Whoever gets elected president will oppose free trade. In fact, both parties are rivaling each other in condemning trade agreements such as NAFTA (which forms a common market with Canada and Mexico) and the not-yet-ratified TPP (which eases trade with Australia and Asian countries other than China).
Such a turnabout is astonishing, since Republicans have long championed free markets and Democrats have come around to agree with them. Credit, or blame, for this new stance goes to the popularity of Donald Trump, who has roused the masses against American industries moving factories and jobs overseas and American products being driven out by cheaper imports.
I can see the appeal of a self-contained national economy, but getting there would seem to involve some dangerous tradeoffs. If we erect trade barriers such as high tariffs and our trading partners retaliate, won’t that be economically disastrous? American companies will suddenly lose a major part of their markets. Prices for consumers will skyrocket. After awhile, maybe new companies would take up the slack, but, in the short term at least, wouldn’t this cause recession and even more unemployment?
This is not my field, so I am open to instruction. [Read more…]