There will be plenty to debate when we get to particulars.
President Trump is a big fan of tariffs. He says so all the time. But what’s the point of the tariffs he wants to impose?
During his confirmation hearings, treasury secretary nominee Scott Bessent said that any upward pressure on prices from tariffs will be counteracted by a rising dollar and price-cutting by importers. But that means that the protective effect of the tariffs will be muted, too: If the price of imports in U.S. dollars drops, for either reason, U.S. consumers will buy more of them. A stronger dollar will also work against U.S. exporters. For what it’s worth, I think that Bessent is right to push back against overblown claims that raising tariffs will be inflationary. But he has also inadvertently pushed back against their rationale.
Trump himself has talked about repeating past U.S. successes through tariffs. Earlier this week, he said that “our country was at its richest from 1870 to 1913,” when we had high tariffs. (He then added a “relatively speaking.”) The U.S. was indeed a rising economic power during that period, which proves that high tariffs are compatible with high growth rates. Whether tariffs contributed to that growth is of course another question. But those were also years of persistent trade deficits — something that Trump usually presents as a form of theft from us by other countries. His own historical analogy suggests that tariffs won’t achieve the main goal he has set for them.
JPMorganChase CEO Jamie Dimon recently made remarks that are being taken as favorable toward Trump’s trade policy, but these too raise the question of goals. What Dimon said is that if tariffs have a small inflationary effect but increase our national security, that trade-off is worth making. That’s not exactly an endorsement of tariffs on Canada, Mexico, and Europe, let alone of across-the-board tariffs on every import from every other country in the world, all of which Trump has suggested.
Dimon’s more general point is that whether tariffs are good or bad depends on what form they take, and that point is worth taking seriously. There will be plenty to debate when we get to particulars.
P.S. Unless, of course, the debate is already over. Here’s how a recent New York Times story begins:
Partway through a panel discussion at a recent economics conference in San Francisco, Jason Furman, a former adviser to President Barack Obama, turned to Kimberly Clausing, a former member of the Biden administration and the author of a book extolling the virtues of free trade.
“Everyone in this room agrees with your book,” Mr. Furman said. “No one outside of this room agrees with your book.”
The academics and policy wonks gathered in the hotel conference room laughed, but the comment captured something real. . . .
Maybe that’s true about Clausing’s book, which I haven’t read. A poll this month finds, however, that only 29 percent of Americans favor an across-the-board tariff. Last month a poll found that more people think tariffs on Canada, Mexico, and even China will hurt than help the U.S. economy. That’s a big room.