Putting a link to Tariffs, saving, and investment on its own post because it is one of the only posts I have seen that hits the true basics of the tariff issue and I want to be able to find it again quickly if I ever need to search for it again.

Most people in the anti-tariff camp are covering things like “it is going to hurt business” (but so does any tax so unless you are going to argue that all tax is bad that just means it is arguable), that it might increase inflation (it could, but it don’t have to as anyone who understand economics should know) or Trump is mean (a bigger problem is that he is faithfully representing the economic beliefs of the average blue collar voter). What all the above points have in common are that they are arguable and really don’t advance people’s understanding of basic economics. And it is a lack of understanding of basic economics that leads to things like Trump’s tariffs.

The fundamental problem with most supporters of tariffs is that the vast majority of them don’t understand the three basic points that the Grumpy Economist makes. Unlike the common complaints against Trump’s tariffs the Grumpy Economist’s points are in the “World is Round” category. In other words they are inarguably true but not obvious to people who know nothing other then what they see by looking around at them. Those three points are 1. The capital and current account must add up, 2. Money is a veil. Understand the underlying movement of goods and services, 3) The overall trade (goods and services) deficit equals the difference between savings and investment plus the government deficit [(M-X) = (I-S) + (G-T)]. If you don’t understand these three things, then you should read the linked post.

There are arguments in favor of tariffs that still make sense even if you understand the above points. But it is hard to imagine anyone supporting Trump’s tariffs if they understood those points. Regardless, it is clear from what Trump himself that he does not understand these points. And from every day conversations in the blue collar world, it is clear that his supporters (and even most people who not his supporters to be fair) don’t understand these basic but non-intuitive points.