Guess what tariffs on Canadian lumber do to home prices. If you answered that they raise the cost and American homebuyers are forced to pay higher prices, go to the head of the class.

This retaliation policy is both cruel and not very smart. It's as if you and I were in a rowboat out at sea and I shot a hole in my end of the boat.

What should be your response?

If you were Secretary of Commerce Wilbur Ross or Secretary of the Treasury Steven Mnuchin, you might advise retaliating by shooting a hole in your end of the boat.

If I were president, I'd try to persuade officials of other countries not to serve special producer interests by forcing their citizens to pay higher prices. But if they insisted, I'd say, "Go ahead, but I'll be damned if I'll do the same to Americans!"

The ruse used to promote producer interests through tariff policy is concern about our large trade deficit. It's true that we have a large current account trade deficit. However, that's matched exactly by a very large capital account surplus.

Translated, that means Americans buy more goods from other countries than they buy from us; that's our current account deficit. But other countries find our investment climate attractive and invest more in the U.S. than we invest in other countries; that's our capital account surplus.