There is much concern among free-market economists that President Donald Trump's policies on foreign trade represent classic "trade protectionism." This protectionism, according to classical free-traders, will make the U.S. and world economy worse off in the same way that the Smoot-Hawley Tariff Act of 1930 deepened and lengthened the Great Depression. I beg to differ.
First, note that President Trump does not see the world through an ideological prism of political economy. Rather, his world view is informed by his experience of negotiating in the business world. He sees the world in terms of negotiating win-win deals. Much of what he says that is mistaken for trade policy is merely his opening position in a trade negotiation.
For example, pundits have mistaken Trump's comments on trading with China as an attempt to close off trade through higher tariffs on imports. That is a reasonable interpretation, but only when viewed through the prism of free-trade ideology. In fact, what he says is more like a negotiating position, "If you do not stop subsidizing your exports, stealing our intellectual property, and manipulating your currency, then we will institute countervailing tariffs. Now, let's talk." Tariffs are seen as a negotiating tool, not a policy. For far too long, U.S. trade deals have been negotiated in favor of particular crony businesses at the expense of American labor. Globalist trade deals have also been negotiated to favor particular trading partners, to "bring them up", so to speak, "to our level," while at the same time bringing our economic foundation and standard of living down to theirs.
Just because a trade bill says "Free Trade", that doesn't mean it is so. Did the "Affordable Care Act" make medical care more affordable? Of course not. The devil is in the details of these trade deals, whether it is the North American Free Trade Agreement or the Trans-Pacific Partnership. These were sold to the public as market-based free trade but in fact they were layered with sweet-heart crony deals for special interests, delivered at the expense of American jobs and particular businesses and industries that were on the losing end of these deals. As a result, American factories closed and American workers lost their jobs - with more on the way if TPP had been allowed.
Even worse, the U.S. economy was being strangled by high taxes and regulation. Estimates are that President Barack Obama increased the regulatory burden by $800 billion per year. That is the equivalent of costing 16 million jobs at $50,000 per job. High taxes and regulation prevented the jobs that were lost due to bad trade deals from being made up by the dynamic force of creative destruction. Lost jobs could not be replaced with other, newer, jobs, because the economy was too strangled to do so.
President Trump's proposed tax and regulatory reforms will free up the economy to do what it does best. When politicians get out of the way the economy will create jobs, income, and wealth for the greatest number of people through the natural forces of the marketplace. Renegotiated trade deals that put America first are a big part of that resurgence. This is what is meant by "American economic nationalism."
Paul Prentice is a fellow in Economics, Centennial Institute at Colorado Christian University.