The Lawyer’s Theory of Trade | Diving In

Yeah, I think we've been wildly successful.
That's Jameson Greer, Donald Trump's trade representative, appearing on The
Daily the New York Times podcast, and it's worth listening
to because Greer isn't some random spokesperson that they tried
out to read a talking point. He is, by all accounts,
one of the central architects of Trump's tariff agenda, maybe
the central architect. So I want to use his interview
with The Daily for what it is genuinely good for
to try to understand the person who's at the center
of America's trade war, and more importantly, the worldview that
informs it. And I'm going to tell you as I listened,
I came to understand both of them a lot better.
Here's what struck me. Jamison Greer is a lawyer, not
an economist. Now I mean that as a description, not
really as an insult a coherent worldview. He can argue it,
and you can argue it hard, but time after time
through that interview, I just go that worldview rests on
muddled thinking about what trade is about, who benefits and
what problem the policies that he's pushing, what problems are
even trying to solve. You see Jamison Greer, the US
trade representative. He sees the world the way a trade
litigator sees it. There are clients, there are injuries, there
are bad actors, there are grievances, and there are remedies.
And look that lends. I bet it's useful for some questions.
If another country, for instance, is subsidizing an industry or
dumping its product below cost, breaking the rules, then yeah,
I reckon A loyal in mind would help you prosecute
the case. If foreign government is cheating, you might need
a legal response, so you might want to call Jamison Grier.
But when you make that approach your whole theory of trade,
something happens. You see, every starts to look like an injury,
every deficit starts to look like evans, Every foreign gain
starts to look like a domestic loss. That's how lawyers seek. Now,
we economists, we start somewhere else. We don't start by
asking who hurt whom. Instead, we step back a level
and we ask why do people trade in the first place,
and when does that exchange between them make them better off.
Look the lawyer's narrow approach, it's not unique to Jameson greer.
You hear it everywhere. You hear it from the President,
from politicians, from your uncle at Thanksgiving, from anyone really
who has a gut feeling that if another country or
other people are gaining America and Americans must be losing.
International tradees a complicated topic, which is why I want
as us to listen carefully. So this is going to
be a story in five parts. First, I'll make the
case that trade enlarges the pie. Second, there's going to
be a reminder consumers count to and I want jameson
Greed to remember that. Third, there's one word that shows
up a lot in rhetoric from Jameson Greed jd Vance
in the entire Trump group. That word's cheap. We're going
to talk about how to use that word carefully. Fourth, manufacturing, Yes,
it matters, but nostalgia isn't policy in the past, isn't
the future. And Fifth deficits trade deficits. They're not scoreboards.
I'm just amorphus, and I'm here to help you understand
the world around you today. It's the world economy. So
let's begin. The first thing that I want you to
notice in this interview, and I'm going to play some
of it is the language Greed talks about trade the
way other people talk about war.
You know, if China is not going to change its
practices that we believe are harmful, then we have to
take you to lateral measures. We have to be policymakers.
Otherwise we just have to accept all these giant surpluses
that they're developing through their own policies. And I'm not
going to take that. The President doesn't want to take that,
because he's not just going to take other countries' policies
and say, oh, well, okay, I guess we'll just hand
over our industrial base to everybody else. I guess everyone
else will just have subsidies and will lay down and
take it on the chin. Again.
Listen closely to all of that, and you start to
see the worldview come into focus. I get where this
one lands. China really does subsidize some of its industries.
Some governments really do try to tilt the playing field.
Supply chain dependencies can be a national security problem. There
are real concerns for trade lawyers to worry about. But
Greer takes those partial truths and turns them into a
universal frame for how he thinks about all of international trade.
You can hear in the background. If they make more,
we must be making less. If they export more, we
must be losing. If we import more, we must be surrendering.
Notice throughout all of that the zero some thinking if
they gain, we lose. But that's not how economists, or
in fact people think about trade. We think about it
as enlarging the pie. Look, the easiest way to see
this isn't to start with China. That triggers too many
of our biases. Let's start at home instead. Let's start
in my home. See my better half an eye. We
do a lot of international trade with each other. She's American,
I'm Australian. We trade chores, and I promise you I'm
not doing more of the dishes so that she ends
up worse off. We do it because she can do
the stuff she's relatively better at, and I do the
stuff I'm relatively better at. And our whole household, even
though it's an Australian American, it runs better as a
result of trading chores. That is, our household pie gets bigger,
and when the pie gets bigger, we both get more pie.
She's American, I'm Australian, and yet somehow we manage to
structure trade to make us better off. Want Jameson grew
to understand that. Look, you might find it easier. Maybe
you'll find it easier if we think about this instead
as thinking about trade between American states. Look, nobody talks
as if New York could get richer by refusing to
trade with Pennsylvania. Even just saying it out loud makes
it sound ridiculous. To put an ocean between those two parties.
Suddenly it stops sounding ridiculous. The water doesn't change the economics.
It just makes it easier to blame the other side. Look,
I want to put it this way. If trading between
states is a good idea, then I reckonsose trading between countries.
That's the whole difference here. The lawyer's view is it's
country versus country, a zero some fight, and it denies
the possibility that the pie can get bigger. The economists view,
we're a yes and bunch. It's country and country. It
starts by recognizing trades. Fundamentally, like my relationship about corporation,
it sees that we can make more together than we
can apart. You make the thing where you're relatively good
at whether you're in China or Pennsylvania, I'll make the
thing I'm relatively good at, and both of us can
come out ahead. Now, I don't want to romanticize or
overly simplify this. Trade doesn't only create winners. The claim
instead is when Americans trade across the country, Americans come
out ahead across the country. Chinese people come out ahead.
So here's the more honest way of putting it. Trade
makes the pie bigger in both countries. Along the way, though,
and this is where it gets difficult. It redistributes the
slices within each country. So there's redistribution, and that redistribution
it can be brutal. If you've ever talked, for instance,
to an American factory worker, some towns get hammered, Some
workers are going to lose stable jobs, some industries get squeezed.
Those costs are real, They matter, They matter morally and
politically and economically, and honestly, economists haven't always been good
enough at admitting that. But the gains are real. Two,
that's what Jamison Grea is missing. The pie is bigger.
That is why people trade. Okay, the next thing I
want you to notice is who gets to be a
character in Jamison Grea's story of international trade. Early on,
he frames the whole project like this, we.
Have to take measures to protect our economy, to protect
our industrial base, to protect our agricultural production, to protect
our factories and farms and families and the people who
work there.
And later he talks about the businesses that are hurt
by his tariffs.
So for every small business person that says, well, my
business model is to import from China a finished good
market up and resell it to an American, could that
impact their business? Yeah, of course it could.
Later on and the piece the reporter sums up his
view that is Jameson Greer's view that he doesn't really
feel bad for firms who structured their business models around
importing cheap stuff from China and other countries. But here's
what I want you to notice. I want you to
notice whose story is being told. Who's highlighted, Jameson green
notice is the steel company and the small manufacturer, the
worker in a hard hat, the factory owner fighting off
the imports. Those people are real, their problems are real,
fair enough, glad you see them. But they're not the
whole story. There are at least three other groups who
should matter in any honest discussion of trade policy. First, consumers,
families buying shoes and toys and appliances and groceries and
school supplies, in car parts, folks like you and me
for that matter. Second, there are those American firms who
use imported inputs. Maybe you're assembling something in Ohio, but
you need parts from Taiwan or Mexico or Germany. Tariffs
raise the cost to American producers of getting those inputs,
but they don't raise the cost for their foreign competitors. Hate.
The third group that's missing is the workers who work
at those firms. They're no less American, They're no less
deserving of concern than the workers standing next to the
blast furnace. Hey, I want to see you some data
on this, because this part really matters. I'm going to
pull it from the folks at the New York Fed.
In a recent Federal Reserve study, the New York Fed
says that the Trump tariffs have been overwhelmingly born by
domestic businesses and American customers. Another estimate puts it at
nearly ninety percent of the burden falling on US firms
and businesses, and re and study actually finds that higher
tariff exposure raised prices and cut household spending, and low
income households bear a disproportionate share of the pain. So
the thing I want you to notice is the protected
producer is always the hero in Jameson Grier's story. The
consumer who's paying more, who can't make their paycheck stretch
far enough for their family, just doesn't rate a mention
in his narrative. That's the habit I want you to break.
Let's write the consumer back into the trade story. You
and I have to ride them in because unlike the
businesses who have lobbyists who are pounding the pavement in
Washington beating the drum for their interests, consumers don't have
a powerful lobby marching on Washington demanding that someone pays
attention to them. That's our job. A quick word from
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I want to move on and talk about one little
word that shows up again and again in this interview.
And by the way, it's a word that you hear
jd Vance use a lot too cheap.
Thirty years we had a bipartisan failed consensus that we
ought to let cheap plastic garbage come into our country.
See cheap here. It being used in a funny way,
not just to mean low priced. It seems to sound
like it means suspect, illegitimate, tainted, maybe unfair, maybe dangerous,
but not something you're supposed to like. And look, it's true.
Sometimes goods really are cheap for bad reasons, because of
an unfair subsidy or dumping or distorted competitions. Sometimes that's true,
but actually pretty rarely. Here's the thing. Another word, a
better word for cheap is more. You're going to have
more left in your wallet, more breathing room at at
the end of the month, more living standards out of
the same paycheck. Cheap sneakers for the kids means more
money for pants. A cheaper microave when the old one
dies means more is left in your rainy day fund.
Lower cost inputs for a small business translates to being
more competitive more. I like that word low prices. They're
not a dirty word. Low prices help consumers, they help
you get more. And here's the problem. Once low prices
are treated as morally suspect, making things sound more expensive,
which is what the Trump tariffs has done, it somehow
ends up sounding like patriotism. I reckon, it's the exacty.
Now there's one more idea. I don't want Jamison Greer
or the Trump administration to let slip by. And that's
the special reverence that folks seem to have for manufacturing. Look,
Democrats are guilty of this too, they say, both Democrats
and Republicans say manufacturing matters. And I agree, it matters
for some communities, and it matters for some strategic sectors.
And a plant closure can wreck a town. And if
you've ever lived through one, you don't need an economist
like me explaining that to you. But Jamison Greer and
the whole Trump administration, they keep treating manufacturing is the
moral center of the economy. You hear it in the
talk of factories and farms and families I played earlier.
You hear it in the nostalgia for steel meals. You
hear it in the sense that making physical stuff is
somehow more real than everything else. I'm not so sure.
Let me show you one really simple fact. Average hourly
earnings in manufacturing the most recent data was thirty six
dollars and seventy one cents across the whole private sector.
It was actually a little higher, at thirty seven dollars
and sixty four cents. So in fact, manufacturing pays a
little worse than the average job. Increasingly, manufacturing jobs aren't unionized,
they're not high paying, and they're not the road to
long term security they once were. The point is, there
was a time the president's youth, when factory job was
basically a shorthand for a middle class wage. But that's
no longer reliably true. There's something a little worse here.
I think manufacturing jobs are what a lot of rich
people seem to think that poor people want. But if
you talk to a worker who's busting their back on
the factory floor and you ask them what do they
want for their kids, they're usually pointing somewhere else, something
easier on the body, more stable, maybe a bit more schooling,
maybe not, but something with a bit more dignity and
a bit less wear and tear. So yes, I'm going
to agree manufacturing still matters. But a job doesn't become
a good job just because it's loud, doesn't become dignified
just because it's dirty. That's nostalgia. We don't need loud,
we don't need dirt. America's economic future is further up
the value chain, and honestly, I'm looking forward to it. Okay, Now,
the part that economists like me find especially maddening. Jamison Greer,
along with President Trump, talks about the trade deficit as
though it's a scoreboard for whether America is beating other countries.
Here, he is, our trade deficit exploded by forty percent
in the five years before President Trump's second term. It
was one point two trillion dollars at the end of
twenty twenty four. This is crazy.
So later on he goes on and he continues.
We want the trade deficit in goods to go down.
But a trade deficit is not the same thing as
being ripped off. Sorry, I had to shout that it's
in the economics textbook. Let me explain it in the
calmer voice. I have a trade deficit. We traded Joe's.
I go there all the time. I'll buy a ton
of stuff from Trade to Joe's. It has never bought
a single thing from platypus economics. That means I have
a trade deficit with them. You probably have a trade
deaf with Traded Joe's too, unless you're an employee. And
if someone saw your shopping card as you left Traded
Joe's and they told you that Traded Joe's was winning
and you were losing, and it's an emergency that you
fix it, you'd probably take a long look at the
frozen fertile and tell them to reconsider. Let me be clear,
Traded Joe's isn't exploiting me. It's nourishing me. It's feeding me.
And so yes, this whole idea of a trade deficit
with traded Joe's sounds silly, but that's the point. Anytime
you're talking about bilateral, two party trade deficits, the logic's
always silly. At the macro level, the aggregate trade deficit
reflects a broader gap between national savings an investment. You
can actually take this idea a trade deficit. It sounds
bad because we've all been taught the word deficit is bad,
but you can in fact describe the exact same phenomenon
instead in terms that sound rosy as an investment surplus.
Call Jamison Greer and ask him if he wants an
investment surplus. It sounds so good, I bet he's into it.
Our trade deficit is also the same thing as an
investment surplus. What we have is folks from all around
the world who want to invest their money in the
United States. They send their dollars from abroad, either so
they can invest directly in our businesses or lend to
Americans who think they've got a better use for those
dollars than foreigners do. This is literally the same idea,
but when you describe it from this other side of
the accounting ledger, it just hits different. And even on
Jamison Grea's own terms, these bilateral deficit numbers don't prove
what he wants them to prove. Look, let's dive into
Stata to check out the numbers. I'm going to plump
us import data from the Census Bureau, focusing on total
trade over the past twelve months. Take a look and
you'll see the US inports from China fell sharply after
Trump started his trade war. But look, here's one more thing.
Let's look at imports from other countries in the region.
We'll focus on ASI. Aren't a club of eleven Southeast
nations that does and include China. By Jingo, you can
see it. The fallen imports from China, it coincides almost
one for one with the rise from these other neighbors.
Here's one more way to see it. We're taking but
the data back to two thousand. The left panel shows
that typically when the US imports more from China, it
imports more from the rest of the region. That's basically
a pattern of tidy US integration. But also notice what's
changed since the start of the second Trump administration. Now
fewer imports from China is associated with more imports from
the rest of the region. So, yeah, jameson Greer can say,
and he does say, and he boasts the bilateral trade
deficit with China. Fel that's a fact. Does that prove
that tariff's worked? No, that's an interpretation. But what was
really happening here was that a lot of that trade
just changed to dresses. And if all that's happening is
you're still trade in the same amounts but with different addresses,
the claim that somehow that's a win or a deep
change it's not a very good interpretation. Hey, look, let's
try and pull the threads together here. You might want
to listen to the whole interview see what you think
of it, But hopefully you get something from this, which
is a sense of that there is an animating, coherent
worldview behind the Trump trade agenda. It's just not right.
And look, trade is complicated, and I get it, and
that's why there is this sort of muddled thinking just
about everywhere. So my task today it's not to argue
with Jamison Gear or the broader set of ideas animating
Trump's trade policy. Instead, what I want to do is
I want to equip you with a few ways to
sort out good trade policy arguments from bad ones. It's
a skill that's going to be usedful well beyond this administration.
So the next time you hear someone, whether it's Trump,
vance Jamison Gear, or the guy next door, talking about trade,
listen for the tells. Are they treating it like a
war instead of operation. A consumer's disappearing from the story.
Is cheap being used as a slur, a word that
takes a benefit and rebrands it as a shame. Is
manufacturing being treated like somehow it's magic. Is a deficit
being waved around like a scoreboard at halftime. Those are
the tells, and once you hear them, you can't unhear them. Yet,
despite all of that, here's Grier's own grade for his
trade policy.
I would give us an air
Not in my class, Jennison, not in my class.