out the misunderstanding of the balance of trade that runs throughout the new book by Heritage Foundation president Kevin Roberts. A slice:
China’s government might well be running a trade surplus as a matter of policy. It may even be doing so with the aim of strengthening itself relative to geopolitical rivals like the United States. But if, as Roberts argues, it has tried this before, that same history indicates that the prospects for the government in Beijing are not good. Little good it did the Qing dynasty and little good will it do the Communist Party.
[DBx: As Phelan points out, the book’s author, Kevin Roberts, commits the foundational mercantilist error of mistaking money for wealth. A country whose government conducts trade policy with the aim of shipping real goods, services, and capital abroad for the purpose of accumulating money at home is a country whose government, although it generates trade surpluses, puts other countries’ economic interest ahead of its own. It’s a government that compels its citizens to enrich foreigners at the expense of its own citizens. In contrast, when trade is free, foreigners are also enriched, but so too are home-country citizens. The mercantilist habit of mistaking money for wealth, combined with the related mercantilist obsession with the misbegotten notion of the “balance of trade,” continues to fuel egregious intellectual error and destructive trade policies.]
Vincent Smith and Joseph Glauber conclude that:
The 2025 Trump trade war is a dark cloud that offers little in the way of silver linings for U.S. farmers, in the short term and beyond as importers of U.S. agricultural products permanently reduce reliance on an increasingly untrustworthy trading partner.
Peter Earle – although I believe that he concedes too much to those who assert that America has “deindustrialized” – rightly warns of the threats to the American economy posed by the economically ignorant “Mar-a-Lago Accord.” A slice:
Proponents of a weaker dollar argue that devaluation would make US exports more attractive while raising import costs, thereby incentivizing domestic production and consumption. However, currency devaluation alone does not enhance the quality or competitiveness of goods; it simply manipulates prices. As a National Bureau of Economic Research study notes, currency undervaluation can influence comparative advantage, but its impact varies widely depending on broader economic conditions.
[DBx: Measured absolutely, America has emphatically not deindustrialized: Industrial production and industrial capacity today in the U.S. are both at all-time highs. But because as we grow richer our demand for services rises relative to our demand for goods, the share of GDP that’s generated by goods-producing activities falls relative to the share generated by services-producing activities. To describe this result as “deindustrialization” conveys the mistaken impression that – as many prominent people assert as a prelude to calling for trade restrictions – “we don’t make things anymore.”]
Katarina Hall tells a beautiful story of globalization.
As Michael Taube explains in the Wall Street Journal, Trump’s economic-nationalist bluster regenerated the fortunes of Canada’s economically misguided progressives. A slice (in which what Trump is quoted to have said to Justin Trudeau is so economically ignorant that it is literally painful to an economist):
At the start of 2025, Canada was on the verge of political change. Pierre Poilievre’s Conservative Party had led the Liberals of Prime Minister Justin Trudeau for more than two years. With elections scheduled for April 28, the Liberals, now led by Mark Carney, lead most polls. The credit, or blame, goes to Donald Trump.
Mr. Trudeau visited President-elect Trump at Mar-a-Lago in November and it didn’t go well for the Canadian. He urged Mr. Trump to drop his threat of 25% tariffs on all Canadian products, reportedly saying they would “kill the Canadian economy completely.” Mr. Trump retorted, “So, your country can’t survive unless it’s ripping off the U.S. to the tune of $100 billion?” and suggested Canada could “become the 51st state.” He later mocked Mr. Trudeau by calling him “governor.”
But when Mr. Trump actually imposed tariffs, it helped Mr. Carney—who has served as a governor, of the Bank of Canada and later the Bank of England. Some voters believe an economist can better deal with the issue. (The two leaders haven’t spoken to date.)
The most important factor is that the Liberals, who have long tried to link Mr. Poilievre to Mr. Trump, are finally having some success. When they depict Mr. Poilievre as a “Canadian Trump,” it isn’t easy for him to shrug off the association.
Jarrett Skorup and Steve Delie argue that federal-government workers shouldn’t have the right to collectively bargain.
Mia Love, age 49, has died.
