Donald Trump and Hillary Clinton are both playing to your emotions, not facts
Many Americans across the political spectrum find protectionist appeals to be deeply satisfying. Supporters of Donald Trump have responded to his claim that, “This wave of globalization has wiped out totally, totally, our middle class.” Hillary Clinton has sought to reassure workers by promising, “I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership.”
Why is there such a big disconnect between popular opinion and sound economics? The answer may be explained by millennia of human evolution.
Encountering people who were not members of the clan would have involved risks. However, if there was no need to fight or flee, trading could take place. One group might wish to exchange decorative cowry shells for some of the other group’s surplus arrowheads, for instance. If there was sufficient trust to allow such bartering, both tribes would come out ahead. The gains from trade were tangible.
When considering trade issues, economists prefer to abandon reliance on visceral instinct and instead use thoughtful analysis. The reality is that key economic concepts can be counterintuitive. Certainly, that is true for two ideas that are central to understanding why free trade is so beneficial.
The first is that countries imposing import restrictions always will do more damage to their own economies than to the economies of exporting nations. Despite how fundamentally gratifying it may feel to impose a large import tariff on “unfairly traded” products from other countries, such a move will be economically self-defeating. Domestic producers of the goods in question may obtain a modest benefit from the import restriction, but that gain will be outweighed by the higher costs borne by domestic consumers. Countries at which the new import duties are aimed also will be hurt by them to a lesser degree. But their exporting companies still will have access to other global markets, and their consumers stand to benefit if an abundance of formerly exported goods causes prices to fall in the home market.
The second non-intuitive concept is comparative advantage. David Ricardo’s insight from 200 years ago was that nations would be wealthier if they didn’t try to be self-sufficient. Rather, they should allow their citizens to produce goods for which they enjoyed the greatest relative advantage; some of those goods would be exported. Then, to satisfy consumer demand, goods that could not be produced as efficiently at home would be imported. All countries are better off when they produce according to their comparative advantages.