Is Donald Trump to be taken literally or seriously? Salena Zito offered these alternatives in a column in The Atlantic published in September 2016. Today, before he obtains power for a second time, Trump must be taken more seriously and more literally than last time. The evidence comes from his nominations, notably Robert F Kennedy Jr at health, Pete Hegseth at defence, Tulsi Gabbard at national intelligence and Matt Gaetz at justice. These people show that Trump will be far more radical. Moreover, trade policy has long been the area where he is to be taken both seriously and literally; protectionism is not just a long-standing personal belief, but one that he was already dedicated to last time.

Unfortunately, the fact that Trump needs to be taken literally and seriously does not mean that he (or those around him) understand the economics of trade. If he is prepared to buy into Kennedy’s “anti-vaxxer” nonsense, why should he care about what economists think about that? He makes two big mistakes: first, he has no inkling of comparative advantage; second and worse, he does not understand that the trade balance is determined by aggregate supply and demand, not by the sum of bilateral balances. That is why his tariff war will not reduce US trade deficits. On the contrary, especially in the current context, it is more likely to lead to inflation, conflict with the Federal Reserve and a loss of trust in the dollar.

If one wants to produce more of something — import substitutes, for example, as Trump desires — resources must come from somewhere. The questions are “from where?” and “how?”. The answer may be “from exports, via a stronger dollar”, as tariffs lower the demand for foreign currency, with which to buy imports. In this way, a tax on imports ends up as a tax on exports. The trade balance will not improve.