“How painful will Trump’s tariffs be for American businesses?” A slice:
If Mr Trump were to slap tariffs on America’s northern and southern neighbours, the impact on American companies would be devastating. Businesses from Mattel, the maker of Barbie dolls, to Whirlpool, a home-appliance manufacturer, have factories in Mexico. Around three-fifths of America’s imported aluminium and a quarter of its imported steel come from Canada, with large volumes of steel also coming from Mexico. According to Citigroup, a bank, Mr Trump’s tariffs would raise the price of steel for American manufacturers by 15-20%.
Among the hardest hit by the suggested tariffs would be American carmakers. General Motors, for example, imports over half of the pickup trucks it sells in America from Mexico and Canada. About a tenth of the value of parts for cars produced in America also comes from the two countries. According to Nomura, a Japanese bank, the tariffs threatened by Mr Trump would wipe away four-fifths of the operating profit of General Motors next year. Foreign carmakers, such as Toyota, would also be hit.
GMU Econ alum Paul Mueller ponders the cultivation of market societies. Two slices:
A defense of free trade requires good paradigms and mental models—otherwise, our responses will be disjointed, abstract, and ultimately uncompelling. Adam Smith popularized economic freedom, classical liberalism, and limited government by developing and defending a coherent, compelling, beautiful system of economic prosperity—one that he contrasted with the existing corrupt system of mercantilism that dominated the eighteenth-century European world.
Great economists have always cared about more than technical market efficiency. They often marvel at markets, and inspire students with their dynamism, beauty, and wonder. The political Right’s recent drift away from free markets largely stems from losing the grand vision of a commercial republic and instead myopically focusing on a few visible economic and social phenomena. I want to recapture part of this vision by using gardens as an analogy for markets.
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Critics tend to focus on flaws. They notice every weed, every bare spot. They explain how the garden fails to live up to their ideals—too much color here, not enough there, too few flowers, too many trees, etc. The critics, unlike the gardeners, rarely know what would be required to fix the problems they see or to transform the garden into their idealistic vision. Not being gardeners themselves, they rarely appreciate how much work their suggestions entail. Nor do they share in that work. This creates problems when critics are given power to direct what the gardeners can, can’t, or must do.
Mike Munger compares the U.S. Constitution to the ship of Theseus.
Wall Street Journal columnist Mary Anastasia O’Grady looks back on Javier Milei’s first year in office. Two slices:
Milei supporters are convinced that things would be much worse if not for their chain-saw-wielding president. He’s their David fighting the Goliath state, a reckless central bank and regulatory capture by special interests—from labor unions and nongovernmental social organizations to domestic producers. The recession is probably over and next year the economy might grow 4% to 5%. Country risk has fallen sharply. Inflation still isn’t whipped—prices are forecast to rise around 30% in 2025—but relative to recent history it’s tame. For now he can boast a softer-than-expected landing and some stability, which a year ago seemed out of reach.
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Mr. Milei has backed off his campaign promise to close the central bank and dollarize, which could turn out to be a fatal miscalculation. Exchange and capital controls remain in place and the peso is overvalued, making the country very expensive in dollar terms. Cristina Kirchner, convicted in a $1 billion kickback case in 2022, is now head of the Peronist party that has a plurality in both congressional chambers. Mr. Milei’s negotiations with her are making advocates of the rule of law and institutions nervous.
Changes at the micro level are more promising. Early on in his tenure Mr. Milei used emergency powers to eliminate rent control and amend scores of other economically repressive laws. Mr. Sturzenegger’s task is to deepen and broaden what Mr. Milei began by dismantling the legal architecture guaranteeing many other privileges and protections to organized groups (aka rent seekers) at the expense of the wider population. “Their power is written in the law,” the minister says.
Mark Jamison argues that America’s “digital future went off course under Biden.” A slice:
The most recent example of this challenge is the Federal Trade Commission’s antitrust case against Meta, the parent company of Facebook. The case revolves around two dangerously flawed ideas. The first is the FTC’s narrow and arbitrary definition of “market” based on select product features. In Meta’s case, the FTC claims the company dominates a nebulous “personal social networking” market, a term invented to suit its legal argument. The second is an attack on acquisitions as a legitimate path to growth, suggesting that companies must build internally rather than acquire all new capabilities.
Taken together, these ideas set a dangerous precedent that could bring an entire digital economy under siege.
Richard Epstein wonders “how far will Trump turn back Biden’s green policies.” A slice:
The key premises of the Biden proposals were that fossil fuels were the disease and so-called clean energy sources were the cure. Yet that stark opposition could not be maintained, as the production of wind and solar energy is highly inefficient and has its own environmental issues, including the dirty costs of production and the difficulty of disposal, not to mention the disastrous consequences that will result from any effort to reduce greenhouse gases to “net zero,” as Richard Lindzen, William Happer, and Steven Koonin have warned.
