Senator Rand Paul (R-KY) said Tuesday on CNBC’s “Squawk Box” that it was “absolutely a fallacy” that the United States is getting ripped off because they have a trade deficit with another country.
Paul said, “I mean, the whole debate is so fundamentally backwards and upside down. It’s based on a fallacy, and the fallacy is this, that somehow, in a trade, someone must lose. That somehow, when you trade with someone, there’s a loser and someone’s taking advantage of you, and China is ripping you off, or Japan is ripping you off. It’s absolutely a fallacy. Every trade that occurs in the marketplace is mutually beneficial.”
He continued, “If you have a free society and I trade with you, if you want to sell me your coat and I give you $200 for it, we both agree to it and we’re both happy with the trade. No American consumer trades with China. They trade with Wal-Mart or they may buy something from China, but they individually buy something they want and they make a decision. The trade is always a win-win. Now you can artificially do this accounting between countries and say, ‘Oh, trade deficit, look at this trade deficit,’ but I have a trade deficit with my grocery store.”
Paul added, “The people who employ me, if I work for Corvette and they employ me, they have a trade deficit with my labor. They buy my labor and I never buy their cars. So you can have this artificial accounting and it makes it look like a bad thing, but you have to ask yourself, is trade good or bad? And if you look at the trade deficit, in times of a recession the trade deficit goes down. So if the tariffs push us into a recession, we could reduce the trade deficit because we’re all buying less stuff. We have to get back to the fundamentals of, is trade good or is trade bad?”
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