No, trade surpluses aren’t caused by comparative advantage

In a New York Times essay in the wake of Biden’s recent trade restrictions, former Obama administration official Steven Rattner made a plea for the return of the US to a global system of comparative advantage. Tariffs and other trade policies, he argued, violate the principle of comparative advantage, and anyway Americans are better off if they can buy the cheapest foreign products available.  As Rattner writes: Every student in an introductory economics course learns about David Ricardo’s 200-year-old theory of comparative advantage: the idea that by specialising in the products that they can produce most efficiently and then trading with others, nations can be better off. . . . Tariffs can be used to temporarily shelter nascent domestic industries — much as Alexander Hamilton proposed when he served as our first Treasury secretary. They can be used judiciously to address unfair trading practices. And they can be used when national security is genuinely at risk. However, we also need

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• Swaminathan Gurumurthy