Economists debunk one of Trump’s favorite 'fallacies'

29 August

U.S. President Donald Trump reacts during a meeting with Ukrainian President Volodymyr Zelenskiy at the Oval Office of the White House, amid negotiations to end the Russian war in Ukraine, in Washington, D.C.,(Reuters)

Economists Scott Burns and Caleb Fuller shredded President Donald Trump’s argument for tariffs in the The Hill on Friday.

Trump’s tariffs are alienating U.S. trade partners and raising prices on American consumers, but Trump is arguing that the pain is necessary to jump-start the U.S. economy. The professors describe this as Frédéric Bastiat’s “broken window fallacy,” with the painful downside of tariffs being the “broken window” and the so-called upside being the national investment required to repair the window.

It's a flawed fallacy, say Fuller and Burns.

“Whether breaking windows or blocking imports, the visible gains in one sector come at the expense of unseen losses elsewhere,” they write. Resources in both cases get diverted towards less desirable uses.

Trump wants to tweak trade policy to “raise an army of millions of Americans to assemble iPhones,” but that will come at the expense of better jobs.

Plus, Americans get “stuck paying much higher prices for iPhones” to support higher U.S. wages. The international community, similarly, will have no desire to buy a $3,500 U.S.-made iPhone, and they will turn to competitors.

“Regrettably, we’ll never see what the shopkeeper would have done with that $1,000. All the products he might have bought and the jobs he might have helped create remain forever hidden in counterfactuals,” they write. The only thing that can be measured are the exorbitant costs of all the broken windows.

Read the full Hill analysis at this link.

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