In a July 25 press conference, President Donald Trump and European Commission President Jean-Claude Juncker announced, “We agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” Although eliminating all tariffs and trade barriers is a worthwhile goal, Trump’s recent trade war tactics aren’t a wise strategy for achieving long-term free trade.
“We’re glad that Trump and Juncker have indicated their intention to seek a libertarian solution to international trade disputes,” said Libertarian National Committee Executive Director Wes Benedict. “Libertarians have long said that trade is something that happens between individuals and companies. All governments can do is get in the way. Getting rid of trade barriers gets governments out of the way. We eagerly await seeing these admirable goals put into practice.”
The United States would benefit from a policy of unilateral free trade — whether or not other countries follow suit. Any country that establishes trade barriers and tariffs hurts its own residents more than it hurts foreign producers. That’s one of the primary reasons why limiting trade is a poor negotiation tactic.
“Trump’s negotiating style has been unorthodox, to say the least,” Benedict said. “And we certainly don’t support $12 billion in subsidies to farmers to make them whole from the retaliatory Chinese tariffs on American soybeans. Although Europe has seemingly succumbed to Trump’s bullying style of negotiation, it remains to be seen whether that will work with China, Canada, or Mexico.”
Ultimately, tariffs function as a regressive sales tax on American consumers, raising the prices of imports in order to prop up favored industries with political connections. Subsidizing farmers with money created out of nothing ultimately leads to inflation, which is also effectively a regressive sales tax on consumers.
“If you drive costs of consumer goods high enough through sales taxes, eventually people start buying less,” Benedict said. “In the 1930s, protectionist trade policy compounded by crony capitalist subsidies led to and exacerbated the Great Depression. If Trump and Juncker don’t follow through with their trade agreement and apply its principles to our other trading partners, we are in grave danger of repeating history.”
Libertarians are running hundreds of candidates in 2018 at the local, state, and federal levels. Neither Democrats nor Republicans can be counted on to avoid the folly of trade wars. Only Libertarians can will always defend the right of people to trade freely with others without government interference.