In this Nov. 9, 2017, file photo, U.S. President Donald Trump, right, chats with Chinese President Xi Jinping during a welcome ceremony at the Great Hall of the People in Beijing. (Andy Wong/AP

By Michael Busler From Newsmax

On July 15^th, The New York Times ran an article, “Trading Free-Market Ideals for Protectionism, G.O.P. Goes Full Trump.” In the article the authors concluded that because former President and Republican presidential nominee Donald Trump favors strong tariffs, he has abandoned the GOP’s longstanding position favoring free market economics.  That conclusion is questionable.

Free market economists, like me, generally favor no government intervention in markets. Government intervention nearly always results in poorer quality products, higher prices and losses for business. The electric vehicle market is a perfect example. Biden’s rebates and cheap loans to business, clobbered the EV market.

Regarding international trade, economists like me generally favor no tariffs or quotas on just about everything. Those actions always distort markets and lead to negative outcomes. It is far better to engage in trade that is free and fair. That way both countries benefit.

The theory is easy to see. If each country specializes in products that can be made at a lower comparative cost to another country and then then trades for other products, both countries benefit. 

For instance, the U.S. efficiently grows wheat. But coffee is difficult and costly to grow. Colombia efficiently produces coffee, but growing wheat is difficult and costly. So, the U.S. grows wheat. Columbia grows coffee, and the countries trade. Since this specialization results in more wheat and more coffee produced in total, it is a win-win for everyone.

It doesn’t work nearly as well if the government decides to alter the market price and alter the amount being traded. Placing a tariff or setting a quota reduces the amount that is traded and raises the price, thereby distorting the market.

However free trade assumes fair trade. Government subsidies designed to eliminate competition are not part of free trade. Government subsidies reduce the cost to manufacture a product. The products are then sold at a lower price in foreign markets. The low price is significantly below the price that the domestic producer must charge for his unsubsidized product.

That forces domestic manufacturers out of business.

This is exactly what car manufacturers, like BYD from China are attempting to do here in the U.S. If the U.S. practiced free market economics, it would tell China to sell all the low-priced subsidized cars it wants. After all, the Chinese government is really subsidizing the U.S. consumer.

The problem is the long term. While the consumer benefits in the short term, American auto manufacturing will be severely reduced and a number of jobs will be lost causing harm to the economy.

Because government intervention in the EV market has already caused market distortions that led to large losses by American firms, BYD can fill a the void with inexpensive EVs.

How can our leaders stop this?

Both political parties agree that a tariff which raises the price of the BYD car to the price of the American-made car would solve the problem.

Some free-market economists may disagree. It is always much more efficient to have the low-cost producer make the cars, they would argue. But, in this case, the trading partner is not simply interested in economic benefit. There are other motives that would produce negative outcomes for the U.S. and the world.

The only way to prevent that, even if the cost is loss of efficiency, is to place tariffs on cars produced in China. At this point it is not just an economic question.

In other areas Trump generally follows free-market policies that will result n a higher standing of living for Americans. He favors low tax rates on all Americans regardless of their income. And he favors less government regulation of business.

Recall, in his first term, he promised to eliminate two regulations for every new one imposed. He did that, and it made it easier for business to operate. That led to increased profits and increased real wages.

Trump also recognizes that more freedom is needed in energy markets, where demand keeps growing and supply is restricted. Government intervention in energy markets has resulted in high energy prices.

Trump will remove restrictions in energy markets and allow the market to work properly.  The result will be larger supplies of energy and much lower prices. That’s how the free market works.

Conservative economists also don’t want the public debt to grow so quickly. In fact, balancing the budget is something they favor. While Trump hasn’t specifically talked about this, he is a businessman and as such he understands the problem of carrying too much debt.

Trump’s Maganomics does follow the principles of free-market economics.

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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.

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