Lighthizer’s Mistaken Claims About Trump’s Tariffs

Phil Gramm and Don Boudreaux respond to the Trump administration trade guru

Letter to The WSJ. 

"Former U.S. Trade Representative Robert Lighthizer doesn’t deny that President Trump’s protectionist policies reduced economic growth by 20% in their first full year of implementation (“In Defense of President Trump’s Trade Policy,” Letters, Sept. 21). Nor does he deny that manufacturing output fell by so much after Mr. Trump’s tariffs took effect that it was 4% lower at the start of the pandemic than when tariffs were announced in 2018.

Instead, Mr. Lighthizer highlights the rise in manufacturing output in 2017 and 2018. This reinforces our point that Mr. Trump’s deregulation and tax cuts stimulated manufacturing. Only when his tariffs were imposed did manufacturing output start to fall (“Trump’s Trade War Was a Loser,” op-ed, Sept. 12).

We never argued that countries are better off running trade deficits. We pointed out only that trade deficits often occur during periods of rapid economic growth and that surpluses occurred during the Great Depression. Trade deficits alone reveal nothing about the level of prosperity. 

When a quarter-century of rapid growth was triggered by President Reagan’s policies, foreign capital surged into America to help fund that growth. The same thing happened during Mr. Trump’s presidency. His deregulation and tax cuts fueled economic growth, attracting more foreign capital and causing the trade deficit to rise by 17% before the pandemic.

In Mr. Lighthizer’s telling, the U.S. dominated postwar manufacturing until expanding trade, including Nafta, stole our factories and prosperity. In reality, from the end of World War II until the 1970s, America had a virtual monopoly in heavy manufacturing because the rest of the world’s capital had been destroyed and 50 million of their people had been killed. By the mid-1970s, however, Europe and Japan had reindustrialized and Korea and Taiwan had become major manufacturers. America’s monopoly ended and its share of world exports returned to its prewar level.

Facing foreign competition, U.S. companies mechanized to become more efficient. While employment in manufacturing declined, industrial production is today 154% higher than when America last had a trade surplus (1975) and 54% higher than when Nafta was implemented (1994). Real wages for production and nonsupervisory workers are at an all-time high, up by about 33% since the start of Nafta even without including the 25% of compensation now paid as fringe benefits.

Phil Gramm

Helotes, Texas

Mr. Gramm, a fellow at the American Enterprise Institute, was chairman of the Senate Banking Committee.

Prof. Donald J. Boudreaux

George Mason U., Mercatus Center

Fairfax, Va."