Do I subsidize Safeway? Why would I ask? This is why. My wife and I spend at least $400 a month at Safeway. Safeway doesn’t buy anything from us. So our monthly trade deficit with Safeway is at least $400. And in Trump’s view of the world, a trade deficit is equivalent to a subsidy. By Trump’s reasoning, I do indeed subsidize Safeway.
This sounds ridiculous. It is. But it’s no more ridiculous than Trump’s claim that Americans are subsidizing Canadians. If you spend more on someone’s goods than someone spends on yours, there is no subsidy. The fact that expenditure takes place across borders does not change this.
And that fact makes Trump’s proposed tariffs on Canadian goods and services all the more tragic.
This is from David R. Henderson, “Tariffs will hurt both Canadians and Americans,” Defining ideasDecember 19, 2024.
Read the whole thing. It is unusually long: about 2500 words.
Shout out to Don Boudreaux, who looked at an earlier version and provided good comments.