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More and more the term “elite” is coming to mean this: “Someone who tells those persons who are unhappy that their lives aren’t perfect that the world does not exist solely to satisfy their fancies – that there are other persons whose interests count and should be taken into account.”

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“Who is paying for Trump’s tariffs?” ask Gary Clyde Hufbauer and Ye Zhang. Having examined the data through July, these researchers find that “so far, it’s US businesses.” Three slices:

But the data suggest that US businesses have absorbed most of the tariff costs through July 2025, not foreign sellers.

This blog post explores the effects of Trump’s tariffs on import prices for these five broad product categories to identify who has borne the costs so far. After all, the tariffs paid by the importers of record have to show up in one of three places: lower prices paid to foreign sellers, smaller spreads earned by US firms between the cost of imported goods and their selling prices, or higher prices paid by US households.

The US government has collected growing revenue from the tariffs paid by US importers, but the prices paid to foreign sellers for many imported consumer goods have changed very little. Meanwhile, American consumers have not yet seen much change in retail prices for most imported goods.

…..

Three scholars—Cavallo, Llamas, and Vazquez—have documented the short-term price behavior of thousands of individual retail items following the imposition of Trump’s tariffs. They found that average retail prices for imported items increased more than average retail prices for domestic items following tariffs imposed on March 4, 2025 (see their figure 2). Moreover, through August 2025, they found that retail prices of domestic items that were close substitutes to imported items increased almost as much as retail prices of imported items.

But there’s an important qualification. According to Cavallo et al., average retail prices for imported items were just 2 percent higher in August 2025 than in October 2024.

…..

However, the overall impact on the US Commerce Department’s price index for personal consumption expenditures (PCE) thus far remains limited. As of July 2025, the PCE price index had only increased by around 1.2 percent compared to January 2025. In other words, through the middle of 2025, American consumers were not bearing much of the tariff burden.

The logical conclusion is that, at least through July 2025, US firms were absorbing most of the tariff burden through compressed spreads between the cost of imported goods paid by the firms and the selling prices they received. Many firms probably based their selling prices on the historic cost of inventory imported prior to Trump’s tariffs, thereby delaying the impact on consumers.

Here’s the abstract of a forthcoming paper (in the California Law Review) by Kathleen Claussen and Timothy Meyer. The paper is titled “The Foreign Commerce Power”: (HT Scott Lincicome)

This Article is the first to scrutinize presidential trade authority under the Constitution. The Constitution grants the president no independent power to regulate foreign commerce. That conclusion, while apparent from a straightforward reading of Articles I and II, stands in stark contrast to executive conduct of U.S. trade policy in recent years. This Article traces the roots of this constitutional distortion to a confluence of doctrinal drift and academic oversight. Courts and commentators have increasingly relied on an expansive conception of executive power grounded in a perceived general foreign affairs authority. In doing so, they have blurred the line between diplomacy and commerce and used this confluence to justify unilateral economic actions by a “trader-in-chief” that circumvent the allocation of power in the Constitution. These matters have reached a tipping point over the last decade, prompting a series of high-profile cases in which the government has argued that this general foreign affairs powers include some portion of the foreign commerce power. To correct this misapprehension, the Article undertakes a novel examination of Founding-era materials, including the distribution of commercial authority between the king and parliament in eighteenth century Britain, the correspondence and deliberations of the Framers, and Founding Generation’s implementation of the commerce power in matters of national security during the early year of the Republic. These sources reveal a consistent and deliberate understanding both that Congress’s control over foreign commerce is exclusive and that Congress’s control over commerce trumps the president’s general foreign affairs powers when the two intersect. The Article further argues that this allocation was not accidental or ancillary, but central to the constitutional design. As the Supreme Court prepares to confront fundamental questions concerning the scope of executive trade authority, this Article provides the necessary historical and legal framework to restore the foreign commerce power to its constitutional home.

“Free speech means you can criticize anyone.”

David Bier warns of the negative consequences to the U.S. economy of Trump’s $100,000 fee on H-1B visas. A slice:

President Trump is imposing a $100,000 fee to obtain an H‑1B visa, the primary visa for skilled foreign workers. To be clear, this $100,000 fee is in addition to the salary, lawyer fees, and other costs of hiring an H‑1B worker. This fee would effectively end the H‑1B visa category by making it prohibitive for most businesses to hire H‑1B workers. This would force leading technology companies out of the United States, reduce demand for US workers, reduce innovation, have severe second-ordereconomic effects, and lower the supply of goods and services in everything from IT and education to manufacturing and medicine.

Jim Geraghty contrasts an honorable, civilized spirit with a dishonorable, uncivilized one. A slice:

If you find turning the other cheek difficult, don’t worry. Someone else spoke at the Kirk memorial service to represent the other side, making the case for hate.

“He was a missionary with a noble spirit and a great, great purpose. He did not hate his opponents. He wanted the best for them,” President Donald Trump said. “That’s where I disagreed with Charlie. I hate my opponent. And I don’t want the best for them. I’m sorry.”

The crowd laughed.

“I am sorry, Erika. But now Erika can talk to me and the whole group, and maybe they can convince me that that’s not right. But I can’t stand my opponent. Charlie’s … angry at me … he wasn’t interested in demonizing anyone.”

Kevin Corcoran reveals “the social benefits of iconoclasts.”

Michael Cannon explains that

Many critiques of US health care begin with the assumption that, as The Economist put it, the United States is “one of the only developed countries where health care is mostly left to the free market.” In truth, among wealthy nations, the United States may have one of the least-free health care markets—and it’s making health care less universal.

In a free market, the government would control 0 percent of health spending. Yet the Organization for Economic Cooperation and Development (OECD) reports that in the United States, the government controls 84 percent of health spending. That’s a larger share than in 27 out of 38 OECD-member nations, including the United Kingdom (83 percent) and Canada (73 percent), each of which has an explicitly socialized health care system. When it comes to government control of health spending, the United States is closer to communist Cuba (89 percent) than the average OECD nation (75 percent).

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… is from page 111 of Anne Krueger’s 2020 book, International Trade: What Everyone Needs to Know:

[I]t must be remembered that it is not possible to protect everything. If some activities are singled out for preference or protection, that means that the others are subject to discrimination and negative protection.

DBx: Yep. No matter how much the likes of Bernie Sanders and Donald Trump insist otherwise, reality isn’t optional.

Pop Quiz: Why does Krueger’s point hold even if the government were to impose prohibitive tariffs on all imports – that is, even if the government weren’t to single out a select relative few domestic industries for preference or protection, but, instead, imposed high protective tariff all imports? The answer is beneath the fold.

[continue reading…]

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Writing in the Wall Street Journal, the Cato Institute’s Colin Grabow puts Trump’s punitive taxation of Americans’ purchases of imports – a.k.a. protective tariffs – in historical context. Two slices:

Donald Trump has imposed tariffs on a whim and trashed past trade agreements, with rhetoric steeped in economic nationalism and zero-sum thinking. He thinks that trade consists not of mutual benefits but of a winner and a loser.

Yet for all its volatility, Mr. Trump’s trade agenda isn’t that much of a departure from past policy. For decades, American trade policy has been animated by mercantilist thinking that treats imports with suspicion, exports as trade’s primary reward, and the trade deficit as a scorecard.

The American approach to trade liberalization has long hinged on reciprocity. Instead of eliminating trade barriers to benefit U.S. consumers and firms, Washington has treated trade barriers as bargaining chips to be negotiated away only if foreign governments respond in kind. Imports’ many benefits—lower prices, greater choice, improved productivity—have been played down or ignored.

In some ways, this approach is understandable. Opening U.S. markets to foreign competition creates resistance from affected industries. To overcome this, policymakers highlight new export opportunities to other business sectors. But in doing so they reinforce the idea that exports are the primary objective of trade and imports are a price to be paid—a reversal of reality.

While Mr. Trump’s trade policies don’t appear to be informed by careful study—he operates more on vibes than on Adam Smith—he has embraced this underlying logic and pushed it further. If reducing import barriers in exchange for similar actions by others is good, then why not take it to the next level—raising import barriers and demanding even greater market access from other countries? Mr. Trump’s trade policy isn’t a repudiation of past approaches but their culmination.

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America has long suffered under warped bipartisan trade policy that prioritizes exports over imports and reciprocal deals over unilateral liberalization. Mr. Trump deserves criticism for his erratic and economically destructive trade decisions, but the intellectual groundwork for his extreme approach was laid by years of bad policy.

Also writing insightfully in today’s Wall Street Journal is AIER’s Samuel Gregg, who explains the benefits that American workers reap from foreigners employed under the H-1B visa program. Two slices:

The theme underlying these claims [by the Trump administration] is that the H-1B program—like trade liberalization and economic openness to the world generally—is hurting American workers. Consequently, the argument goes, the legal importation of foreign high-skilled workers into America via H-1B visas should be harder and more expensive.

Missing from this picture is appreciation of how H-1B visas benefit the U.S. economy, particularly the American-born workforce.

In the first place, there is considerable evidence that the young skilled immigrant workers typically granted H-1B visas increase overall U.S. employment. One 2015 study of the employment structure of U.S. firms found “rising overall employment of skilled workers with increased skilled immigrant employment by the firm,” with the native employment expansion occurring primarily among younger workers. A more recent analysis, by the National Foundation for American Policy, likewise concluded that “H-1B visa holders do not adversely affect U.S. workers.” Instead, they contribute to “lower unemployment rates and faster earnings growth among college graduates, including recent college graduates.”

…..

In a saner policy environment, these factors would encourage American policymakers interested in stoking American employment and growth to expand the availability of H-1B visas and allow more foreign-born high-skilled workers into the U.S. The same considerations suggest that Washington should make it easier for such workers to do, at some point, what I did seven years after entering the country on an H-1B visa: become an American citizen and personally invested in this great country and its dynamic economy.

Unfortunately, in the upside-down world of economic nationalism in which we now live, different outcomes are more likely to be the case. The biggest losers, sadly enough, will be American workers—the very people whose interests economic nationalists claim to be protecting.

Anders Ingemarson makes the case that MAGA is postmodern. A slice:

Postmodernism is a strain of philosophy that constantly questions the rules, pokes holes in “objective” truths, and turns the serious business of metaphysics (is reality out there or in our heads?), epistemology (how we know), morality, and—yes—politics into a skeptic mishmash of perspectives and performances. It’s fundamentally a negation of Enlightenment philosophy which champions reality, reason, objective truth, rationality, individualism, respect for and protection of individual rights, limited government, and—although often with only one or two cheers—capitalism, with free markets for goods, services and ideas.

MAGA and Trump fit postmodernism to a T, embracing many of its classic attitudes—mostly without bothering about the philosophy behind. In the MAGA universe, truth is less about cold, hard facts and more about what sticks—what sounds right, feels true, or gets shouted loudest.

The Editorial Board of the Wall Street Journal praises Sen. Ted Cruz (R-TX) for pushing back against FCC head Brendan Carr’s authoritarian assault on freedom of speech. A slice:

Most Republicans are afraid of uttering even a syllable of disapproval about the Trump Administration, so kudos to Ted Cruz for noticing the danger from Brendan Carr’s use of regulatory threats to stifle free speech.

The Texas Senator used his podcast on Friday to criticize Mr. Carr, who runs the Federal Communications Commission, for his threats against Disney, its ABC network and its station affiliates if they didn’t punish Jimmy Kimmel. Disney then pulled the late-night host off the air “indefinitely.”

Mr. Carr “says, ‘We can do this the easy way or we can do this the hard way,’” Mr. Cruz told his listeners, quoting Mr. Carr. “That’s right out of ‘Goodfellas.’ That’s right out of a mafioso coming into a bar going, ‘Nice bar you have here. It’d be a shame if something happened to it.’”

The Senator added that he’s no fan of Mr. Kimmel, but he warned conservative that government power abused in this way won’t hurt only the left. “What [Mr. Carr] said there is dangerous as hell,” Mr. Cruz continued. “It might feel good right now to threaten Jimmy Kimmel, but when it is used to silence every conservative in America, we will regret it.”

That’s exactly right. Mr. Carr used to understand this too, and he criticized Democrats for using government power to censor conservatives when he was a commissioner in the FCC minority. But now that he’s chairman, he follows the whims of the White House.

Reason‘s Jacob Sullum applauds Ted Cruz’s – and Rand Paul’s – criticisms of the FCC’s Brendan Carr’s threats made in light of Jimmy Kimmel’s (baseless but perfectly legal) on-air comments. A slice:

By abusing his power to exert pressure on ABC and its affiliates, Cruz said, Carr was setting an example that Democrats are apt to copy. “Going down this road, there will come a time when a Democrat…wins the White House,” the senator said, and “they will silence us. They will use this power, and they will use it ruthlessly. And that is dangerous.”

Although “it might feel good right now to threaten Jimmy Kimmel,” Cruz said, “when it is used to silence every conservative in America, we will regret it….It is unbelievably dangerous for government to put itself in the position of saying, ‘We’re going to decide what speech we like and what we don’t, and we’re going to threaten to take you off air if we don’t like what you’re saying.'”

Sen. Rand Paul (R–Ky.) agreed that Carr’s involvement in kiboshing Kimmel was “absolutely inappropriate.” The FCC’s chairman “has got no business weighing in on this,” Paul said on Sunday’s edition of Meet the Press. “If you’re losing money, you can be fired. But the government’s got no business in it. And the FCC was wrong to weigh in. And I’ll fight any attempt by the government to get involved with speech.”

Here’s David Henderson on Disney’s suspension of Jimmy Kimmel’s show.

GMU Econ alum Bryan Cutsinger looks back at the Banking Act of 1935. A slice:

Previously, each Reserve Bank set its own discount rate. The Board could sign off, but lacked the power to force changes or to impose a uniform national rate. The 1935 Act changed that. From then on, the Board could compel changes and, if it wished, establish a single discount rate for the entire country.

Finally, the Act strengthened the Fed’s independence. Before 1935, the Treasury Secretary and the Comptroller of the Currency sat on the Federal Reserve Board, with the Treasury Secretary serving as its chair. The Act removed them, creating a new Board of Governors composed solely of presidential appointees serving long, staggered terms, with a separate chair nominated by the President. Around the same time, the Fed left the Treasury Building for its own headquarters on Constitution Avenue. The Fed’s move was both a symbolic and practical marker of independence.

Some good news: “Global child poverty has been on a steady decline since 2014.”

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… is a remark made in the House of Representatives on February 26, 1923, by Cordell Hull (D-TN), as quoted on page 108 of William R. Allen’s March 1953 American Economic Review paper, “The International Trade Philosophy of Cordell Hull, 1907-1933“:

A protective tariff, speaking generally, is immoral and dishonest, because its sole purpose is to increase prices artificially, in certain instances, thereby enabling one citizen to levy unjust tribute from another.

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… is this September 19th, 2025, Facebook post by Jason Brennan:

One of the most basic practical insights of liberalism is that any power you give government with the goal of empowering your side will–usually within 8 years!–be captured and used by the other side against you. So you shouldn’t create any source of power you wouldn’t want your ideological enemies to possess.

One of the most basic moves of American politics is to ignore this insight, even though it has so far never been wrong.

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Writing earlier this month in The Atlantic, Scott Lincicome warns of “America’s Perón.” A slice:

When the populist strongman Juan Perón ran Argentina’s economy from his presidential palace in the mid-20th century—personally deciding which companies received favors, which industries got nationalized or protected, and which businessmen profited from state largesse—economists warned that the experiment would end badly. They were right. Over decades of rule by Perón and his successors, a country that had once been among the world’s wealthiest nations devolved into a global laughingstock, with uncontrollable inflation, routine fiscal crises, rampant corruption, and crippling poverty. Peronism became a cautionary tale of how not to manage an economy.

President Donald Trump seems to have misunderstood the lesson. His second term has begun to follow the Peronist playbook of import substitution, emergency declarations, personal dealmaking, fiscal and monetary recklessness, and unprecedented government control over private enterprise. And, as with Argentina’s Peronism, much of U.S. economic policy making runs directly through the president himself.

Trump’s tendency toward Peronist policy is strongest on trade. Central to Perón’s economic vision was an “import substitution industrialization” strategy, or ISI, that used tariffs, quotas, subsidies, localization mandates, and similar policies to push Argentines to produce domestically what they’d previously imported more cheaply from abroad. The approach was intended to fuel domestic growth, but it instead created insular and uncompetitive manufacturing industries saddled with high production costs, bloated finances, and rampant cronyism. Perversely, it also crushed Argentina’s globally competitive agricultural sector by diverting resources away from it and toward protected industries. Argentinian consumers suffered from higher prices, unavailable products, and lower overall living standards.

One of the most notorious examples of ISI’s failure was when the government of the Peronist President Cristina Kirchner attempted to incubate a local electronics industry through steep restrictions on imported televisions and smartphones. The result was disastrous: Modest increases in low-value domestic-assembly operations were more than offset by a market that featured substandard products priced at double what consumers were paying in neighboring Chile. Popular items such as iPhones were simply unavailable, forcing Argentines into local black markets or shopping trips abroad.

Trump’s second term is following the ISI playbook in several respects, in some cases even more so than Argentina did. According to the World Bank, for example, Argentina’s average tariff rate has hovered between 10 and 16 percent since 1992, while the Yale Budget Lab estimates that the United States’ now exceeds 18 percent and could go higher in the months ahead. “National security” tariffs for Trump’s preferred industries—including steel, aluminum, copper, and automotive goods—top out at 50 percent, well above the 35 percent duty that Argentina once applied to smartphones. And with U.S.-imposed tariffs varying by product, country, and content, what was once a relatively simple tariff system has been replaced by a labyrinth of overlapping requirements that even large and sophisticated American importers struggle to navigate.

GMU Econ alum Meg Tuszynski writes wisely about overblown fears of AI. Here’s her naturally intelligent conclusion:

In 1897, Mark Twain heard a rumor that he’d died. He sent a letter to the New York Journal to clear up the matter, stating that “the report of my death was an exaggeration.” Not only are the reports of AI’s employment “death toll” an exaggeration, but they’re missing information about the critical second act of the play. After the destruction comes the creativity, and the story of the internet can give us clues about the future of work in this technological episode as well.

This: “Abolish the FCC.”

Washington Post columnist Kathleen Parker is correct:

Of the countless words expressed by friends and foes since the shocking killing of conservative provocateur Charlie Kirk, the young husband and father who dared express opinions in the crowded public square, only two matter: free speech.

Too many Americans who’ve been expressing their opinions after Kirk was killed seem not to understand what the words truly mean. This group includes Attorney General Pam Bondi, who, before she backpedaled, said the Justice Department would “absolutely target you, go after you, if you are targeting anyone with hate speech.”

This would certainly keep her busy, though maybe not as busy as her subsequent attempts to clarify what she meant. Even some of her MAGA supporters challenged her “thinking” on the matter, mentioning that hate speech, despicable though it might be, is allowed in the U.S. of A. We might not like it, but we sure don’t want the government defining what it is. Thus, Bondi says she meant people who encourage violence would be in her sights.

Fair enough. But when a reporter asked President Donald Trump, who filed a meritless $15 billion defamation suit against the New York Times on Monday, what he thought of Bondi’s clarification, he responded snidely: “We’ll probably go after people like you because you treat me so unfairly. It’s hate. You have a lot of hate in your heart. … Maybe they’ll have to go after you.”

It’s easy to see where Bondi gets it. The administration to which she belongs fantasizes about, and sometimes succeeds in, shutting down its critics, one way or another. This should lead civic-minded Americans to wonder whether Bondi or any others seated around the Cabinet table understand how fundamental free speech is to all other freedoms enshrined in the Constitution and the Bill of Rights.

Andrew McCarthy of National Review – a magazine not known for its skepticism of the U.S. government’s use of military power – warns of Trump’s unauthorized use of military force. Two slices:

The leaps of law and logic being taken by the administration and its supporters are breathtaking.

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To summarize, then, the president has three times in the past three weeks ordered the use of lethal military force, and so far reportedly killed 17 people. These attacks are based on the theory that Venezuelans he has designated as terrorists are attacking the United States with shipments of illegal drugs. But (a) the terrorist designation appears to be based on drug trafficking, which is not terrorist activity under U.S. law; (b) even if drug trafficking qualified as terrorism, an executive branch designation of an entity as an FTO does not authorize the use of military force; (c) absent a true threat to the United States that requires an emergency military response, the president needs authorization from Congress to employ lethal military force; (d) Congress has made drug importation a crime for court prosecution, not the occasion for military force; (e) the first Trump administration indicted Maduro and other Venezuelans for drug importations but did not seek an authorization of military force; (f) the president has not established — he has merely asserted — that the ships he has bombed were Venezuelan vessels operated by entities he has designated (however dubiously) as FTOs operating under Maduro’s direction; and (g) with respect to the most recent strike, the president has not even claimed the vessel allegedly ferrying illegal narcotics was from Venezuela — i.e., he appears to be claiming a power to use lethal force whenever he suspects a boat on the high seas is carrying drugs, which he further suspects are destined for the United States.

Yep: “Americans like drugs. Killing drug traffickers won’t change that.”

Steven Greenhut makes a compelling case that Trump is not a man of peace. A slice:

Whether or not you agree with these policies, they don’t adhere to any principled non-interventionist philosophy. And that takes us back to Russia and Ukraine. The problem with appeasement is that it emboldens the aggressor rather than secures lasting and just peace. No serious person is calling for American troops in Ukraine, but Trump’s insistence on blaming Ukraine and not pushing Russia for serious concessions has escalated the conflict.

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… is from page 27 of the 2015 Matthew Dale translation of Weiying Zhang’s superb 2010 book, The Logic of the Market:

How do enterprises create more surplus value? They rely on creativity. Market competition is not simply price competition. Instead, it is a competition to see who has the ability to produce new products, or uses new ways to produce products at a lower cost. It is a competition to see who can find new markets, discover new raw materials, and use new forms of organization to create higher value for the consumer. Whoever can do so will receive a larger market share.

DBx: Yes.

The image above is taken from this paper of mine from the 1980s.

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… is from page 220 of the conclusion of Michael Strain’s 2025 paper “The (non) effect of tariffs on manufacturing employment”:

Regarding the trade war and manufacturing, the two most important conclusions are as follows. First, the current administration’s trade war is founded on a deeply flawed analysis of the US’s economic challenges. American manufacturing is not in crisis, and open trade has not been the most important driver of declining manufacturing employment. From an economic perspective, manufacturing jobs do not deserve special attention.

Second – and, from a political perspective, perhaps more important – the trade war will not substantially increase manufacturing employment. Indeed, it is likely to decrease manufacturing employment. It will fail to achieve its wrongheaded goal.

Protectionists are motivated by a misplaced nostalgia for an imagined past.