"Trade War" makes a dramatic headline, replete with dire implication. Donald Trump's bellicose trade rhetoric has destabilized financial markets. Foreign investors are retreating from emerging markets. The Chinese stock market is down 25% since January. But how much harm will the U.S. president's tariffs actually do?
Trade experts have joined the chorus of concerns. Economists are renowned for their diverse opinions, but they are unanimous on one topic: Trade restrictions are bad. Trump is ignoring the wisdom established by English economist David Ricardo two centuries ago: A country cannot make itself better off by imposing trade barriers. To do so is like putting rocks in your own harbors. Trade should be multilateral: Countries should buy from the cheapest supplier and sell to the highest bidder. Trump is busy recasting trade in bilateral terms and promoting "America First."