What Trump Could Learn From Reagan on Trade
If Americans on the political right want guidance on reacting to President Donald Trump’s enthusiasm for trade wars, tariffs and winner-takes all economic nationalism, they would do well to look to Ronald Reagan.
When it came to criticizing the type of protectionist policies Trump favors, the Gipper, who left office 30 years ago this week, was ruthless. He warned that trade wars like those Trump favors would “weaken our economy, our national security, and the entire free world.” “Protectionism,” Reagan declared, “is destructionism.” But in fact, it’s worse. When Trump and his cheerleaders in the conservative media like Tucker Carlson reject free trade, they not only commit economic malpractice, they also reject the foundational national optimism that Reagan infused into the American conservative movement.
The economic case for trade is simple and well-known to anyone who has taken an introductory economics class. Nonetheless, the pro-trade litany is still worth reviewing. Voluntary trade of any kind produces gains for everyone involved. More free trade raises wages, reduces the cost of consumer goods and creates prosperity. Trade may occasionally dislocate certain people and industries, but any type of growth and economic progress will do that. Trade is not a zero-sum game, either: Imports and exports are both good things.
Even many of the supposed “disadvantages” of trade are anything but. A trade “deficit” is simply a measure of foreign investment in the United States relative to American investment elsewhere. Since World War II, the economy has generally grown faster when we’ve run bigger trade deficits than when we have seen them shrink. A country that imports heavily is one that has the confidence of the world as a place to sell and invest. Indeed, the relatively strong economy under Trump comes partly from the fact that his policies have attracted more foreign investment and thus increased the trade deficit.
Even “unfair” trade practices, like subsidizing domestic industries and then exporting their goods — something that Reagan, to his credit, disapproved of when it came to the Japanese auto industry — the major beneficiaries are consumers who buy the exported goods. Even in the limited circumstances where the Gipper embraced minor import restrictions, they were part of a larger push for more trade liberalization — which included negotiating and signing our first modern bilateral free-trade agreements with Israel and Canada, and kicking off the multilateral negotiations that led to the creation of the World Trade Organization
All that said, the deepest problem with the rejection of free trade among many in the conservative movement isn’t even the way it rejects economic common sense: Instead, it’s a distinct lack of confidence in America and its future.
Reagan was unsparing when it came to those who saw trade as a way of waging war by economic means. He warned that “protectionism is being used by some American politicians as a cheap form of nationalism, a fig leaf for those … who lack the resolve to stand up to real enemies.” If the United States can’t gain from trade, as everyone else does in any basically fair trading relationship, then it has nothing to offer the rest of the world. America leads the world in nearly every important industry and, with just a tad over 4 percent of the world’s population, produces nearly a quarter of all gross domestic product. America’s closest economic rival, China, produces about 15 percent of the world’s GDP with about 20 percent of the world’s population. Thanks ironically to some of Trump’s own tax and regulatory policies, the World Economic Forum last year declared America the world’s most competitive economy.
Reagan, of course, understood American competitiveness and optimism better than anyone. His farewell address made clear that he favored America being a place with “free ports that hum with commerce and creativity.” And, at his last major public political speech at the 1992 Republican National Convention, he proudly declared that “America’s best days are yet to come.” Donald Trump’s rejection of free trade is thus a rejection of Ronald Reagan’s most important ideals.
Three decades after he left office, conservatives would be wise to reject Trump’s pessimism and remember Reagan’s firm commitment to free trade.