Trump Gets Things Wrong With China

Donald Trump has entered the presidential race, with a lot of criticism coming from all sides.  There is something that I like about Trump only because the establishment is so bothered by him.  They are attacking him more at this point than Rand Paul.

If nothing else, Trump’s entry into the race should be entertaining.  He will get the mudslinging going strong.  He also has no trouble criticizing other Republicans such as George W. Bush.  Just because of his seeming honesty, I think he is going to resonate with at least some people.

Unfortunately, when it comes to economics, Trump is terrible.  He may be a good businessman, but it doesn’t make him knowledgeable in the field of economics.

He recently attacked China for stealing U.S. jobs and devaluing their currency.  In speaking about Americans looking for work, Trump said, “They can’t get jobs, because there are no jobs, because China has our jobs and Mexico has our jobs.”

Trump said that with China devaluing its currency, they “make it impossible for our companies to compete, impossible.  They’re killing us.”

This is just bad economics.  I agree that China should not devalue the yuan, but that is for the sake of the Chinese people.  This actually subsidizes Americans by making imports cheaper.  It means that poor Chinese consumers are subsidizing relatively rich American consumers.

It is also rather hypocritical to criticize the Chinese for devaluing the yuan without criticizing the Federal Reserve.  The Fed has quintupled the monetary base since 2008.  And over the last 100 years of the Fed’s existence, the dollar has been depreciated by well over 95%.

After Trump’s comments, a spokesman for the Chinese Foreign Ministry, Lu Kang, responded.  He said, “Economic and trade cooperation between China and the United States has grown to such an extent today that it has become like ‘You are among us and we are among you.'”

He also said, “It’s a two-way win-win situation.  Such trade has actually given the two sides great benefits.”

So for whatever faults I can find in the economic central planners of China, this statement is rather accurate.  Apparently the Chinese central planners understand economics better than Donald Trump, or else they are just less prone to demagoguery.

China doesn’t “steal” jobs.  China is a country.  There are Chinese workers who do work for American companies.  There are Chinese companies and Chinese workers who manufacture products that are sold to Americans.

This benefits Americans on the whole.  If Apple has Chinese workers making i-Pads, it benefits Americans because they are more affordable.  Would Trump rather have those jobs here (if they would even exist here) and have i-Pads selling for $100 more than they are?  It may not matter to him with his billions of dollars, but it matters to middle-class Americans.

Buying products made by Chinese workers is really no different from someone in California buying products from a worker in Virginia.  These are just imaginary borders.  The only difference with China is that the Chinese use a different currency.  But if they want to devalue it, that is their problem.

The liberalization of the Chinese economy over the last three decades has been a huge benefit to Americans.  It has been a bigger benefit to the Chinese, as hundreds of millions of people have moved out of severe poverty.  It doesn’t mean China is a capitalist country now, but it is far better off than it was.  And we are better off for it.

If Trump is worried about American companies shifting jobs overseas (which isn’t a bad thing, if done in a free market), then he should start by advocating a massive reduction in taxation and regulation.  If you cut corporate taxes and income taxes (including payroll taxes), then this goes a long way to helping employment and wages.

If the U.S. had a much more free market environment, then we would be hoping for a lot of jobs to be filled in China and elsewhere.  It would make us that much richer.  It would just be an issue of comparative advantage.

In a free market environment, unemployment is not a problem.  There is always work to be done as long as we don’t live in a world filled with robots that can do everything.  The key is to have jobs that add to productivity and to our overall happiness.

Ultimately, we don’t want more jobs.  We want more wealth.  You would think Trump would understand a thing or two about wanting more wealth.

One thought on “Trump Gets Things Wrong With China”

  1. Trump is right to a certain degree.

    The reason Americans are broke is

    because of bad trade agreements.

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