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Trump’s trade plan conjures up the ghosts of depressions past

Donald Trump delivers a speech to a campaign rally in Iowa – Matthew Putney/AP

All trade is good, even when it results in a deficit. This may be economics 101, but it is amazing how quickly it falls victim to contrary political thinking when international tensions run high.

As it happens, we don’t need to rely solely on economic theory to know the benefits of free trade. Just take the example of the United States, which has run current account deficits for the past 50 years or more, but has seen real GDP per capita more than double in that time.

It is no coincidence that this great leap forward in measured prosperity has coincided with a period of unprecedented globalisation.

There are, however, some important caveats. It used to be said that when politics and economics collide, it’s economics that in the end always wins.

Much of the time it’s true. You cannot buck the market, as…

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