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Alan Greenspan says Trump's Tariff Policies are ‘Insane’ and I agree.

> Former Federal Reserve Chairman Alan Greenspan called President Donald Trump’s tariff policies “insane” and said “why we’re doing it probably is very deep in the psyche of somebody.”

> Responding to a question about China at an event in New York on Wednesday, he said both sides lose out in such a clash.

> “It’s an excise tax, and people think of tariffs other than what it is, it’s a tax and everybody engaged in warfare of this type, it would mean that you’re withdrawing credit or purchasing power from a whole series of countries,” Greenspan said at New York University. “There are victors and there are losers in a tariff fight, but that doesn’t say that a more important issue is both are losing, it’s just the winner loses less.”

Greenspan also said the notion that China would outrace the U.S. in all economic respects “is a mistake,” pointing to their lower gross domestic product per capital.

Greenspan is correct on that as well.

Greenspan BS Detector

It's usually easy to detect when Greenspan is right or wrong about something.

Generally, if the public agrees with what Greenspan says, he's wrong, and vice versa.

Art of the Deal

In this case, Trump's die hard supporters believe the crazy notion that Trump really understands the "Art of the Deal".

Trump did not even wrote the book.

Please note the ‘Art of the Deal’ Ghostwriter Says Trump is ‘Deeply Disturbed’ and ‘Utterly Untrustworthly’

Arguably, that is carrying things too far, but Trump is no brilliant deal maker or businessman.

Enter the Democrats

The Democrats generally want to support the unions, and that's always the wrong thing to do.

The Wall Street Journal provides an interesting case in point: Democrats’ House Victory Complicates Passage of New Nafta, Trade Deals

> Most Democrats, backed by unions, have voiced skepticism about liberalizing trade unless the deals allow workers in the other countries to take advantage of higher labor standards and wages. Passage “will depend on whether unions will want to push it,” a senior White House official said.

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NAFTA liberalized virtually nothing. Rather, it is essentially the same deal we had before.

So here we are. Trump is bragging about a deal that changed nothing and Democrats want even more Tariff stupidity.

Democrats and Republicans Skeptical

With Democrats and Republicans skeptical of free trade but Greenspan an advocate, we have a clear winner.

Not only does this setup fit my Greenspan rule, it fits a more obvious rule:

When Democrats and Republicans both want the same thing, it's nearly always worth taking the opposite side.

EU Silliness

Note that the EU and UK just finalized a 585 page document on a "customs union".

Yes, it's asinine.

Good Free Trade Agreement

A good free trade agreement can be written on a napkin with a crayon.

"Effective today, all tariffs and subsidies on all goods and services are eliminated"

That holds true no matter what any other nation does. The first nation to do so will have a monstrous advantage in jobs and wealth creation.

Greenspan was generally wrong!

Related Articles

  1. Reflections and Reader Comments on Free Trade: “China Doesn’t Play Fair!”
  2. Dear NAFTA Bashers: You Need New Charts
  3. Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Mike "Mish" Shedlock