Writing in the Wall Street Journal, Samuel Gregg explains what should not – but, alas, what in fact does today – need explaining: trade is a two-way street. Two slices:
The U.S. economy is a formidable source of exports. According to the Office of the United States Trade Representative, America was the world’s second-biggest goods exporter and the biggest services exporter in 2022. Directly and indirectly, U.S. exporters supported about 10.2 million jobs that same year.
Crude and refined petroleum, gas turbines, cars, aerospace products, pharmaceuticals, and soybeans are among America’s biggest exports. Contrary to economic nationalist mythologies, the U.S. still makes plenty of “stuff” (including manufactured goods) that millions of people around the world want to buy—if the price is right.
That’s where today’s problems begin for American exporters. Thanks to Mr. Trump’s tariff spree, U.S. export prices are about to go up.
…..
Some exporters will lobby the federal government for subsidies to offset their losses. That’s a recipe for cronyism. The exporters most likely to get assistance will be those with the best political connections. So much for draining the swamp.
Tyler Cowen warns of the dire consequences of the regime uncertainty foolishly created by Trump’s tariff announcements. A slice:
The Trump administration has created a new monster—one of unpredictability and erratic behavior. We simply cannot predict with any degree of accuracy what will happen next. By the time you are reading this article, there will probably be some newer report about the tariffs or threat of tariffs, and then another report after that.
Even if the White House winds up instituting a pause on the proposed tariffs—or ultimately adopts much better economic policies—this seesawing may plunge the American and perhaps also the global economy into recession.
Also criticizing the calamitous economic uncertainty stirred up by the Trump White House’s tariff announcements are some Republican U.S. senators:
Sen. John Kennedy (R., La.) criticized the conflicting messaging coming out of the White House on tariffs, saying it is difficult to discern whether the tariffs are meant to raise revenue, as trade adviser Peter Navarro has championed, or negotiate away other nations’ tariffs, as Treasury Secretary Scott Bessent said Monday.
“They went on television this weekend and all offered different scenarios,” Kennedy said. “It just seemed to me that they ought to talk to each other, and, more importantly, talk to their boss.” Sen. Ron Johnson (R., Wisc.) echoed those concerns saying that “very few’’ people know if this is for revenue or negotiations.
Sen. Rand Paul (R-KY) “is leading the charge against Trump’s tariffs.” A slice:
But the senator from Kentucky is issuing a stark warning to fellow Republicans that Trump’s tariff policies could lead to a generational political loss for the party. And he’s raking in surprising praise from his Democratic colleagues as he pushes back relentlessly on the airwaves and the Senate floor against what he describes as Trump’s executive overreach and infringement on Congress.
In an impassioned floor speech ahead of his vote to roll back Trump’s Canada tariffs Wednesday, the senator said members of Congress had “abdicated their power” over decades, and he placed the blame on both parties.
Here’s the Editorial Board of the Wall Street Journal on how the damage from tariffs spreads. Three slices:
Stocks took another header Monday as trade uncertainty continues to unnerve investors, and President Trump threatened China with an additional 50% tariff on top of the 54% already promised. One certainty is that his tariffs will inflict sweeping and hard to predict costs on businesses and consumers.
…..
Used car prices will also climb, AEG predicts, as demand increases among consumers who don’t want to pay higher prices for new cars. If tariffs also cause car makers to reduce their U.S. inventory, car prices will rise even more. Volkswagen said last week it would stop rail shipments to the U.S. from Mexico.
The auto tariffs will cause Americans to pay $30 billion more for cars in the first year while “investors and employees of manufacturers, suppliers, and dealers in the automotive industry will absorb at least another $30 billion in tariff costs,” AEG predicts. Over time, manufacturers will pass more of their tariff costs onto consumers, including the higher costs of reworking supply chains to produce more cars and parts in the U.S. So much for the claim that foreigners will pick up all tariff costs.
…..
In other words, companies will try to mitigate their higher costs by various means, including by raising prices on products and services not subject to tariffs. The impact of Mr. Trump’s tariffs will ripple through the economy, especially if they cause consumers to pull back their spending.
This may be why shares in U.S. steel and aluminum makers have also plunged. Even the purported beneficiaries of tariffs inevitably become victims as an ebbing tide maroons all ships.
Eric Boehm is correct: “The president is raising taxes, hiking prices, and creating supply chain chaos. Congress should act quickly to stop this.” Two slices:
Here’s the bad news: That’s not the end of the bad news.
As ugly as the stock market losses have been, the big hit from Trump’s tariffs probably haven’t even arrived yet. As always, the stock market is not the economy—it’s an aggregated indicator of what investors think the economy will look like in the future. Right now, they think it will be bad. Really bad.
It’s hard to blame them. In addition to crashing Americans’ retirement accounts and wiping out huge amounts from American companies (Apple and Nike were among the biggest losers in Friday’s rout), Trump’s move will soon raise taxes, wreck supply chains, and make basic goods more expensive or difficult to obtain.
In other words, even if you aren’t affected by the stock market sell-off, you’ll feel the effects of the tariffs before long.
…..
“A trade war triggered by Trump’s chaotic tariffs is the same type of aggregate shock as the Covid crisis, but worse,” warns Ben Golub, a professor of economics at Northwestern. As the tariffs degrade the ability of modern international supply chains to function, he wrote on X, the results will be “supply shortages and price spikes.”
Phil Magness reveals the flimsiness – to put it politely – behind Trump & Co.’s case for tariffs.
Pierre Lemieux describes “the ugliness of the great protectionist state.”
Thomas Firey recommends Pierre Lemieux’s exploration of “the mysterious transformation of Peter Navarro.”
Scott Lincicome is correct:
Good pt here from @RameshPonnuru: achieving Trump’s balanced trade goal requires a massive increase in government control over the economy – in the US and abroad.
Damon Root explains that “Trump’s tariffs violate the constitutional separation of powers.”
“We have a bad globalization narrative, not bad economics” – so explains economist Kyle Handley.
Wall Street Journal columnist Mary Anastasia O’Grady understandably insists that “Argentina needs the dollar more than ever.” A slice:
There has been much media hype likening Mr. Milei to Mr. Trump. The Argentine enjoys the attention, perhaps thinking it might help get favors from the White House. But Mr. Milei is an economic liberal. Mr. Trump is not, as this latest effort to stop Americans from buying foreign-made goods demonstrates. Rather than seeking favor with Tariff Man, Mr. Milei would be better served enhancing Argentina’s economic and financial independence by repairing the country’s broken monetary system. Dollarization is the best way to get there.
The good news is that Mr. Milei’s success isn’t dependent on an enlightened U.S. president. Sixteen months after he took office, the self-described libertarian has made important strides toward freeing his nation from the death grip of peronism. Inflation is expected to end this year below 25%, down from over 210% in 2023. Deregulation has slashed the cost of doing business, and the economy is on track to grow at 5%.
