President Trump’s Made In America Week featured plenty of firetrucks but few hard facts to support his brand of economic nationalism. Spending more on essentially the same product because it happens to be produced domestically is economically inefficient. It will remain inefficient whether or not anyone or everyone is willing to admit this. Yet, interestingly, even those who believe in buying American-made products aren’t willing to pay the higher prices generally associated with them.
A recent Reuters/IPSOS poll probed Americans to see how much they value the Made In America label and how much they would be willing to pay for it. While prices vary widely, most consumer goods produced in the United States goods cost at least double of comparable made overseas. Nonetheless, while 70 percent of Americans said that buying American is important, only 4 percent were willing to pay that 100 percent premium.
A bit more than a third, or 37 percent, said they weren’t willing to pay anything more at all for American-made products. Most of that segment probably shares the view of the 30 percent that said buying American good was not important. Even those that were willing to pay more still weren’t willing to pay much more. Further questions found that 26 percent were willing to pay a cost increase of 5 percent, 21 percent were willing to pay 10 percent more, nine percent were willing to pay 25 percent, and only percent would pay 50 percent more.
While it may be a bad sign for Trump’s agenda, the poll substantiates the economic logic of everyday American. Saving money by purchasing equivalent goods at lower prices is a no-brainer; it’s common sense. The money that consumers are saving on cheap goods from overseas can be saved and spent on more important purchases, including services and good produced in America. A dollar saved is one earned, and will end up contributing further to the economy.
Poorer and working-class Americans benefit the most from free trade because it allows them to purchase goods they otherwise wouldn’t be able to afford. They’re also the group that would be hurt the most by tariffs and taxes on imported goods proposed by Trump.
Economic nationalists would have us believe that saving money by purchasing cheap goods is bad because such money should go to American workers. They’re engaging in the same sort of protectionism that special interests employ. Small groups of workers, such as those that manufacture shoes, will be hurt by Vietnamese manufacturing. But the value of the jobs of 50,000 workers pale in comparison to the value of millions of consumers saving billions of dollars.
These nationalist-protectionists would also have us believe that it’s best for a country to produce all of its own products and export a trade surplus. That’s the thinking of mercantilism, which held mankind’s economic progress back for centuries. Few today would yearn for economic nationalism if they understood that it flows from imperialism and nationally-chartered monopolies.
The main problem with “Buy American” is that it doesn’t account for basic economics. Some countries have natural advantages that enable them to produce goods better or cheaper than others. That is no different from the specialization of labor within an organization. Specialization allows each country to do what they do best, and to trade with other countries that excel in different areas.
Free trade enriches both sides of the trade and has been proven its record, which allowed to operate, such as the period following World War II. If free trade didn’t benefit both parties, no one would engage in it. Insisting on buying American rewards economic inefficiency and raises prices for everyone. The last poll shows that even if the American people say it, they act as if they believe in free trade.