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George Will urges the courts to do their Constitutional duty and rein in Trump’s lawless imposition of tariffs punitive taxes on Americans’ purchases of imports and import-competing goods. Three slices:

Donald Trump’s destructive “Liberation Day” tariffs, announced April 2, should result in a constructive judicial ruling that significantly sedates today’s hyperactive presidency. Next Thursday, a federal appeals court will hear oral arguments about this: May the president, by making a declaration (that he claims is exempt from judicial review) of a national “emergency” and “an unusual and extraordinary threat,” impose tariffs (taxes paid by U.S. consumers) whenever he wants, at whatever level he wants, against whatever country he wants, on whatever products he wants, for as long as he wants?

A unanimous lower court has said, essentially: Of course not. Eighteen organizations, spanning the jurisprudential spectrum, have filed amicus briefs opposing the president.

…..

The Supreme Court says the nondelegation doctrine, which undergirds the separation of powers, “bars Congress from transferring its legislative power to another branch of Government” without providing “an intelligible principle to guide the delegee’s use of discretion.” Today’s president insists that IEEPA grants presidents unbounded discretion in wielding a power that is neither granted to him by the Constitution nor delegable by Congress.

Constitutional scholar Philip Hamburger says the Constitution’s framers thought “the natural dividing line between legislative and nonlegislative power was between rules that bound subjects and those that did not.” Tariffs bind Americans seeking to purchase imports.

…..

The president claims his declaration of an “emergency” is unreviewable because it involves foreign relations. But tariffs, which have domestic consequences and purposes, properly are congressional exercises of a constitutionally enumerated power and must come from statutes.

Today’s president is a hare, darting here and there. The judiciary is generally a tortoise, slow because it is deliberative. But you know the fable. And here is a fact: This tariff case could markedly restrain this rampant presidency.

John Puri warns of Trump’s scheming to exert unilateral control over more foreign investment funds in the U.S. A slice:

As George Will recounts in a recent column, Donald Trump has deployed a range of open-ended executive powers to reshape global supply chains at will, extract favors from firms seeking either exclusion or protection from tariffs, threaten price controls, effectively nationalize private companies, and more. When given the choice between spontaneous order — allowing private individuals to allocate and consume scarce resources as they see fit — or exercising personalist control over economic decisions, Trump often opts for the latter.

Through his newly announced “trade deal” with Japan — under which Americans will have the privilege of paying 15 percent more for Japanese goods than they did before — the president has taken to new heights his effort to micromanage the U.S. economy. Trump’s press secretary, Karoline Leavitt, says that the “centerpiece” of the deal is a new $550 billion investment fund that will pour Japanese money into private U.S. companies. The details of this fund — which Trump thinks of as a “signing bonus” — are astonishing. Let us go over how this thing is supposed to work, according to the White House:

Japan, already the greatest source of foreign direct investment in the United States, will put over half a trillion dollars into a new investment fund. That fund, in Leavitt’s words, will be invested in U.S. companies and projects “at President Trump’s discretion,” who will supposedly funnel Japan’s money to “key industries such as energy, semiconductors, critical minerals, pharmaceuticals and shipbuilding.” Once those investments start bearing income (assuming they ever do), the U.S. federal government “will retain 90 percent of the profits.”

I’m sorry, Japan is going to invest half a trillion dollars in America but can only keep 10 percent of the profits? And who gets 90 percent of the losses?

And Donald Trump is going to have unilateral control over how this money is invested? Without any law from Congress authorizing this fund?

Jack Nicastro reports the lamentable, but unsurprising, reality that Trump wants his punitive taxes on Americans’s purchases of imports and import-competing products to be even higher than his administration has signaled in the past. A slice:

At the time of writing, the U.S. has brokered only five trade deals: with the U.K., Vietnam, the Philippines, Indonesia, and Japan. In every case but the U.K., the agreed-upon tariff rates are higher than the baseline rate of 10 percent and are, in every case, markedly higher than they were in 2022, meaning Americans will pay more for goods from these countries than they would have three years ago.

Brayden Myers explains that Adam Smith would have detested taxing individuals who send remittances to their families and friends abroad. A slice:

To understand why, we return to 1776. The year Americans declared independence, the economist Adam Smith launched a revolution of his own, publishing The Wealth of Nations, an attack on the mercantilism that had been embraced by governments in that era. One aspect of this practice involved piling up gold reserves and restricting money outflows in a top-down effort to drive national prosperity. Smith rejected this idea. Wealth, he argued, is not in cash but in the capacity to produce and trade. He mocked the notion that sending money abroad made a nation poorer, calling these views “vulgar prejudices.” He wrote that even if all of a country’s money was exchanged for useful goods, that was no loss. Wealth flows back through trade, investment, and the trust of global exchange.

To the extent that concern about outflows of money has been part of the rationale for the introduction of the remittance tax, it signals a rebirth of this mercantilist fallacy. It treats money sent abroad not as part of global prosperity but as a taxable loss. It suggests that your right to property doesn’t depend on how you’ve earned it but on how you use it. When your love, duty, or generosity crosses a border, the government gets a claim to it — an extension too far of state power.

Ruy Teixeira is right:

We are far, far away from the midcentury progressive attitude, which welcomed technological change as the handmaiden of abundance and increased leisure, or, for that matter, from the liberal optimism that permeated the culture of the 1950s and ’60s with tantalizing visions of flying cars and obedient robots.

Instead, today’s progressives seem to envision a socially liberal ecotopia of dense housing powered by renewable energy. This very much includes the progressive “abundance” advocates who are having a moment in the discourse. This is abundance as today’s progressives envision it, not as working-class people desire, who would prefer a big house in the suburbs with plenty of money and lots of nice stuff and perhaps a “big-ass truck” or two in the driveway. Here as elsewhere progressives are dedicated to progress as they define it, not as normal people would and as they themselves used to.

Dominic Pino offers helpful advice to high-income Americans who feel that they are undertaxed by the U.S. government.

Noah Rothman rightly ridicules United Nations’ environmental idiocy.

Samuel Peterson tells the public-choice tale of bans on self-serve gasoline stations.

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… is from page 201 of my former Mercatus Center colleague Adam Thierer’s important 2020 book, Evasive Entrepreneurs [original emphasis]:

What permissionless-innovation advocates generally are advancing is the notion that new ideas deserve a fair shake or that entrepreneurs and innovations should generally be considered innocent until proven guilty. Permissionless innovation means giving innovators a bit more breathing room and avoiding a knee-jerk rush to regulate the new and the different. It means innovators should have a green light to experiment with those new and different ideas unless we can agree that a compelling reason exists to disallow trial and error as the basis of innovation policy.

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Here’s a letter to a new correspondent.

Mr. R__:

Thanks for your e-mail.

You ask if there are “circumstances when the case for tariffs for growing the economy beats the case of free trade.”

No, at least not as long as decision-makers, private and public, are human.

There are two variants of the economic case for protectionism. One is the naïve and the other is the arrogant.

The naïve protectionist (who, in my experience, is most common) implicitly assumes that labor, capital, and resources are free. He sees, say, steel tariffs increase the domestic output of steel, and domestic employment in the steel industry, and triumphantly concludes that tariffs increase total domestic output and employment. This protectionist is blind to the fact that the labor, capital, and resources that the tariffs draw into the domestic steel industry are drawn away from other domestic industries. The naïve protectionist ignores the domestic outputs and jobs that protectionism destroys.

The arrogant protectionist is also naïve, but in a very different way. In contrast to the naïve protectionist, the arrogant specimen will admit that tariffs cause protected industries to expand only by causing other domestic industries to shrink, but he’s naïvely confident that the additional outputs and employment of the protected industries are of higher value than the lost output and employment of the shrunken industries. When asked how he came by this knowledge, he has no good answer. Typically, he’s dumbfounded that the question is even asked (“How can you not see that we should produce more steel?!” “Isn’t it obvious that we need more manufacturing jobs?!”). And when not dumbfounded, he answers only with irrelevancies – such as “We’re running trade deficits!” or “Foreign governments subsidize their exports!” – that he naïvely thinks suffice to seal his case.

But press the arrogant protectionist by asking “Trade deficits and subsidies there might be, but, still, how do you know that the additional economic value generated in the protected industries will exceed the value lost in the shrunken industries?” and you’ll find that the closest he comes to offering a substantive answer is to insinuate that he, and the government officials who’ll faithfully follow his advice, simply know better than do market participants what is the ‘right’ mix of domestic outputs and what are the ‘right’ methods of producing these outputs. Without realizing it, he poses as a mystic – one who, bizarrely, is quick to accuse free traders of relying on nothing but blind “faith.”

When you point out to the arrogant protectionist that both theory and history confirm that competitive market forces, while not perfect, are far more reliable than are political decision-makers at allocating resources productively, his dogma makes him deaf. He’ll not hear it. Someone who has as a premise that his knowledge is superhuman will not be persuaded that his knowledge – like that of every other individual – is puny.

Each protectionist, both the naïve and the arrogant – oblivious as each is to economic reality – is like someone who, upon asking a dishonest or inept bank teller to break his $100 bill and receiving in return four $20 bills, rejoices at being enriched by $80.

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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The Wall Street Journal‘s Editorial Board reports on the sour consequences of the U.S. government’s cronyist protection of American sugar producers. A slice:

Coca-Cola’s statement was that it plans to sell “an offering made with U.S. cane sugar,” but as a “complement” to its existing U.S. lineup. In other words, corn syrup isn’t being phased out. Since it’s cheaper, that’s no surprise. The federal government props up sugar prices to the benefit of U.S. producers, particularly but not exclusively in Florida, by meddling in markets with a complicated tariff-quota system.

“In 2022, U.S. wholesale refined sugar prices were more than double the world price,” the Government Accountability Office said in 2023. Its report cited estimates that U.S. sugar producers get a protectionist windfall of $1.4 billion to $2.7 billion a year. But sugar users “lose an estimated $2.5 billion to $3.5 billion of consumer benefit,” making it a net loss. Also, high U.S. sugar prices are another incentive for confectioners and food manufacturers to set up shop elsewhere.

It’s classic protectionism: The government gives concentrated benefits to sugar producers. The costs are borne by everybody, but they are diffuse. The program is a net loss for the country, but the subsidized industry becomes influential and will spend money in politics to preserve its take. The downstream jobs that never get created because of the protectionist policies don’t have anyone to stand up for them, because they don’t exist.

By the way, Mr. Trump is threatening to levy a new 50% tariff on imports from Brazil. What does the U.S. buy from there? Cane sugar.

Also from the Editorial Board of the Wall Street Journal is this account of protectionism lashing out at its supporters. Two slices:

Those who prosper by government protection can quickly end up suffering from it. The latest example is President Trump’s trade deal with Japan, which has U.S. auto makers and United Auto Workers (UAW) President Shawn Fain up in arms—and they have a point.

Mr. Trump in April slapped 25% tariffs on autos and parts with exemptions for U.S.-made content. Mr. Fain cheered. But under the Japan deal, Japanese-made cars will pay a tariff of 15%, which is lower than the 25% on imports from Canada and Mexico.

Because American auto plants rely heavily on parts from Canada and Mexico, the tariff cost on U.S.-made cars could be larger than on Japanese imports. A mooted deal with the European Union would also apply a 15% tariff on its car exports to the U.S.

…..

Tough luck, Mr. Fain. Protectionism is a fickle benefactor.

Here’s Paul Krugman on Trump’s new trade ‘deal’ with the Japanese government. A slice:

It has been clear for a while that Trump and co. don’t understand or believe in balance of payments accounting, that they want both a smaller trade deficit and more foreign investment in America. Now their basic lack of understanding is embodied in a specific deal.

Second, as I said, it appears that Trump will get to influence how Japan invests. We’re already well on the way toward an economy in which success in business depends not on how good your product is but on your political influence (and also an economy in which Trump tells Coca-Cola what ingredients it should use.) This is another step on that road.

Finally, a 15 percent tariff is still really, really high — much higher than the 1.6 percent tariff Japanese non-agricultural exports faced before Trump began his trade war.

Will Japanese exporters, rather than U.S. consumers, end up paying that tariff? Some people have looked at the relatively muted effect of tariffs on consumer prices so far and suggested that maybe Trump was right about that. But they’re looking at the wrong data.

If foreigners were eating the tariffs, we’d expect to see a large decline in the prices America is paying for imports. And the BLS does, in fact, measure import prices; its index specifically does not include tariffs.

So let’s compare the increase in average tariffs from a year ago with the change in nonfuel import prices:

Source: Yale Budget Lab, Bureau of Labor Statistics

Have import prices fallen by enough to offset the tariff hikes? No, they’ve gone up slightly.

So why aren’t we seeing big increases in consumer prices yet? Basically because for the moment U.S. businesses are absorbing much of the cost rather than passing it on to consumers. They’ve been able to do that partly because many companies rushed to bring imports in before the tariffs hit, and are still selling out of that inventory. They’ve been willing to do that because they don’t want to alienate customers and lose market share, and have been hoping that the tariffs will mostly go away.

Desmond Lachman is correct: “By now, it should be clear that Trump is taking us to a permanent state of damagingly high import tariff levels.”

Scoop from Scott Lincicome: The Office of the U.S. Trade Representative complains of America’s trade deficit in ice cream. [DBx: Anyone still want to argue that America’s current rulers have a mature and trustworthy understanding of trade?]

Jack Nicastro explains that “the American AI industry doesn’t need industrial policy, just freedom.” Two slices:

President Donald Trump published his administration’s AI Action Plan on Wednesday. Though much of the reporting following the announcement of the 28-page plan focuses on its accompanying executive order on “woke AI,” the more important aspect of the plan is how it removes regulatory barriers to foster a friendly environment for American AI innovation.

…..

While the plan’s deregulatory agenda promotes AI innovation, its heavy-handed industrial policy will interfere with private investment and discourage productivity. The plan directs OSTP to publish a National AI Research and Development Strategic Plan “to guide Federal AI research investments.” But there’s no need for taxpayer dollars to be infused into the sector. Stanford University’s Institute for Human-Centered Artificial Intelligence calculates that the private sector invested $109 billion in American AI, “nearly 12 times higher than China’s $9.3 billion,” in 2024; it is this private investment that is responsible for the industry’s meteoric technological and economic growth.

The CHIPS and Science Act appropriated $53 billion to subsidize American tech businesses. The case of Intel is illustrative: Scott Lincicome, vice president of general economics at the Cato Institute, describes how the company was foundering for yearsbefore the Biden administration (unwisely) promised it $19 billion in corporate welfare in March 2024; Intel’s stock fell so precipitously that year that Taiwan Semiconductor Manufacturing Co. considered purchasing the failing company this February. Trump recognized this failure on the campaign trail, but his AI Action Plan still invokes the statute to “invest in developing and scaling foundational and translational manufacturing technologies.” The plan’s direction of the Departments of Labor and Education to “prioritize AI skill development as a core objective of relevant education and workforce funding streams” is doomed for the same reason: Federal subsidies crowd out private funding, encourage bad investment, and discourage productivity.

My intrepid Mercatus Center colleague, Veronique de Rugy, explains that “Trump doesn’t need to fire Jerome Powell. He needs to end America’s spending addiction.” A slice:

One thing is for sure: The pressure Trump and his people are exerting on the Fed is a push for fiscal dominance. The executive branch wants to use the central bank as a tool to accommodate the government’s frenzy of reckless borrowing. Such political control of a central bank is a hallmark of failed monetary systems in weak institutional settings. History shows where that always leads: to inflation, economic stagnation, and financial instability.

My Mercatus Center colleague Liya Palagashvili brings these happy tidings: “Portable Benefits Are (Finally) Having a Moment.”

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… is from page 324 of Richard Epstein’s magnificent 1995 volume, Simple Rules for a Complex World:

There is yet another reason to beware the use of communitarian arguments in a political setting. Just as large political societies are not families writ large, so they are not communities writ large. A community requires more than people who live side by side or individuals who owe allegiance to a single sovereign. It requires that people within the community show some concern for each other. Equal concern and respect cannot be rammed down the throats of people who wish to direct their emotional energies elsewhere. What is required is some willing acceptance and recognition of the communities by their members. Communities can be destroyed from without, but they cannot be created from without; they must be built from within. Thus any effort to use state machinery to create a sense of community is likely to backfire and to displace voluntary groups that could otherwise be formed by free and independent people.

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Because 30 days have passed since the Wall Street Journal published Phil Gramm’s and my June 26th, 2025, piece, “Steel and Aluminum: These Are Trump’s Worst Tariffs,” I share the full text of this piece here, without charge, beneath the fold.

[continue reading…]

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Here’s a letter to my good friend at Berry College, the economist Frank Stephenson.

Frank:

In an email this morning you ask if I’ve “considered blocking the troll” who lately, at my Facebook page, has been defending protectionism.

I’ve not. In fact, I now regret even asking him voluntarily to stop posting at my page.

I understand that encountering the troll’s many ‘arguments’ and assertions is intellectually painful. The head can’t help but hurt when it confronts blatant illogic, especially when this illogic is presented as if it’s as irrefutable as Euclidian proofs. Still, I believe that such trolls, as long as they refrain from advocating violence or overt bigotry, ought not be blocked.

First, to block such a person conveys the false impression that we’re insufficiently confident in our ideas. Let the ‘woke’ and the progressives – and now increasingly the MAGA – embrace cancelling; let them monopolize this gutless maneuver. We, unlike them, have nothing to fear from challenges to our ideas and ideals.

Second, it’s possible that the troll will occasionally raise an objection that is serious and worth considering. If the case for free trade is to be as strong as possible, its advocates should be as familiar as possible with all coherent arguments – theoretical and factual – that are marshaled against it.

Third, the troll serves our purposes by revealing to us the protectionists’ arguments and attitudes du jour. Even though most of these arguments and manners of argumentation are unserious and incoherent, even illogical, it’s precisely these arguments and attitudes, because they are widespread, that we proponents of free trade must counter. And we can’t effectively counter them unless we’re up-to-date on what they are.

Fourth, the troll also serves our purposes by revealing to intelligent yet uncommitted individuals the nature of protectionists’ thinking. No sensible person can come across protectionists’ arguments without soon realizing both that these arguments hold no water, and that many protectionists argue like undisciplined third-graders. A sensible person who hasn’t yet made up his or her mind about trade policy can compare, side by side, the arguments and manner of argumentation of free traders with those of protectionists, a distressingly large number of whom, like the troll, argue by hurling ad hominems, by repeatedly committing the post hoc, ergo propter hoc fallacy and the fallacy of composition, by suddenly shifting the argument to ground Y when checkmated on ground X, by ignoring or misrepresenting free-trade arguments that they cannot refute, and simply by showing their poor command of facts and theory – and sometimes even by throwing temper tantrums when they’re unable to escape the superiority of the case for free trade.

So I welcome the troll to continue to comment at my Facebook page, and you should welcome him to do so at yours. The annoyance at encountering his ignorance is more than repaid by the value that he unwittingly contributes to the cause of free trade.

Sincerely,
Don

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Writing in today’s Wall Street Journal, former Senator Phil Gramm (R-TX) defends Ronald Reagan from the charge, popular today among protectionists, that the voluntary export agreement (launched during Reagan’s presidency) on Japanese automobiles is evidence that Reagan was a protectionist. Four slices:

During a debate that I participated in at the Harvard Club of New York in December, Oren Cass, founder of the think tank American Compass, tried to draft President Ronald Reagan into the ranks of trade protectionists. Mr. Cass quoted a claim that Reagan was “the greatest protectionist since Herbert Hoover” and said that he “took repeated aggressive protectionist trade actions against the Japanese in particular.”

Mr. Cass’s argument, now a standard protectionist claim, was that because Reagan in 1981 agreed to a temporary voluntary restraint deal limiting the number of Japanese automobiles that could be imported into the U.S., he was a protectionist. I pointed out to Mr. Cass that I saw Reagan “at least once a week” during that period while I was working on the president’s budget, which I co-authored in the House, and could attest that the president hated the deal. He agreed to the compromise only to prevent lawmakers from passing more extreme protectionist legislation.

…..

President Reagan’s support for free trade wasn’t based on any of the economic arguments that have dominated informed opinion on trade policy for 250 years. To Reagan, free trade was simply an economic extension of freedom. In his view, except in limited circumstances involving national security, government had no right to tell people that they had to buy a product so that someone else could benefit from producing it. In a 1988 radio address, he said that “open trade policy . . . allows the American people to freely exchange goods and services with free people around the world.”

…..

Protectionists argue the restraint agreement brought foreign auto investment to America, but Volkswagen—which wasn’t under the auto agreement—built its first U.S. plant in Pennsylvania in 1978. Foreign investment in U.S. auto plants between 1981 and 1994, when the restraint agreement was in force, averaged only $671 million a year in 2017 dollars but averaged $6.6 billion between 1995 and 2008 after the voluntary restraint ended.

It wasn’t protectionism but lower taxes, a more favorable regulatory climate and right-to-work policies that brought foreign auto investment to the U.S. and created a vibrant auto industry in the American South. Alabama, which didn’t produce a single automobile when the restraint ended, is now the fifth-largest auto-producing state due to foreign investments by Mercedes-Benz, Hyundai, Toyota and Honda.

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Reagan warned America to reject “the siren song of protectionism” and instead to embrace peaceful trading partners. “We should beware of the demagogues who are ready to declare a trade war against our friends . . . all while cynically waving the American flag,” he said. “The expansion of the international economy is not a foreign invasion; it is an American triumph, one we worked hard to achieve.” Americans would do well to remember his words.

My intrepid Mercatus Center colleague, Veronique de Rugy, decries the damage that Trump’s protectionism is inflicting on U.S. automakers. A slice:

These tariffs were supposed to protect American jobs and strengthen domestic manufacturing. Instead, they’re shrinking margins, reducing profits — and hence investment — and setting the stage for higher consumer prices.

If the goal is to strengthen American manufacturing, this probably isn’t the way. Douglas Holtz-Eakin reminds us how tariffs have repeatedly failed to save the steel industry.

GMU Econ alum Dominic Pino both rightly applauds the recent change in the tax code that allows permanent full expensing, and rightly criticizes the administration’s economically harmful protectionism. A slice:

Computer code isn’t unloaded from ocean vessels. No customs agent ever has to collect a tariff on an app before it appears in an app store. High tariffs provide yet another advantage to technology companies relative to manufacturing companies in government policy.

As Greg Ip of the Wall Street Journal pointed out, this is actually one of the reasons why the stock market hasn’t been affected as much since the initial shock of the April tariff announcement. Fifty years ago, a terrible GM earnings report like the one we just saw would have done a number on the stock market. Today, GM only has a market cap of $50 billion. The biggest tech companies are over $1 trillion. The “old economy” that is hurt more by the tariffs simply doesn’t factor as much into overall stock market performance as the “new economy.”

Punishing the “old economy” is not what populists want, but if you want to continue to have an economy that structurally favors technology companies, tariffs are a great way to do that.

Also from Dominic Pino is this warning: “General Motors will be nationalized at some point, and you’ll be expected to feel patriotic about it.” A slice:

Politicians simply can’t allow GM to go under, even though it deserved to in 2009, and its financial situation will probably merit it again in the future. Between their mismanagement and a torrent of government regulations — safety rules, green rules, and trade rules — it’s going to eventually become impossible to keep going. In some sense, it’s an arm of the government already, meekly complying with every new mandate under the knowledge that it only continues to exist because of the bailout.

It’s possible for a company to reinvent itself, and many have. Barnes & Noble, for example, is actually doing quite well despite competition from Amazon. It realized it needed to change and executed a strategy to do that. GM has not demonstrated that kind of leadership or innovation. And it can’t because it is locked into onerous union contracts.

The only way GM doesn’t get nationalized is if it hangs on long enough that all the old politicians and voters who are nostalgic for the heyday of the company die first. But either Trump or Biden would nationalize GM in an instant if that’s what was necessary to save the company. And they’d act like they were doing you a favor by spending your tax dollars to prop up a zombie firm that the government played a part in killing.

The Editorial Board of the Wall Street Journal identifies “the price of winning the trade war.” Two slices:

The trade deal President Trump announced with Japan Tuesday evening is good news—in the narrow sense that it defuses what could have been an extended tariff war with America’s most important ally in Asia. But if this is winning a trade war, we’d hate to see what losing looks like.

Mr. Trump hailed the pact with characteristic modesty as “perhaps the largest Deal ever made.” Details remain sparse, but the core appears to be a Japanese commitment to invest $550 billion in the U.S. while reducing barriers to imports of American agricultural products such as rice. In exchange, Mr. Trump will reduce his “reciprocal” tariffs on Japan to 15% from 25%—including, apparently, on autos.

The new tariff rate is good news only as relief from 25%. This is still a 15% tax increase on imports from Japan. And don’t believe the White House spin that Japanese exporters will pay this tax. They might absorb some of it, depending on the product and the competition. But American businesses and consumers will pay more too and thus be either less competitive or have a lower standard of living.

That $550 billion in new Japanese investment also sounds better than it may be once we know the details. Japanese Prime Minister Shigeru Ishiba suggested Tokyo will offer government loans and guarantees to support these “investments,” with the aim “to build resilient supply chains in key sectors.”

This raises the prospect that this money, if it arrives, will be tied up in Japanese industrial policy. And American industrial policy, since Mr. Trump said Japan will make these investments “at my direction” and the U.S. “will receive 90% of the Profits.” Yikes.

By the way, more investment inflows by definition mean a larger trade deficit in the U.S. balance of payments. Has someone told the President about this?

The U.S. could have had more Japanese investment all along, except Mr. Trump helped chase it away. The current President and President Biden did their best to thwart a $14.9 billion acquisition of U.S. Steel by Nippon Steel ahead of last year’s election, before Mr. Trump acquiesced in June. Perhaps if Japanese companies were more confident they’d get a fair shake in the U.S., we wouldn’t need all these loan guarantees and trade deals to unlock capital commitments for American jobs.

…..

As for the claim that Mr. Trump is “winning” this trade war, that depends on how you define victory. It’s true Mr. Trump is showing he can bully much of the world into accepting higher tariffs. The size of the U.S. market is powerful negotiating leverage. The pleasant surprise so far is that most countries haven’t retaliated, which has spared the world from a 1930s-style downward trade spiral.

But Mr. Trump is showing the world that the U.S. can change access to its market on presidential whim. Countries will diversify their trading relationships accordingly, as they already are in new bilateral and multilateral deals that exclude the U.S. China will expand its commercial influence at the expense of the U.S. Beijing has also shown that two can play trade bully ball. It retaliated against Mr. Trump’s 145% tariffs with export restraints on vital minerals, and Mr. Trump agreed to a truce.

By the time this trade war ends, if it ever does, the average U.S. tariff rate may settle close to 15% from 2.4% in January. That’s an anti-growth tax increase.

Reason‘s Eric Boehm is correct: “Trump’s ‘deal’ with Japan is another loser for Americans.” A slice:

But, as with earlier “deals” struck with the United Kingdom and Vietnam, this agreement looks like a bad one for the United States. Not only does it raise taxes on American consumers, but it leaves American automakers at a distinct disadvantage relative to their Japanese competitors.

Under the terms outlined by Trump in a Truth Social post on Tuesday, imports from Japan will be subject to a 15 percent tariff when they enter the United States. Yes, that’s lower than the 25 percent tariff that the president has been threatening to impose on Japanese imports, but it is still a huge tax increase relative to existing tariffs on Japanese goods.

Previously, the average tariff rate on American imports of Japanese goods was less than 2 percent, according to the World Bank’s data. In other words, Trump’s “deal” amounts to roughly a 650 percent tax increase on those imports. Those taxes, like all tariffs, will be paid by Americans.

Peter Earle busts the myth – one repeated by Trump – that the United States has for years been “ripped off” by our trade arrangements with other countries. Two slices:

By any serious measure, and certainly by every economic metric, the claim that the United States has been “ripped off” or “mistreated” by its trading partners over the past several decades is incoherent. The rhetorical scaffolding upon which the Trump administration’s protectionist tariff regime rests is a fundamentally flawed understanding of international trade. It substitutes a mercantilist worldview — discredited since the eighteenth century — for evidence-based economic policy, and in so doing risks sabotaging the very system that has helped drive US prosperity, innovation, and leadership in global commerce.

The administration’s argument is built on the premise that large bilateral trade deficits — particularly with China, Mexico, Germany, and Japan — represent exploitation. In fact, a trade deficit is not a measure of being “taken advantage of;” it is a simple macroeconomic identity. It reflects the fact that the United States consistently imports more than it exports, with capital inflows from abroad financing both private investment and public debt. This inflow — recorded as a capital account surplus — signals that global investors view the US as a safe and attractive destination for capital. Far from being a symptom of decline, this pattern is a reflection of economic strength and international confidence in US institutions. Trade deficits are not inherently bad; in fact, they often correlate with periods of strong growth and low unemployment.

…..

Moreover, the assertion that past trade agreements — such as NAFTA, the WTO accession of China, or the US-Korea FTA — were one-sided giveaways is economically unserious. Those agreements were negotiated to promote mutual gains through the reduction of barriers to trade and investment. Some industries contracted, as expected in any process of specialization and reallocation. But far more jobs were created in sectors where the US holds competitive advantages: high-tech manufacturing, advanced services, and capital-intensive production. Consumers have benefited from lower prices, and American firms gained access to global supply chains that improve productivity and innovation.

John Stossel criticizes Tucker Carlson and some other American conservatives for their hostility to free markets.

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… is from page 212 of Virginia Postrel’s marvelous and more-relevant-than-ever 1998 book, The Future and Its Enemies:

Once the rulers of a society – in a democracy, the citizenry – become hostile to decentralized, trial-and-error processes, legal institutions will change accordingly. The sclerosis [Joel] Mokyr fears comes not because dynamism destroys itself but because people abandon it, either because they do not understand what is at stake or because they do not care.

DBx: Until not very long ago, only American “progressives” longed to turn the U.S. economy into a version of the sclerotic and nannying European economy. Today, alas, this longing is now shared by many American conservatives.