If Trump Ruled Venice

Sometimes in history, one can pinpoint the precise moment when things took a turn for the worse. When it comes to America's international economic dominance, that moment is likely to be the day Donald Trump was elected president.

SAN JOSE, CALIFORNIA – Marco Polo, the famous thirteenth-century Venetian merchant, was one of the first Europeans to trade with China. Now imagine that, after a while, the Venetian state became concerned that Polo was purchasing too many silks and spices from China to sell at a profit in Europe. The “trade deficit” he was creating, the authorities worry, would deplete the stock of gold in Venice, while creating jobs for Chinese, rather than for Venetians.

In this imaginary history, Venice assembles a council of experts to decide whether the risks posed by the trade deficit merit retaliation in the form of tariffs, quotas, or potentially even a ban on trade with China. As the council deliberates, two competing theories emerge.

One group – the “mercantilists” – argue that it is up to the state to maximize gold holdings and protect domestic manufacturing employment, by imposing tariffs, restricting the use of gold for imports, and forcing China to buy the same amount of goods from Venice that Venice buys from China. If China refuses to do so, Polo’s purchases will have to be restricted.

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