By Howard Yu
Editor’s note: Howard Yu is the author of LEAP: How Businesses Thrive in a World Where Everything Can Be Copied (PublicAffairs; June 2018), LEGO professor of management and innovation at the IMD business school in Switzerland, and director of IMD’s signature Advanced Management Program (AMP). The views expressed are his own. View more opinion articles on CNN.
(CNN) — Even Donald Trump understands he can’t win his trade wars across all fronts, from China to Mexico to Canada. The White House is now set to restart trade negotiations with Europe and to work toward “zero tariffs” on various industrial goods. Still, the President’s belief that “the US has been ripped off by other countries” is a line of reasoning that only comes naturally to a former real estate developer
In real estate development, land grabs are a zero-sum game: When you win, it means someone else loses. In the same line of thinking, imports result in trade deficits; trade deficits destroy jobs and, consequently, lower citizens’ standard of living. But what if trade deficits have nothing to do with our economic well-being, which in fact relies on a healthy dose of foreign competition?
A generally accepted measure for a country’s standard of living is the GDP per capita — the output of goods and services produced in a year divided by everyone within the country’s borders. It’s a measure of economic growth and well-being used by the White House.
By this measure, Harvard psychologist Steven Pinker shows in his book, “Enlightenment Now,” that China, once a famine-stricken nation, had achieved in 2008 the same per-capita income that Sweden had in 1950. And China’s progress has hardly been made at the expense of the United States. The US has grown richer still, during the same long boom in the late