President Donald Trump ignores economic common sense with his tariff strategy, writes Peter Watson.
The US international tariff strategy is in direct contradiction on what is known and accepted about economics.
The Father of Economics, Adam Smith, stated that specialization is one of the most important causes of economic growth. That quote came from www.study.com.
In simple terms, workers should specialize in work that they are proficient and that specialization will lead to increased productivity and decreasing costs. That is a winning formula.
President Trump is doing the exact opposite. He has stated that he wants items sold in the US to be manufactured in the US. That completely ignores the concept of specialization.
If goods sold to Americans can be better or less expensive than domestically produced items, then that is a benefit to the US and should not be discouraged with tariffs on imports.
Foreign countries would earn money. Some of that money could be used to buy American goods. Technology is a good example because most countries buy American made technology products like Google, Microsoft and Netflix.
But tariffs accomplished one thing that is important for the President. Trump appears to enjoy the media attention and complements. Mission accomplished: the tariff era has pushed Trump to the top of the world news cycle. World leaders have flocked to the US to complement President Trump in any number of ways, and their motivation, from my perspective, was to use their unrestrained salesmanship in order to have smaller tariffs charged on products exported to the US from their country.
Discretely I think our federal government, lead by Prime Minister Mark Carney, is capitalizing on the world’s distrust of President Trump to create new trading relations with non-US countries.
President Trump is the catalyst to get countries to increase their non-US trade agreements. History might show that is a major benefit for the world that resulted from his days as President.
President Trump’s tariffs could prove to be a “win” for many countries, including Canada.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
