Arnold Kling discusses “some trade myths that refuse to die.” Two slices:
But counting workers is the wrong metric. America is outstanding at food production. But in terms of employment, our agriculture industry is even more “devastated” than manufacturing. The majority of Americans 250 years ago were in farming. Now it is only about 2 or 3 percent.
Since 1980, American manufacturing output has doubled. Manufacturing has not been devastated. We are making more goods with fewer workers.
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The over-arching myth that is popular these days is that mainstream economists do not understand how trade works in the real world. I disagree with mainstream economists plenty. But on the issue of international trade I think that, if anything, mainstream economics under-estimates the benefits, and critics under-estimate the value of mainstream economics.
Americans have expressed distress over the demise of manufacturing in this country for as long as I can remember.
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Today, the issue seems as politically potent as ever. From progressives like Bernie Sanders proclaiming that their great goal is “to rebuild the manufacturing sector in America” to MAGA populists like President Trump pledging in his inaugural address that “America will be a manufacturing nation once again,” the revival of old-fashioned manufacturing appears to be the rare subject on which both sides of the aisle concur. In a national survey conducted by YouGov last year for the Cato Institute, 80 percent of all respondents agreed that “America would be better off if more people worked in manufacturing.”
But would it? According to the same survey, the overwhelming majority of Americans say that they personally would not be better off if they worked in a factory. “For all the … nostalgia about manufacturing jobs, most Americans aren’t on board with the idea of returning to work in factories,” economist Veronique de Rugy wrote last month in National Review.
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To be sure, US plants have largely turned away from making many of the low-tech, labor-intensive consumer items they once specialized in — sneakers, T-shirts, small appliances, toys. Those jobs have mostly gone overseas, and trying to bring them back by means of a trade war would be ruinous. Yet America remains a global manufacturing powerhouse — highly skilled, highly innovative, and highly efficient. It is also, as it has been for many decades, a global services powerhouse. Meanwhile, as in every advanced country, the service sector in the United States accounts for an even greater share of national wealth than manufacturing. For most American families, careers in fields like health care, law, banking, and computer science long ago supplanted factory jobs as the surest path to middle-class comfort.
What all this adds up to is not, as the gloom-and-doomers of the progressive left and the MAGA right insist, an economically ravaged nation incapable of decently employing its people. Rather, this is a nation that, with all its failings, continues to boast the mightiest, most resilient economy in history. Manufacturing employment has been decreasing for 80 years, yet manufacturing output is at or near its all-time high. So is manufacturing capacity. So is the average American’s economic standard of living (real per-capita GDP). So is the median US household income. Fewer jobs in US steel mills and assembly lines didn’t mean the end of US manufacturing. Nor did it mean the end of US prosperity.
Then again, crudely tearing through the complex spider web of connections that constitute a well-functioning market will lead to that web being repaired in ways that the tariff Taliban will find . . . disappointing.
[DBx: Stuttaford’s term “tariff Taliban” is perfectly descriptive: The tariff Taliban – whose fanatical leader is Trump and whose chief mystic is Peter Navarro – are motivated by an antediluvian ignorant dogma into laying waste to a magnificent part of modern civilization that they are too benighted, arrogant, and closed-minded to understand.]
Here’s a new report on just how chaotic and dangerous is Trump’s trade ‘policy.’ (HT Phil Magness)
And yet … the dollar is down since Trump started his “Liberation Day” tariff adventures. So is the S&P 500, of course, but bond yields haven’t fallen like one would expect. Investors suddenly seem a bit wary of all things American. There are technical reasons for some of this, trades being “unwound” and so forth. But there’s a real risk we’re losing our status as the premier destination for global financial capital — a status that is crucial to growing our economy and maintaining our standard of living. (All that foreign money funds business investment.) And that means a real risk for an administration that would like to finance trillions of dollars’ worth of unfunded tax cuts.
Phil Magness’s letter in today’s Wall Street Journal is superb (second link added):
Joseph Epstein’s op-ed “Is That an Augur, or a Mere Economist?” (April 24) makes the peculiar assertion that “nothing near a consensus among economists about the likely effect of [President Trump’s] tariffs has arisen.” He adds that some economists are predicting “unprecedented prosperity for the U.S. and its people” from the levies—albeit without offering any examples or evidence.
Several data points belie Mr. Epstein’s depictions of a divided economics profession. Earlier this year the University of Chicago’s Clark Center surveyed an expert panel of economists about Mr. Trump’s tariff objectives. It found negligible support among respondents for the president’s claim that these policies would reduce U.S. trade deficits.
More recently, I co-organized a letter of economists articulating the profession’s opposition to the president’s tariff agenda. As of this writing, we have more than 400 Ph.D. signatories from across the political spectrum, including three Nobel laureates and several leading experts on international trade. These patterns confirm a 2009 survey of the American Economics Association’s membership, which found that 83% of respondents believe in the elimination of tariffs and other barriers to trade.
Exceptions to the anti-tariff consensus among economists exist, though they constitute a tiny minority on the periphery of the profession. Unfortunately, the only sizable concentration of pro-tariff economists is on the current White House’s staff.
Phillip W. Magness
Independent Institute
I joined a broad coalition of leaders—including former U.S. senators, retired federal judges, a former U.S. attorney general and pre-eminent constitutional scholars—in filing a friend-of-the-court brief last week in V.O.S. Selections v. Trump. Our brief urges the U.S. Court of International Trade to strike down President Trump’s 2025 tariffs as an unlawful and unprecedented seizure of legislative power. It challenges Mr. Trump’s sweeping proclamations not because of what they do but how they were done: unilaterally, without congressional authorization, and in defiance of the Constitution’s structure.
In April, Mr. Trump imposed a 10% baseline tax on all imports and sharply higher duties on goods from many countries. Then, in a series of whiplash tweaks, he shifted the numbers. These measures weren’t authorized by Congress. They weren’t part of a debated trade bill. They were declared unilaterally by presidential proclamation.
Tariffs are taxes, and under the Constitution, they must be enacted by Congress. Mr. Trump claims authority under the International Emergency Economic Powers Act of 1977. But that law allows the president to freeze certain foreign assets in times of national emergency, not to impose new taxes on Americans. It was a post-Watergate reform crafted to limit executive power, not expand it.
Yet here we are, in a strange moment of constitutional drift. Trade deficits dating back to the 1990s [DBx: actually, to the 1970s] are labeled “emergencies.” A decades-old global economic pattern is rebranded as justification for executive taxation. The president signs a proclamation and the machinery of taxation begins—without hearings, votes or the consent of the people.
Conservatives have spent decades preaching the importance of limited government, checks and balances, enumerated powers and the rule of law. We have insisted that means matter—that you can’t govern well by ignoring the architecture of the Constitution. We rallied against executive overreach under President Obama, rightly pointing out that even noble goals don’t justify unconstitutional methods. What are we to make of this moment, when a president supposedly from our own ranks casts aside those same constraints?
Some will be tempted to shrug. The tariffs are popular in certain quarters and Mr. Trump is strong-willed. But that’s exactly the problem. We’ve grown accustomed to Congress punting hard decisions to the executive branch, and to presidents treating ambiguous statutes as blank checks. We’ve lost the soul of republican government, the idea that sovereignty resides with the people, and that power must be mediated by institutions designed for consent and deliberation.
“As the economy tumbles, so does Trump’s approval rate.”
Trump’s tariffs are shocking. (HT Scott Lincicome) Two slices:
Since the US raised levies on China to 145% in early April, cargo shipments have plummeted, perhaps by as much as 60%, according to one estimate. That drastic reduction in goods from one of the largest US trading partners hasn’t been felt by many Americans yet, but that’s about to change.
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“We are paralyzed,” said Jay Foreman, CEO of toymaker Basic Fun in Boca Raton, Florida, which supplies big retail customers such as Amazon.com Inc. and Walmart. He called the tariffs a “de facto embargo” and said customers have been pausing orders so far, but he expects them to start canceling them if the China tariffs stay at this level for much longer.
On Wednesday, it will hear oral arguments about an Oklahoma dispute involving the tension between the First Amendment’s proscription of the “establishment” of religion and its guarantee of the “free exercise” of religion. And about whether charter schools are “state actors.” Specifically: Is an explicitly Catholic charter school an extension of the state government, or is it a private entity contracting with that government?
