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Here’s a letter to the Wall Street Journal.

Editor:

Reporting on President Trump ‘softening’ the impact of his automotive tariffs, you quote him saying that “it’s a little bit of help. We just wanted to help them enjoy this little transition, short-term” (“Trump Softens Blow of Automotive Tariffs,” April 30).

Lovely. We should all be grateful – just as we should be grateful to an armed robber who, after initially demanding that we fork over $1,000 of our hard-earned money, announces that he’s kindly offering us a little time to transition by temporarily reducing his demand to $300, but also assuring us that he’ll return soon for the remaining $700.

What a guy.

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

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All this winning from tariffs: “The US stock market just recorded its worst first 100 days of any presidential term since President Gerald Ford assumed office in 1974.”

The Editorial Board of the Wall Street Journal is rightly disappointed that Amazon won’t itemize on its sales site the costs of Trump’s tariffs punitive taxes on Americans who buy imports or import-competing products. A slice:

The public could have used Amazon’s price transparency. Tariffs are taxes, and it’s helpful to know how policy choices affect final prices. Some shoppers might say the additional cost is worth it to support Mr. Trump’s policy. But there’s no denying that they’re paying, and everyone is better off knowing how much.

Ride-sharing platforms understand this dynamic. After each trip, riders get an itemized bill that shows how much of their fare went to tolls and political fees. So do hotels when they list local tax.

Mr. Trump likes to say foreign exporters bear all the costs of tariffs, with none passed on to customers. Economists disagree, as in a 2020 study showing that final consumers bore the burden of Mr. Trump’s first-term tariffs.

Ms. Leavitt accused Amazon of playing politics selectively, asking why the company didn’t propose a similar feature to display the cost of President Biden’s inflation. She’s right that businesses might have protested more about the cost of progressive governance. But the comparison overlooks the unique simplicity of tariff costs. Like taxes, tariffs often add a precise dollar figure to a sticker price. Voters who pay little attention to the macroeconomy will notice a direct markup on items they buy.

Consumers are already feeling the tariff pain, whether or not retailers quantify it on their websites. White House denials won’t change that, but repealing the tariffs would.

Also weighing in on Amazon’s decision to (not) itemize the costs of Trump’s tariffs taxes is Andrew Stuttaford. A slice:

The administration has repeatedly assured Americans that its tariffs are a key element in bringing about the country’s coming golden age. If Amazon were to do this (it seems that they are not) it would highlight the sacrifices made by American consumers chipping in to pay the tariffs that are going to bring this country so much prosperity. They deserve the recognition.

Kyle Smith tweets: (HT Scott Lincicome)

Amazon does me the favor of identifying the 8.875 percent NY tax. I don’t know why they would fail to point out a 145 percent Trump tax on goods from China.

Jack Nicastro decries Trump’s Bidenesque economic ignorance in the treatment of AI. Two slices:

President Donald Trump pledged to remove “barriers to American leadership in artificial intelligence” in a January executive order by reversing the Biden administration’s precautionary approach to AI. Despite this order, the Trump administration is repeating its predecessor’s mistakes by allowing export controls issued by former President Joe Biden to take effect.

…..

Restricting the sale of advanced semiconductors doesn’t only harm domestic tech firms such as Intel and Nvidia, but the American economy writ large. “Closing the door on all sorts of international trade opportunities,” explains [Matthew] Mittelsteadt, “means we’re closing the door on the markets that are needed to reap revenue on the things that we invent.” Not generating revenue means the U.S. “can’t invest in R&D,” he adds, “and if we can’t invest in R&D we’re going to start falling behind.”

Jim Geraghty warns that “tariffs are already damaging the supply chain.” Two slices:

Most of the time, what’s said at the meetings of the Los Angeles Board of Harbor Commissioners probably doesn’t have much impact on your life. But the assessment of Port of Los Angeles Executive Director Gene Seroka at their Thursday meeting should make every American consumer sit up and take notice. The most spectacular self-inflicted economic wound of all time is already here.

“We are beginning to see the flow of cargo to the port of Los Angeles slow,” Seroka said. “It’s my prediction that in two weeks’ time, arrivals will drop by 35 percent, as essentially all shipments out of China from major retailers and manufacturers has ceased and cargo coming out of Southeast Asia locations is much softer than normal with the tariffs now in place.”

That’s just the bad news for U.S. consumers who are seeking to purchase goods made in China and other Southeast Asian nations; the outlook for Americans whose livelihoods depend on exporting goods to other countries is even darker.

…..

When the ships stop coming in, it creates a domino effect of bad economic news. Fewer ships means there’s less work for port workers. That also means less work for truckers. (On Wednesday, trucking industry analyst Craig Fuller noted that the amount of trucks leaving Los Angeles was comparable to Thanksgiving and Christmas Day, usually the lowest-volume days of the year.) This also means fewer goods ending up on store shelves. Limited supply and steady demand mean price increases.

The Houston Chronicle reports on former Sen. Phil Gramm’s (R-TX)’s principled and informed opposition to Trump’s tariffs punitive taxes on Americans who buy imports or import-competing products. A slice:

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… is from page 73 of Art Carden’s and GMU Econ alum Caleb Fuller’s superb new book, Mere Economics (footnote deleted; link added; original emphasis):

Clearly, protectionism is alluring. Make foreign steel more expensive, and more Americans make steel. Simple. But that’s what economist Thomas Sowell calls “Stage One Thinking.” When we ask, Then what happens? (stage two), we see how tariffs affect everyone in the market – not just American steel workers – and see how tariffs Make America Poorer Again.

DBx: The protectionist sees the robber and only the robber; the protectionist is blind to the robber’s victims. And noticing the successful robber’s increased wealth, the protectionist declares triumphantly that robbery paves the path to national riches – such is the essence protectionism.

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Among the most careful, thorough, and insightful – and significant – economic analysts at work today is the American Enterprise Institute’s Scott Winship. In this new post, which is long but well worth a complete and careful read, Scott summarizes the “China Shock” research as well as all of the significant pieces of research inspired by it.

Especially important is this bit:

Finally, all the research estimating “effects” of the China Shock suffers from an important real-world weakness. They all envision a counterfactual world in which not only do Chinese imports stay frozen at, say, 1990 or 1999 levels, but imports from other developing countries fail to expand to meet the American demand that the China Shock filled. Imagine if China had never liberalized its economy or if it had been kept out of the World Trade Organization. Heck, imagine that we had levied insane tariffs against China in 2000. What would have happened?

If you think that the China Shock reduced employment, do you think all those jobs would have been saved if it could have been prevented? Or do you think that trade with Vietnam and other countries would have grown at a faster rate in the absence of greater trade with China? Implicitly, all this research has in mind that trade with other countries would not have ramped up in the absence of Chinese import competition. But that seems highly dubious. If at least some ramp-up would have happened, then all the research discussed above overstates any negative impact of the China Shock.

A similar argument could be made about automation. Suppress the China Shock and perhaps manufacturer reliance on automation would have accelerated to keep costs and prices down. If that would have been the counterfactual history, and automation would have reduced manufacturing employment more than it did in the presence of the China Shock, then the studies above overstate the effect of the Shock.

Indeed, when we remember that the cross-CZ [DBx: “commuting zones”] studies are estimating relative effects (how some places were affected by the China Shock relative to others), we must also take seriously a different sort of counterfactual if the China Shock had been suppressed. If places vulnerable to import competition had avoided those rising imports, they still might have lost manufacturing employment to places elsewhere in the US to which manufacturing had already been migrating for decades. Some places would have lost out relative to others even in the absence of the China Shock, and if the reallocation had accelerated in a world without the Shock, the research discussed above gives the China Shock too much blame.

And here’s part of an email that I sent to Scott this morning after I read his essay:

I’m especially glad to see that, near the end, you explicitly make a point that too many people, including economists who should know better, overlook – namely, that lower-priced imports, whether from China or some other country, are not the only feasible substitutes for goods manufactured domestically using labor-intensive methods. Labor-saving automation has been a thing for all of human history, and a thing the use of which has immensely accelerated over the past few hundred years.

Although there’s obviously some exogeneity to increased trade with China, there’s also no small amount of endogeniety: As you note, had China not opened up, rising real wages of American workers would have led to even greater reliance in the U.S. on labor-saving techniques. But because China did open up, suppliers in the U.S. imported more instead of mechanized even more to produce at home. I doubt that a team of even the world’s greatest econometricians could calculate any reliable number of manufacturing jobs (even just in the CZs) ’caused’ by China opening up.

Changing the subject a bit: If you take (as is reasonable) the first half of 1953 as the post-war point at which manufacturing employment as a share of total nonfarm employment began its steady descent, and then calculate the average monthly change in this share, here’s what you find:

– May 1953 through November 2001: -0.168%
– December 2001 through March 2025: -0.146%

These rather raw data show that manufacturing jobs as a share of total nonfarm employment fell at a slightly faster average monthly rate before China joined the WTO than afterward. Now I don’t think that much can be inferred from this simple calculation, but it at least provides some additional reason to doubt that the China Shock was as big a deal as the popular narrative makes it out to be.

Don

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Here’s a letter to the Wall Street Journal.

Editor:

The White House is outraged that Amazon even considered, as you report, “displaying the impact of tariffs during its online checkout process” (“Amazon Rules Out Displaying Tariff Impact After White House Attack,” April 29). How surprising.

President Trump’s base insists that he’s singularly forthright and fearless. Yet when a merchant proposes to reveal to the American people the precise costs of his tariffs, he angrily demands that it not do so. Afraid of people being shown clearly the ill consequences of his protectionism, the president, by insisting that this information be quashed, refuses to man-up to the consequences of his tariffs.

Many people have defended Trump’s protectionism with the boast that they’re willing to pay higher prices to protect American workers. Obviously, Mr. Trump doesn’t take these boasts of his supporters seriously.

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

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Here’s a letter that I sent ten days ago to the New York Times, but which was never published there.

Editor:

Although rightly decrying tariffs, as well as suggesting some worthwhile policy changes, Sam Hammond’s case for industrial policy fails (“Tariffs Won’t Fix Our Trade Imbalance. This Will.” April 18). That case rests on a misunderstanding of economic history and of current economic realities.

It’s untrue, for example, that America’s postwar boom was fostered by government’s wartime industrial subsidies and planning. As the economic historian Alexander Field reports in his 2022 book, The Economic Consequences of U.S. Mobilization for the Second World War, “the economy’s postwar capabilities are almost entirely attributable to conditions already in place in 1941.”*

Mr. Hammond also overstates the problems with the current state of American manufacturing and exports. Standard accounts today have the U.S. as second in the world, behind China, in manufacturing and exporting. But on a per-capita basis, the U.S. manufactures more than twice what China does, and exports more than three times what China exports.

And while the growth both in U.S. manufacturing output and in manufacturing-worker productivity** have stalled since the Great Recession, each of these measures is today multiple times larger than it was in the mid-1970s when the U.S. began running the annual trade deficits that Mr. Hammond, along with Pres. Trump, believe to be a problem that needs to be solved. Given the explosion in the regulatory state under Presidents Obama and Biden, and of protectionism under Presidents Trump and Biden, perhaps the best thing the government can do to ‘revive’ U.S. manufacturing is to leave it alone.

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

* See page 372.

** Phil Gramm and Donald J. Boudreaux, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism (Lanham, MD: Rowman & Littlefield Publishers, forthcoming May 13, 2025), page 93.

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The Editorial Board of the Wall Street Journal writes – using understatement – that Trump’s calamitous tariffs crushing taxes on Americans who buy imports and import-competing products “could sink his second term.” A slice:

That’s especially true on tariffs, which could sink his Presidency. Mr. Trump was elected to control inflation and raise real incomes, but tariffs do the opposite. They guarantee at least a one-time increase in prices on imported goods that will flow through the economy. They portend shortages for consumers, and for businesses that source goods and components from abroad.

The tariffs are the largest economic policy shock since Richard Nixon blew up Bretton Woods in 1971, which unleashed inflation that Nixon tried to stop with wage and price controls and a tariff. The economic consequences arguably doomed Nixon’s second term, perhaps as much as Watergate.

It’s a mistake to think the tariff damage is only domestic. The willy-nilly assault on friends and foes has shaken global confidence in U.S. reliability. Ken Griffin, the investor and major donor to Mr. Trump, summed it up last week as a self-inflicted blow to the American brand. The U.S. is needlessly ceding global economic leadership.

Also from the Wall Street Journal‘s Editorial Board is this just criticism of Trump’s and Trump’s lieutenants’ myopia on trade. A slice:

Apple makes iPads and watches in Vietnam. Since 2018, when Mr. Trump first put tariffs on China during his first term, annual U.S. imports of goods from Vietnam have increased 178% in nominal dollars, from $49 billion to $137 billion last year. Some in the White House find such figures disappointing, since they want everything made in the U.S.

That includes, by the way, smartphones. “The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America,” Commerce Secretary Howard Lutnick said soon after Liberation Day. “It’s going to be automated.” Mr. Lutnick added that the result would be “the greatest resurgence of jobs in the history of America, to work on these high-tech factories.”

Mr. Lutnick is behind the times since iPhone production in Asia long ago was automated far beyond people turning screws. He also misses that returning iPhone assembly to the U.S. would mean that smartphones would be far more expensive given relative production costs. There’s also the problem of finding workers, since the U.S. had some 482,000 open manufacturing jobs in February.

Apple has good reason beyond tariffs to move its supply chains out of China, given geopolitical tensions. But forcing the company to make iPhones in the U.S. is a losing game that would hurt Apple and its customers.

Reason‘s Eric Boehm reports on the coming ill consequences, at retailers near you, of Trump’s tariffs crushing taxes on Americans who buy imports and import-competing products. A slice:

“The whole situation is a bit like lockdowns,” [Molson] Hart wrote on X. “Once you shut down, it takes a long time to get economic activity back to where it was, if you ever can.”

Sharing this graph, Mark Perry asks: “Feeling liberated?”

The Editors of The Economist are correct: “Trump’s incoherent trade policy will do lasting damage.” A slice:

The scale of the shock to global trade set off by Mr Trump is still, even now, unlike anything seen in history. He has replaced the stable trading relations which America spent over half a century building with whimsical and arbitrary policymaking, in which decisions are posted on social media and not even his advisers know what is coming next. And he is still in an extraordinary trade confrontation with China, the world’s second-biggest economy.

Investors and companies everywhere have been put through the wringer. Global markets crashed in response to Mr Trump’s first tariff announcement. The S&P 500 fell by about 15%. Long-dated Treasuries sold off, as hedge funds were forced to unwind their leveraged positions. The dollar, which is supposed to be a safe haven, fell. After the tariffs were delayed, stockmarkets enjoyed a vertiginous climb. Between its low and high on the day, Nvidia’s value fluctuated by over $430bn

Even after the tariff pause, however, Treasury yields remain elevated. Global stocks are 11% below their highs in February—and justifiably so. Mr Trump has still raised America’s average tariff rate to over 25% since January, with the promise of more levies, including on pharmaceuticals imports, to come. The president’s advisers display a jaw-dropping insouciance about the damage tariffs can do to the economy. In their view, foreigners foot the bill for tariffs and market declines hurt only rich investors. Yet the dollar’s fall all but guarantees that tariffs will cause American consumer prices to surge, hurting households’ real incomes. The knock-on hit to consumer spending, including on goods made in America, is likely to be substantial, compounded by the blow to confidence from volatile stocks.

A similar blow will be dealt to capital spending.

Phil Magness – here, at his Facebook page – exposes nonsense when he see it:

Argument I’m seeing a lot lately: “The Biden admin screwed up inflation by calling it transitory. Therefore economists are wrong to oppose tariffs.”

Keeping in mind that the Biden admin was staffed by MMT crackpots, that’s akin to calling the local observatory to complain when your horoscope doesn’t come true.

Gary Clyde Hufbauer offers evidence that economic nationalism has been on the rise for 15 years, with Trump 2.0 only accelerating this scourge. Two slices:

President Donald Trump’s new tariffs mark the latest steps in a 15-year policy path of growing trade restrictions around the world.

However, most countries also became more economically intertwined as their global commerce increased during this period, according to a measure developed by economist Jeffrey Frankel.

…..

To summarize, despite the hostile policy environment since 2010, globalization continues to characterize commercial transactions between the overwhelming majority of countries. It remains to be seen whether Trump’s aggressive tariff agenda changes this pattern.

Wall Street Journal columnist Mary Anastasia O’Grady is spot-on about Trump:

His handling of the economy so far is an epic failure. The S&P 500 has lost roughly $5 trillion in market capitalization. Uncertainty is high. Small businesses that rely on imported intermediate goods face extinction. Large producers are telling factory workers to stay home as production slows. Whether there will be a recession is an open question. But the president has thrown sand in the gears of a humming economic engine. The nation waits for him to relent.

Also spot-on about Trump is Allysia Finley:

His tariff barrage calls to mind a kid who pushes buttons on a machine out of curiosity. Hmmm, let’s see what happens if I slap arbitrary tariffs on every country. Stock prices plunge and bond yields jump. Oops.

I’m proud to be a dismal scientist.

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… is from page 6 of Diane Coyle’s 2014 book, GDP:

It [GDP] is a measure designed for the twentieth-century economy of physical mass production, not for the modern economy of rapid innovation and intangible, increasingly digital services. How well the economy is doing is always going to be an important part of everyday politics, and we’re going to need a better measure of “the economy” than today’s GDP.

DBx: Yes indeed. But until we get such a measure, GDP is the best that we’ve got. It must be used with care, but I don’t see how we can avoid using it until a better measure of economic performance is developed.

Worth noting: No matter how good or bad GDP is today as a means of assessing an economy’s performance, if it’s going to be used it should be used as intended. Too many are the grossly uninformed people who, looking at the identity GDP ≡ C+I+G+(X-M) (in which “X” is a symbol for exports and “M” is a symbol for imports), mistakenly conclude that imports reduce gross domestic product and also, if imports are larger than exports, that the resulting trade deficit is a drag on GDP. Such people should learn more economics.

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… is this tweet by my GMU Econ colleague Alex Tabarrok:

When America makes more X, it must make less Y.

Grasp this fundamental fact and you will never see tariffs the same way again.