Tag: trade

Gerrymandering

The United States has flourished and grown to almost the highest GDP per capital in the world (exceeded only by tiny Luxembourg, Switzerland, Ireland, Singapore, and Iceland) because of the individual freedom of its citizens to act in their own interest and whose property and freedoms are protected by a government to which they gave limited powers. Historically individuals only had the rights and freedoms handed down to them by their Kings/rulers.

The preservation of the rule of law under our Constitution is essential for our continued flourishing. It is eroding.

The U.S. House of Representatives has 430 members of which currently 217 are Republicans and 212 are Democrats (one is independent). These numbers have changed slightly because of recent “resignations.” The number of representatives from each state depends on its population at the end of each decade’s Census. Each state is geographically divided into the number of congressional districts matching its number of representatives. While states may approach the drawing of its congressional districts in its own way, there are some criteria that must be observed.

1. Federal Mandatory Criteria

These rules apply to every state, regardless of their internal policies:

  • Equal Population: Based on the principle of “one person, one vote,” districts must be as nearly equal in population as practicable. This is rooted in the U.S. Constitution and upheld by Supreme Court cases like Wesberry v. Sanders.
  • Race and Ethnicity (The Voting Rights Act): Under Section 2 of the Voting Rights Act, districts cannot be drawn in a way that dilutes the voting power of racial or language minorities. In some cases, this requires the creation of “majority-minority” districts.

2. Traditional Districting Principles

Most states also follow “traditional” principles to keep districts logical and representative. These vary by state law:

  • Contiguity: All parts of a district must be physically connected. You shouldn’t have to leave the district to get to another part of it.
  • Compactness: Districts should be geographically “tight” rather than sprawling or having jagged, “finger-like” extensions (though this is frequently debated in court).
  • Respect for Political Subdivisions: Mapmakers often try to avoid splitting counties, cities, or towns between multiple districts.
  • Communities of Interest: This is the effort to keep groups with shared social, economic, or cultural interests together so they have a unified voice in Congress.

If district lines are drawn to concentrate likely Republican or Democrat voters into one or a few districts, their voting strength in other districts would be reduced. In this way the likely number of Republican or Democrat representatives from the state can often be increased or decreased, a practice known as gerrymandering. Such political concentration has also favored the election of candidates with more extreme views within their party hollowing out the center.

 “Ordinarily, states draw new congressional lines once every 10 years, at the start of the decade when they receive new data from the U.S. Census Bureau. Last year, Trump pressed Republican-led states to break with that tradition and gerrymander their districts to help his party maintain its narrow control of the House.

“The push resulted in better lines for the GOP in five districts in Texas, two in Ohio and one each in Missouri and North Carolina. Democrats responded by persuading voters to approve new maps that would give Democrats the edge in five seats in California and four in Virginia.”  Washington Post  Redistricting in Virginia

While I have been a free market, limited government Republican all my life until Trump’s first campaign in 2016, I was not willing to vote for him and changed my party to Libertarian. Given my disappointment with the Republican Party’s unwillingness to use its constitutional authority to vote on tariffs and war among other things, I am hopeful that the Democrats will take control of Congress in the midterm elections later this year. None the less I voted No on Virginia’s referendum on a midterm redistricting that is expected to give Democrats 4 additional seats in the House. Why? Gaining House seats by questionable (The Supreme Court may reverse all of this) mid-decade redistricting rather than by convincing voters to change their votes diminishes the rule of law I so strongly defend.

Democratic Sen. John Fetterman (Pa.) reacted with dismay Tuesday evening when informed during an appearance on NewsNation’s “Cuomo” that a Democratic redistricting initiative had passed in Virginia, declaring, “We all lose at this point.”

“Even The Washington Post has said the ‘yes’ campaign is, in their words, brazenly dishonest.”  David Weigel, Semafor

Trump’s Record so far

So far Trump II has made or is making a number of changes that have benefited our economy.  However, his delivery on his key campaign promises is mixed.

Trump promised to “stop the migrant invasion,” and to carry out “the largest deportation operation in American history.” He delivered. Southern border attempted entries that were blocked in 2023 and 2024 of 2,475,670 and 2,135,000, dropped to 237,538 in 2025 and authorized new arrivals dropped from 2.9 to 2.8 million in 2023 and 2024 to less the 2,000 in 2025. Deportations and voluntary exit jumped from over 460,000 and 700,000 in 2023 and 2024 to over 2,500,000 in 2025 of which and estimated 1.9 million were self exits.

However, the behavior of masked ICE agents, including the deaths of over 30 people in ICE custody in 2025 have created a public outcry.  In 2024 and earlier, the majority of ICE arrests focused on those with criminal records. In 2025, the government stated that 70% of ICE arrests involved individuals with criminal charges or convictions. However, independent analyses of 2025 data suggested that only 23% of those targeted in broader sweeps actually had prior criminal convictions, with many of those being for minor traffic or immigration offenses.

Trump also promised to “End inflation and make America affordable again,” and to “Stop outsourcing” and turn the U.S. into a “manufacturing superpower” by bringing factories back to the United States by tightening trade policy. The high CPI inflation rate of 4.1% in 2023 has fallen to 2.9% in 2024 and 2.7% in 2025. Manufacturing value added to US total output was $2.91 trillion in 2024 rising to $2.95 in 2025 all in 2017 dollars.

The US imports more than it exports. The US trade deficit in 2024 of $903.5 billion changed little at $901.5 billion in 2025, but the highly criticized and erratic US tariffs on imports (both threatened and actually imposed) where eventually struct down as illegal by the Supreme Court. They were not approved by Congress and where not justified to correct unfair trade practice by China, the EU and others. Rather they were threatened punishments if the target country did not give in to some other Trump demand. Here is an example of such an attempted abuse of tariffs. https://x.com/spectatorindex/status/2041842665172693207

Trump was right to promise to reduce costly and unproductive regulations and bureaucrat bloat. But his approach with the help of Elon Musk and the DOGE swat teams was misdirected and destructive. https://wcoats.blog/2025/04/27/trumps-chainsaw/

https://wcoats.blog/2025/07/01/econ-101-government-budgets/  Just how bad the Musk DOGE chainsaw was can been seen in the following deposition of one of the totally unqualified kids swinging the chainsaw. He is being questioned by a lawyer for an agency suing DOGE https://www.youtube.com/watch?v=NXXvgZzK0Cc

And then there is the rest. Unlike previous US Presidents, Trump’s style of governing was that of a bully making threats. The result has not been good.

Trump the Egomaniac:  Putting his name on the Kennedy Center was sort of harmless (but distasteful) but then shutting it down all together is much less so and, and as is so often the case with Trump, hard to understand. The United States Institute of Peace is now the Donald J Trump Institute of Peace. Then there are programs he has created in his name: Trump accounts, Trump Gold Card, TrumpRx, Trump National Parks pass, etc. But he hasn’t stopped there, creating the “Trump-class” battleship. Though it violates the tradition of the U.S. Treasurer, currently Brandon Beach, signing our currency notes, Trump will do so in the future. While most of these displays of Trump’s name might be taken as the actions of an immature child, his proposal to issue special one dollar coins with his likeness seems to violate more than just good taste.

Trump the Authoritarian (postliberal)–domestic:  We have gotten used to Trump using his Truth Social or X/twitter accounts to damn and/or label as stupid or evil those who have criticized him, but he has used the power of his office to much more seriously attack his enemies or to force compliance with his policy views.

For example, after firing FBI director James Comey, who oversaw the probe of ties between Russia and Trump’s 2016 Presidential campaign, Trump repeatedly called for investigations of Comey over alleged leaks and handling of memos, and his current Justice Department has pursued renewed inquiries premised on those same grievances. Similarly motivated DOJ indictments or investigations have been made against Trump appointed officials John Bolton, Letitia James, Robert Mueller, Andrew McCabe, John Brennan, and others who played leading roles in Russia‑related or Ukraine‑related investigations.

Beyond criminal investigations, Trump has repeatedly used or threatened non‑criminal tools of the presidency—regulation, funding decisions, security clearances, and administrative enforcement—to punish domestic opponents. He has used threats to cut off federal funds to Democratic‑led “sanctuary cities” or jurisdictions whose leaders criticize him, framing them as “anarchist” or lawless and directing DOJ and other agencies to look for legal hooks to withhold grants.  Reuters and civil‑society trackers describe cases where universities, law firms, and other entities changed diversity or governance policies after threats of lost contracts, funding, or investigations from the administration. https://protectdemocracy.org/work/retaliatory-action-tracker/

If you have wondered, as I have, why the Republicans in Congress have not exercised their constitutional rights to block Trump’s abuses of power, often in direct contradiction of Republican party principles, I assume that it is their fear of his vindictive attacks on anyone who criticizes him.

Trump has both threatened and actually moved to cut federal funds to a small but high‑profile group of universities, mainly to force changes on campus protests, DEI, admissions, and governance policies. At Harvard University billions in federal research grants and contracts were frozen or terminated starting in spring 2025. The reasons given by the Trump administration were the alleged failure to protect Jewish students and to tolerate antisemitism linked to pro‑Palestinian activism and criticism of “woke” policies, DEI programs. The Trump administration demanded leadership and governance changes, review of academic departments for perceived ideological “bias,” and changes to admissions policies. Harvard has filed legal challenges and publicly refused to accept some of the administration’s conditions, while still facing a major funding freeze.

Similar reasons were given for stopping and/or threatening to stop funding of contracts and projects at Columbia, Cornell, Northwestern, and Princeton, University of Pennsylvania and UCLA.  These are the tip of an ugly iceberg that are very inappropriate in our liberal, limited government, freedom loving country.

But not all demands were objectionable.In October 2025, the White House offered a formal “compact” tying preferential access to federal funding to a raft of ideological and policy conditions that were agreed to by nine universities.Vanderbilt University.Dartmouth College.University of Pennsylvania.University of Southern California.Massachusetts Institute of Technology (MIT).University of Texas at Austin.University of Arizona.Brown University and University of Virginia.

Key policy demands in the compact included:

  • Ban consideration of race or sex in admissions and hiring.
  • Cap international undergraduate enrollment at around 15% and subject foreign students to additional vetting.
  • Freeze tuition for several years.
  • Eliminate or sharply curtail DEI offices and programs.
  • Guarantee “ideological balance” or a “vibrant marketplace of ideas” without a dominant ideology

Trump the untrustworthy Bully –International: Trump pledged to serve American interests first, promising to end America’s forever wars and claimed to deserve the Nobel Peace Prize. Virtually every aspect of his foreign policy has been a failure, weakening our standing abroad and our national security.

The second Trump administration has ended no wars, conducted military strikes in at least seven countries, and with Israel started a new war in Iran. It has been complicit with Israel in the ethnic cleaning of Gaza and increasingly the West Bank, and by financial and armament support of Israel. Trump has weakened or lost the support of traditional allies with his threats to annex Canada and Greenland and his insults of European and other countries for not supporting his illegal war in Iran and more generally.

Bully Trump’s approach is illustrated by his spat with Pope Leo XIV. On Truth Social Trump proclaimed:

“Donald J. Trump

@realDonaldTrump

A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will. However, now that we have Complete and Total Regime Change, where different, smarter, and less radicalized minds prevail, maybe something revolutionarily wonderful can happen, WHO KNOWS?”

On April 19, 2026, Trump warned that the U.S. would “knock out every single Power Plant, and every single Bridge” in the country if they did not accept a new “DEAL,” Not that Trump cares but many of his threats, specifically those targeting civilian infrastructure like water and power plants, have been flagged by international human rights groups as potential violations of international humanitarian law.

Pope Leo XIV declared President Donald Trump’s threat to destroy “a whole civilization” unacceptable and suggesting Americans should contact their representatives in Congress to stop the conflict.

“Today, as we all know, there has also been this threat against the entire people of Iran.  And this is truly unacceptable. There are certainly issues of international law here, but even more, it is a moral question concerning the good of the people as a whole, in its entirety.

“I would like to invite everyone to think in their hearts of so many innocent children, so many totally innocent elderly people who would also be victims of this escalation. I would like to invite everyone to pray, but also to seek ways to communicate. Perhaps with congressmen, with authorities, saying that we don’t want war, we want peace.”

Trump responded by calling the Pope “Weak on crime” and “Weak on Nuclear Weapons” and falsely claiming the Pontiff agreed that Iran should have nuclear capabilities. In his Easter Sunday message the Pope said: “Let those who have the power to unleash wars choose peace.”

Trump’s failure to understand market trades and deals as win-win has fed his zero sum bully approach. America has been seriously damaged as a result.  Trump has either ignored or withdrawn from the international agreements or organizations such as the WTO, and WHO that have provided the basis of global cooperation and flurishing since WWII. And we have suffered as a result. https://wcoats.blog/2026/03/21/america-alone/  

Trump’s disregard for law has also been an element of his financial corruption, the details of which will hopefully be properly investigated.  Since returning to the White House for his second term, Trump’s net worth has grown by approximately $2.5 billion to $3 billion according to most financial trackers. Trump’s Presidency has been very bad for America.

Not only Tariffs

Tariffs can serve the beneficial function of leveling the trading playing field when exports from, say China, have benefited from government subsidies. The world’s output and thus wealth is maximized when competitive trade (domestic and/or international) uses its labor and capital most efficiently. The rules of the World Trade Organization permit tariffs of this sort.

President Trump has taken a very different approach, which yesterday’s Supreme Court ruling against most of his tariffs has slowed. Trump, typical of his general bully approach to relationships, threatens or enacts tariffs totally unrelated to their proper purpose to make trade fairer. He uses them to gain concessions from other countries totally unrelated to economic efficiency. These, like his bullying more generally, are very damaging to American interests and well-being. As a private business man, his bullying approach resulted in six bankruptcies.

Rather the repeat the arguments I posted earlier I will direct you to some of my earlier comments and a few from others:

Tariffs
https://open.substack.com/pub/damonlinker/p/seven-observations-about-the-supreme?utm_campaign=post-expanded-share&utm_medium=web

Trump’s disregard of the law in the area of tariffs is not all we should be concerned with and push back against. In addition to his nasty treatment of our “Allias,” his corruption is shockingly extensive and very open as is his disregard for the law. Congress needs to wake up and do its job:

https://www.thefp.com/p/the-economy-can-survive-tariffs-not

https://open.substack.com/pub/persuasion1/p/a-blow-to-trumps-favorite-political?utm_campaign=post-expanded-share&utm_medium=web

P.S. I have not mentioned his childish ego expressed by adding his name and face all over the place. It is merely embarrassing, which we can survive.

P.S.S I have also not mentioned Trump’s serious damage to our national security from his war and threatened wars not authorized by congress as required by the constitution (in search for the Nobel Peace Prize??!!)

Immigrants

I think that all illegal immigrants convicted of crimes in the US  should be deported. Those here illegally, often for decades, who have not been convicted of a crime should be given a path to citizenship as provided in the draft act that passed the US Senate in 2013 but died in the House. “Illegal aliens”.

With the horrible attack on American norms and laws perpetrated by ICE  “ICE and immigrants”, President Trump (the most corrupt, dishonest, law breaking, abuse of government powers to attack his “enemies,” President America has ever suffered) apparently has different ideas. Trump’s bullying and winner take all style has resulted in a 6% decline in tourism (one of our previously successful exports) in 2025 relative to 2024. This increased our trade deficit. Net immigration in 2025 fell dramatically to half the level of 2024, which hurting our economy.

The disgusting racism of his “policy” is best exposed by the statements of his evil Secretary of Homeland Security, who: “On Dec. 1, Noem shared on X this thought: “I am recommending a full travel ban on every damn country that’s been flooding our nation with killers, leeches, and entitlement junkies” who “slaughter our heroes, suck dry our hard-earned tax dollars, or snatch the benefits owed to AMERICANS. WE DON’T WANT THEM. NOT ONE.” “George Will on Kristin Noem”  

President Trump’s childish ego and bullying is inflicting great damage on my country. Hopefully the SCOTUS will declare his tariffs illegal SOON.  ICE must be made to abide by the law. Illegal immigrants convicted of crimes (other than their residence status) should be turned over to ICE when they are released from jail and ICE “officials” should get off the streets. But for God’s sake fire Noem immediately.

Trade

Without trade each household/family would have to be self-sufficient, i.e., would only have to consume what they themselves could make, grow or do. No one would doubt the dire poverty the world would endure. Even trade limited to your neighborhood, with each household specializing in a few things to trade with other families specializing in other needs or wants would significantly increase everyone’s income. The wider the range of trade the greater the degree of specialization and increased income possible.

Expanding the potential for trade requires the ability to transport goods and serves over longer distances. The benefits of such connectedness extend well beyond higher incomes. Quoting from George Will’s wonderful book The Conservative Sensibility: Referring to the:

“Erie Canal. [Dewitt] Clinton [the sixth governor of New York] saw this project as a means of preventing states in the West from detaching themselves from the Union. The canal would “bind the union together by indissoluble ties” because the people would be “habituated to frequent intercourse and beneficial inter-communication,” and all Americans would be “bound together by the golden ties of commerce and the adamantine chains of interest.” The canal also, and inadvertently, helped to bring down the old order in Europe. By bringing cheap wheat from America’s Great Plains, the canal struck at the roots of Europe’s landed aristocracy.”

Implicit in the above is private ownership of one’s production. People work hard for their own benefit but to benefit from trade they must take account of the needs and wants of others. Trade must be win-win or it will not take place. I benefit from selling my production and you benefit from buying it. Communism—communal production—lacks the personal (selfish) incentive to work hard and has broadly failed as a system. Also from George Will: “In China, once collective farms were disbanded in 1978 under the leadership of the reformer Deng Xiaoping, agriculture output doubled in the space of just four years.”

The topic of trade keeps returning and I have written about it often. Rather than repeat myself, yet again, I will share some of those earlier blogs:

Econ 101—Trade in very simple terms
The politics of Trade
Econ 101: Tony Judt on Trade

Immigration

what is the problem and what should be done?

The United State—a nation of immigrants—is the most prosperous nation in the world because of the freedom of its residents to innovate, work hard, and seek out what the public wants to buy (i.e. to profit). Many of the founders of our most successful companies (e.g., Google, Tesla, Panda Express, Uber, WhatsApp, eBay, Stripe, PayPal) are first generation immigrants. Immigrants are drawn to America because it offers such opportunities, thus we tend to attract the best and brightest. “Immigrants from hell”

Along with the clear benefits of immigration, it poses challenges and some costs as well. The internal migration of people within a country as new jobs or tastes result in people moving into new homes and neighborhoods produces most all the same issues as immigration of foreigners from abroad. We live in communities and have rules (even laws) for our rights and those of our neighbors. What we do effects then and vice versa.

Before moving back to Crystal/Pentagon City in Arlington Virginia, we lived in a 64 home (two acres each) community in Bethesda Maryland with a convenient reflecting very ridged rules for what we could and could not do on our property in order to preserve its natural wooded environment. This is what we were buying. But over some decades more and more families with children moved in with different tastes and desires (e.g., basketball hoops visible from the road). Many community discussions were held, and some rules were adjusted but it required a lot of community discussion.

Our immigration laws are inadequate. We need more immigrant workers and entrepreneurs and better border control, i.e., we need more legal immigration and better control of the illegal sort.  Laws to give immigrants legal status are inadequate and not consistently enforced. “illegal aliens” In 2013 a bipartisan bill to address these problems (The Border Security, Economic Opportunity, and Immigration Modernization Act of 2013) passed the Senate by 68-32 in favor but sadly failed to pass the House. Quoting from Wikipedia:

“If enacted, the bill would have made it possible for many undocumented immigrants to gain legal status and eventually citizenship. It would have increased border security by adding up to 40,000 border patrol agents. It also would have advanced talent-based immigration through a points-based immigration system. New visas were proposed in this legislation, including a visa for entrepreneurs and a W visa for lower skilled workers.[6] It also proposed new restrictions on H1B visa program to prevent its abuse and additional visas/green-cards for students with science, technology, engineering, and mathematics (STEM) degrees from U.S. institutions. The bill also included a $1.5 billion youth jobs program and repealed the Diversity Visa Lottery in favor of prospective legal immigrants who are already in the United States.”

Refugees pose a special challenge (e.g. Afghans who worked for the US or international bodies and are thus suspect to the new Taliban government) as do the “guest” seasonal workers in California’s farmland. If Congress is up for serious work they should get to it.

Econ 101: Trade deficits

A trade deficit is the difference between what we buy from the rest of the world and what it buys from us. To that extent rather than buying our goods and services, the rest of the world holds our dollars. These dollars are most often held in the form of US securities (Treasury bonds, etc.). Though trade deficits help finance Uncle Sam’s spending that is not financed with tax revenue, and thus reduce the crowding out of domestic investment by government deficit spending, President Trump doesn’t like them. Our trade deficit in 2024 was $918 billion.

Trade deficits can be reduced by reducing our imports (this is what tariffs tend to do) and/or by increasing our exports. We export many things including food and oil. Tourism and foreign students studying in the US generate about 9% of our export revenue. This has dropped sharply this year as the Trump administration has blocked or discouraged foreign students and badly treated other visitors, denying entry to some. It has suspended entry of new foreign students to Harvard and is threatening to revoke existing student visas at Harvard.

Trump has not only reached into the affairs of Harvard (and those of many other “enemies”), he is also demanding that the US dollar surpluses held by our trading partners be invested as dictated by the Trump administration. This was stated explicitly by US Treasury Secretary Bessent in an interview by Larry Kudlow on Fox Business. https://www.youtube.com/watch?v=IgcmRJpE1pc  

It is hard to see much free market here. Gregg Ip nails it in his recent WSJ article “The U.S. Marches Toward State Capitalism With American Characteristics”  https://x.com/greg_ip?lang=en

U.S. – Japanese trade agreement

Free trade of goods and services produced without government subsidies or restrictions would maximize the incomes of all involved. To promote this result, the World Trade Organization has led the effort to reduce or eliminate tariff and other trade restrictions and has authorized the use of tariffs carefully targeted to nullify the distorting effect of government subsidies or other interferences in the competitive market production of goods and services.

This is not how President Trump has used or threatened in his usual bully style to use tariffs. For Trump, tariffs are not established to improve a level playing field for world trade, and not even always to protect inefficient American manufacturers such as the 50% tariff on imported Steel. An outrageous example was his threat to impose a 50% tariff on all Brazilian imports, effective August 1, 2025, if Brazil went forward with the prosecution of his ally, former President Jair Bolsonaro, who is charged with attempting to stage a coup d’état to overturn the results of the 2022 presidential election in Brazil. Incidentally, the U.S. currently has a trade surplus with Brazil. Go figure.

On July 23, “President Donald J. Trump announced a landmark economic agreement with Japan…. [In exchange for a reduction of US tariffs on all Japanese imports from 25% to 15%, it] will invest $550 billion directed by the United States to rebuild and expand core American industries…. The United States will retain 90% of the profits from this investment…. In addition to raising billions in revenue, this new tariff framework, combined with expanded U.S. exports and investment-driven production, will help narrow the trade deficit with Japan and restore greater balance to the overall U.S. trade position.” “Whitehouse fact-sheets/2025/07/”  

As an aside, Trump has also threated to punish any country that stops using U.S. dollars as its reserve and trade vehicle currency. Somehow, he fails to understand that for a country to acquire these dollars (and for Japan to acquire the $550 billion it is to invest in the US) they must have a trade surplus (US trade deficit). Oh well.

“Japanese officials said there was no written agreement with Washington — and no legally binding one would be drawn up — after Trump administration officials claimed Tokyo would back investments in the US from which American taxpayers would reap nine-tenths of the profits.”  https://www.ft.com/content/c1183b13-9135-41f6-9206-7b52af66f0a5

In addition to the fact that Japanese officials are disputing that they have agreed to such a deal, I hope that you are surprised that the American government is proposing to create new state owned companies. The world’s experience with state own companies has not been good. Our private enterprise dominated economy has served us (our standard of living) very well.

If this all seems rather confusing, welcome to Trump land.

Taxation norms

Taxes are levied to raise money but also to influence behavior. What is taxed and how much influences how much of it is demanded. To take an example of a tariff (tax) on steel imports, the resulting higher price of imported steel increases the relative attractiveness of domestically produced steel. Under the rules of the World Trade Organization, such a tariff would be justified if it offsets an artificial (and thus economic efficiency undermining) subsidy of the foreign produced steel.

President Trump has introduced a totally different way of using tariffs/taxes. He uses them as threats to pressure a country to take action totally unrelated to the item to be taxed. This follows his general bully approach to negotiations. To pressure a country or firm to agree to his requests, he threatens harm if they refuse. If a university or newsman behaves in ways he doesn’t like, he attacks them or threatens them with harm.

In the most recent example Trump is threatening a 50% tariff on all imports from Brazil primarily due to Brazil’s legal proceedings against former President Jair Bolsonaro, which Trump characterizes as a “witch hunt,” and to address what he claims is an “unfair” trade relationship between the two countries.

“Trump demands that the trial against former president Bolsanero, who had tried to instigate a military coup after he had lost the last election, should be immediately end.”  “First casualties from Trump’s increasing tariff craze”

 It’s not clear what Trump means by “unfair” trade relationship. His positions on trade, which he clearly does not understand at all, are contradictory. He has threatened to raise tariffs on imports from countries that avoid using US dollars in their FX reserves and foreign trade payments. For countries to use US dollars they must have a trade surplus with the US (a US trade deficit with such countries) in order to acquire them. “Why Does the World Need a Reserve Asset with a Hard Anchor?”  But Trump doesn’t seem to like or want such deficits. The US actually has a trade surplus with Brazil.

It may sound like this is all from the Onion, but sadly it is not. I don’t expect it to end well.

A perfect world (economically)

The goal of policy should be to maximize world income (output) and its distribution that reflects the contribution of each player. That occurs when resources (capital and labor) are allocate to their most productive uses. But how is that achieved? First by ensuring that the government does not interfere. If the government subsidizes an activity, it will draw resources from its most productive use to the subsidized one thus reducing income.

The government’s role is important for defining and protecting property rights and the rule of law and the basic infrastructure on which firms operate. For example, in the U.S. the government funded basic research because there is no market incentive to undertake it. Much of it provides knowledge that is never used or exploited, but some is exploited by private firms for purposes the government could not guess in advance.

In the real world, consumers’ tastes change and the products and services being offered evolve and the optimal allocation of resources (capital and labor) must evolve as well. Those that are not the most productive tend to go out of business, freeing those resources for better uses. When governments intervene via subsidies or differential taxes they invariably reduce the efficiency of resource allocation and thus lower incomes. Bilateral trade deals introduce large distortions in resource allocation and thus lower global income.

The global maximum thus requires common rules for fair trade globally. The World Trade Organization is the institution through which such rules are developed and enforced (or at lease it should be). Bilateral deals undermine the level playing field optimal resource allocation requires and thus lower world income. With the weakening of the WTO and other international rules and norms, the world is increasingly falling below the income it is capable of.