As prices at the gas pump and on our store shelves rise, President Biden recently mentioned he would consider lifting some tariffs on China in an attempt to combat exorbitant inflation. It’s an issue he has addressed before, noting that inflation is his “top economic priority.” And while doing away with tariffs is a start, there’s more to be done to encourage international trade — the real solution to combating rising costs. Simply stated, all barriers to free global trade limit competition and allow domestic producers to increase prices, a contributing factor to inflation. But somewhere along the way, elected leaders have forgotten this basic economic concept and have turned to policies limiting an international marketplace.
A global pandemic and subsequent runaway deficit spending have contributed to a historic level of inflation. Now, Republicans and Democrats alike are questioning U.S. participation in international trade and suggesting that weaning ourselves from a global free market is the right answer. In doing so, they are ignoring a basic economic truth: voluntary trade creates wealth.
Look no further than the president’s State of the Union address: “Instead of relying on foreign supply chains, let’s make it in America,” Biden said, receiving applause from both sides of the aisle. And Democrats recently revved up support for this effort, including Sen. Tammy Baldwin (D-Wis.), who introduced the Supply Chain Resiliency Act. She noted, “Our ‘made in America’ economy has been neglected, exposing us to shocks that leave us unable to produce or acquire the things we need, putting our health, economy and security at risk.”
However, it isn’t just Democrats who want to curtail international trade. Others, such as Sen. Mike Crapo of Idaho, the ranking Republican on the Senate Finance Committee, have said the need to domestically produce critical items such as computer parts and semiconductor chips “was there solidly before, but the Russian invasion [of Ukraine] just puts an exclamation point on it” — making it clear that both parties have experienced an abrupt change on this issue over the past several years.
What has not changed, however, are the fundamental truths by which economies operate. And the benefits of free trade are more than just access to higher-quality, lower-priced goods — a point underscored by the recent baby formula shortage, caused in part by a limited number of domestic formula companies under strict government policies designed to keep out foreign producers. Studies show that globalization actually boosts the American economy by reducing inefficient domestic industries and providing resources and opportunity for innovation, in turn raising wages and improving living standards. In fact, the Bureau of Economic Analysis notes at least half of America’s imports are inputs for U.S. manufacturers, not consumer goods. These imports reduce imported-input costs, ultimately lowering a manufacturer’s production costs and facilitating economic growth.
These aren’t just important lessons for our nation’s elected representatives; they’re a vital message for all Americans. Basic economic literacy — including the role that global trade plays in building a flourishing economy — touches every facet of our lives, from the clothing we wear and food we eat to the cars we drive. At the Foundation for Teaching Economics, we understand the value of teaching young people and educators to think about economics. Our teacher training program on “Issues of International Trade” strives to do this through in-person and online programs for high school teachers, who then pass on these critical economic concepts to their students. Over 3,600 teachers have completed this program, which teaches core ideas such as supply and demand, comparative advantage, balance of trade and opportunity cost. More importantly, these teachers have introduced more than a half-million high school students to the benefits of trade — including an increasing number of them during the pandemic.
It’s my hope that by creating more informed citizens and expanding economic literacy across the country, American citizens will demand that our politicians follow sound economic reasoning, instead of the protectionist trade policies. By growing international trade, we will in turn grow a stronger, more economically sound society — one that includes a new generation of leaders who understand the benefits of a truly open market economy.
Ted Tucker is the executive director at the Foundation for Teaching Economics, a nonprofit educational organization that promotes experiential learning and the economic way of thinking. FTE was established in 1975 and operates as a program of The Fund for American Studies.