For alerting me to the Sander Gerber and Stephen Miran piece in Barron’s I thank Phil Magness.
Editor, The Corner
National ReviewEditor:
I almost never find myself disagreeing with Andrew Stuttaford, but I do so today as I read his applause of Trump’s choice of Stephen Miran to head the Council of Economic Advisors (“Stephen Miran Nominated to Chair the White House Council of Economic Advisers,” December 22). Although Miran is impressively credentialed as an economist, when writing about international trade he comes across as uninformed.
In a piece last month in Barron’s calling for a sextupling of the average U.S. tariff rate, Miran and his co-author Sander Gerber wrote about Trump’s first-term protectionist moves that “the tariffs caused the dollar to move higher by close to the exact amount the tariff rate went up, offsetting the tariffs. Overall after-tariff dollar import prices were unchanged, explaining the total lack of price pressures or drags on growth” (“Fears Over Trump Tariffs Are Overblown. What the Critics Overlook,” November 21).
Well. Forget that there’s evidence that the tariffs did drag down growth. Let’s instead examine the economic logic of Gerber’s and Miran’s argument.
Because the chief goal of Trump’s tariffs is to protect American firms and workers from import competition by raising the prices Americans pay for imports, Gerber and Miran inadvertently admit that these tariffs failed to achieve this goal. After all, if the tariffs really did cause the value of the dollar to rise by enough to completely offset the higher tariff rates – and, thus, resulted in the post-tariff prices Americans paid for imports being no higher than the pre-tariff prices – then no such protection can have occurred.
What instead happened (again, insofar as Gerber and Miran have their facts straight) is that Trump’s tariffs significantly devalued foreign currencies against the dollar. Americans got the same quantity of imports, but for fewer dollars. And when foreigners found themselves with fewer dollars, they bought fewer American exports than they would have bought absent the tariffs – a negative effect of the tariffs that Gerber and Miran ignore.
Trump & Co. often complain about foreign currencies being undervalued. These people are also forever asserting that Americans import too much and export too little. Yet here we have the new head of Trump’s CEA insisting that tariffs don’t raise Americans’ costs of acquiring imports as he also, in essence, endorses tariffs as a means of lowering the value of foreign currencies against the dollar without seeming to recognize that a higher-valued dollar means fewer American exports.
At least on matters of trade, this appointment is nothing to applaud.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
