Causes, Benefits and Costs of International Trade

A primer on the basics

On Thursday, asked about the quite scary prospect of soaring prices and shortages resulting from the apparent collapse of Chinese shipments of goods to the United States, Donald Trump responded

That means we lose less money ... when you say it slowed down, that's a good thing, not a bad thing

OK, Trump doesn’t understand what international trade is all about. But the truth is that even generally well-informed readers often know less about the basics of trade than economists tend to assume.

So this is a primer on the basics of international trade. For the most part it covers the same material encountered by every student taking Economics 101. But I thought I might add some value by presenting these basics in a more conversational style than most textbooks (my own with Robin Wells included), offering more real-world examples, and paying more attention to the shadows — the reasons even generally pro-trade economists, myself included, think that simply shouting “Yay free trade!” isn’t sufficient.

Beyond the paywall I will cover:

1. The reasons nations trade with each other

2. The benefits of trade

3. The costs of trade