Donald Trump is the world’s leading expert in getting things wrong and one thing he gets wrong bigly is the value of the U.S. domestic market. Trump seems to believe that our domestic market is incredibly valuable to the rest of the world and that access to it should allow him to extort large concessions from the rest of the world. This is a seriously wrong understanding of the world economy.

The basic point is a simple one, when other countries sell us things, they are essentially giving us a portion of what they are able to produce for dollar bills. Because they give us a portion of what they produce, they have less to consume or invest domestically. It’s sort of like if you bake a cake and give a slice to your neighbor, that leaves less for you and your family. In that sense, selling things to the U.S. makes them poorer.

This doesn’t mean they are hurt by the trade. They can use the dollars they get from the U.S. to buy stuff from us, or they can use it to buy things from third countries, or they can hold the dollars in reserve in case they are needed in the future. But at the most basic level, the more goods they sell to us, the less they have to use at home.

Suppose Donald Trump gets angry at a country and says that he won’t let them sell to the United States anymore. In this situation they have to figure out what to do with the goods they expected to sell here. They can look to sell them to another country or possibly use them at home. Both outcomes are somewhat worse from the standpoint of the country Trump is angry at.

If they sell them to another country, they will likely get a lower price for........

© CounterPunch