The New York Times doesn't understand Maganomics

The views and opinions expressed are solely those of the author.

The 15th of Julyth, the New York Times published an article, “Trading Free-Market Ideals for Protectionism, GOP Goes Full Trump.” In the article, the authors concluded that because Trump favors heavy tariffs, he has abandoned the GOP's long-standing position in favor of free-market economics. This conclusion is questionable.

Free market economists, like myself, generally do not favor government intervention in markets. Government intervention almost always results in lower quality products, higher prices and losses for businesses. The electric vehicle market is a perfect example. Biden's rebates and cheap loans for businesses hit the electric vehicle market.

When it comes to international trade, economists like myself generally favor no tariffs or quotas on almost everything. Such actions always distort the markets and lead to negative results. It is far better to engage in free and fair trade. In this way both countries benefit.

The theory is easy to see. If each country specializes in products that can be manufactured at a comparatively lower cost with another country and then trades for other products, both countries benefit.

For example, the US grows wheat efficiently. But coffee is difficult and expensive to grow. Colombia produces coffee efficiently, but growing wheat is difficult and expensive. So the US grows wheat. Columbia grows coffee and the countries trade. Since this specialization results in more wheat and more coffee produced in total, it is a win-win.

It doesn't work so well if the government decides to alter the market price and change the quantity traded. Placing a fee or setting a quota reduces the quantity traded and increases the price, thereby distorting the market.

However, free trade means fair trade. Government subsidies designed to eliminate competition are not part of free trade. Government subsidies reduce the cost of manufacturing a product. The products are then sold at a lower price in foreign markets. The low price is well below the price the domestic producer must charge for its non-subsidized product.

This forces domestic manufacturers out of business.

That's exactly what automakers, like China's BYD, are trying to do here in the US. If the US practiced free market economics, they would tell China to sell all the low-priced subsidized cars they want. After all, the Chinese government is actually subsidizing the American consumer.

The problem is the long term. While the consumer benefits in the short term, American auto manufacturing will be severely curtailed and a number of jobs will be lost, damaging the economy.

Since government intervention in the electric vehicle market has already led to market distortions that led to huge losses for US companies, BYD can fill a gap with cheap electric vehicles.

How can our leaders stop this?

Both political parties agree that a tariff that raises the price of the BYD car to the price of the American-made car would solve the problem.

Some free market economists may disagree. It is always much more efficient for the low-cost producer to make the cars, they would say. But, in this case, the business partner is not only interested in financial profit. There are other reasons that would produce negative results for the US and the world.

The only way to avoid this, even if the cost is lost efficiency, is to put tariffs on cars produced in China. At this point, it's not just an economic issue.

In other areas, Trump generally pursues free-market policies that will lead to a higher standard of living for Americans. It favors low tax rates for all Americans, regardless of income. And it favors less government regulation of business.

Remember, in his first term, he pledged to eliminate two regulations for each new one imposed. It did and made it easier for businesses to operate. This led to an increase in profits and an increase in real wages.

Trump also recognizes that more freedom is needed in energy markets, where demand continues to grow and supply is tight. Government intervention in energy markets has resulted in high energy prices.

Trump will remove restrictions on energy markets and allow the market to function properly. The result will be greater energy supply and much lower prices. This is how the free market works.

Conservative economists also don't want the public debt to grow so quickly. In fact, balancing the budget is something they favor. While Trump hasn't talked about it specifically, he is a businessman and as such understands the problem of having too much debt.

Trump's Maganomics follows the principles of free market economics.

Dr. Michael Busler, Ph.D. is a public policy analyst and professor of finance at Stockton University, where he teaches undergraduate and graduate courses in finance and economics.

Last messages from Michael Busler (see everything)

We have zero tolerance for comments that contain violence, racism, profanity, profanity, doxing, or rude behavior. If a comment is spam, instead of replying to it, click the ∨ icon below and to the right of that comment. Thank you for engaging with us in a fruitful conversation.