While I like to blog about religion more than economics, sometimes politicians make such huge mistakes in economics commenting cannot be resisted. Tariffs of trade is an example.
Trump once tweeted a trade war is easy to win. You just stop trading until they give you a better deal.
Then the Chinese raised the tariffs on soybeans. Selling soybeans to China keeps the U.S. price high. South America can produce all the soybeans China needs.
The price of soybean futures fell. Polls in the Midwest, states that put Trump in office, began to fall. Someone must have carefully explained to him his path to political success was being blocked by his ideas on trade. Now Trump is telling us he is getting along much better with China.
Today at our atheist’s group I was chatting with a man who works in John Deere’s IT division. I asked him how John Deere was reacting to the President’s higher tariff policy. He said, “You know, John Deere doesn’t really care. It sounds like Brazil will produce soybeans the U.S. will lose. We make combines in Brazil–fine with us.”
So, by jerking around with tariffs we will lose both our soybean business and the support infrastructure business like farm machinery. Trump has stopped talking tough on trade.
States in the U.S. and countries around the world trade because some areas make things more cheaply than others. The standard of living rises for both areas when they exchange what they each produce most cheaply.