President Trump is tariff-happy. The impetus for his trade war is the U.S. trade deficit, a deficit that he believes is the result of foreigners taking advantage of the United States through “unfair” trade practices.
Trump, like most businessmen, thinks deficits are bad. When a business runs consistent budget deficits, it must either raise more capital to finance those deficits or enter into bankruptcy. But what is true for running a business is not necessarily true for running a country. Indeed, Trump’s line of thinking represents a classic fallacy of composition—the belief that what is true of a part (a business) is true for the whole (the economy).
