Kentucky Republican Senator Rand Paul on Tuesday mocked President Donald Trump’s unusual perspectives on international trade, deficits and tariffs, calling them “backwards and upside down.”
It’s “based on a fallacy," Paul said in a CNBC interview from the Capitol.
"The fallacy is this: that somehow in a trade, someone must lose, that somehow when you trade with someone, there's a loser and someone's taking advantage of you, and China's ripping you off or Japan's ripping you off,” he said, characterizing Trump’s view.
(”They ripped us off left and right. But now it’s our turn to do the ripping,” Trump said Tuesday night in the keynote address at the annual National Republican Congressional Committee in Washington, D.C.)
It’s not a ripoff, it’s a purchase, and the U.S. has been powerful and wealthy enough to be able to purchase just about anything it wants from any country it wants, and that’s not a bad thing, Paul emphasized.
"Every trade that occurs in the marketplace is mutually beneficial," he argued. “If we’re in a free society and you want to sell me your coat and I give your $200 for it, we both agree to it and we’re both happy with the trade.”
Consumers do the same thing when they make a decision to buy something at Walmart that was may have purchased from China, he noted.
"You could artificially do this accounting between countries and say, oh, trade deficit. Look at this trade deficit. But I have a trade deficit with my grocery store,” Paul added.
It’s the same argument University of Chicago Economics Professor Brent Neiman made Monday in a guest essay in The New York Times. He quoted Nobel laureate Robert Solow, who once quipped: “I have a chronic deficit with my barber, who doesn’t buy a darned thing from me.”
Neiman explained: “Trade imbalances between two countries can emerge for many reasons that have nothing to do with protectionism ... [a] pattern reflects differences in natural resources, comparative advantage and development levels. Deficit numbers don’t suggest, let alone prove, unfair competition.”
Ironically, the White House cited research by Neiman and three collaborators to support the White House plan on tariffs. One key problem? They “got it wrong, very wrong,” from the policy to the tariff calculations, according to Neiman.
Paul argued later Tuesday on Fox News that the U.S. economy is always healthier with more, not less, international trade.
“The higher the trade deficits the more prosperity. The lower the trade deficits the less prosperity,” he insisted.
He vowed he won’t support Trump’s tariffs because they’ll hurt Americans’ retirement savings with a likely slowed-down economy and continued weaker stock market.
Paul also mocked Trump’s claims about the tariffs and his calculations to determine the new tariffs he’s imposing on foreign goods (which will mostly be borne by American consumers).
The astronomical figures Trump claimed would be “reciprocal” ( but aren’t) were based on a cooked-up equation taking the U.S. trade deficit with a particular country, dividing it by the total goods imported from that country, and then dividing that by two. At best, according to Neiman, those figures are at least four times higher than make any sense.
"We have to start [with] talking about the truth,” Paul told CNBC, pointing to Trump’s exaggerated claims about Canadian tariffs on U.S. dairy products.
“One of the things they say with Canada is, 'Oh, there's a 270 percent tariffs on dairy products going from the U.S. into Canada.' Well you know what the real tariffs is? Zero. That's a big difference between what the truth is,” he said.
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