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Scott Lincicome and Tad DeHaven explain what shouldn’t – but, alas, what these days nevertheless does – need to be explained: “Trump’s automotive tariffs will hurt American consumers and producers.” Five slices:

President Donald Trump’s decision this week to implement a “permanent” 25 percent tariff on imported automobiles and automotive parts represents one of his most brazen—and foolish—moves yet. For the moment, we’ll leave aside that the president relied on data at least eight years old to ridiculously argue that imported cars threatened national security, that his latest move blows up his own USMCA trade agreement, and that his tariffs can’t both raise substantial revenues (which requires more imports) and boost domestic jobs and investment (which requires fewer imports) as he claims.

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Today’s industry is characterized by sophisticated and highly interconnected regional supply chains spanning multiple national borders. In the North American supply chain, the manufacturing of a component like a transmission or engine may require it to travel between the United States, Canada, and Mexico multiple times before finally being incorporated into a finished vehicle.

When tariffs are applied in such an integrated market, costs do not simply rise incrementally—they compound. A single component could therefore be subjected to multiple rounds of tariffs, resulting in exponential increases in the overall cost of manufacturing. In a previous Cato blog post, for example, we showed how a simple car seat capacitor crossed borders five times. According to Canadian manufacturer Linamar, which produces transmissions via factories in the US, Mexico, and Canada, parts cross the three borders seven times, with the transmission finally assembled in Michigan.

Even if cars and parts don’t cross borders multiple times, the tariff costs for American vehicle manufacturers will be significant because they source significant quantities from abroad. Like a “Made in China” iPhone that contains parts from all over the world, an automobile that’s “Made in America” is assembled with parts from the United States, Canada, Mexico, and elsewhere. Here, for example, is the rear suspension of a vehicle manufactured in North America.

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This does not mean, as TV personality Jim Cramer recently alleged, that US automotive production involves merely the rudimentary assembly of foreign-made engines, transmissions, and other parts. For starters, assembly itself is economically valuable. The BMW plant in Spartanburg, SC, for example, employs more than 11,000 Americans (with junior production roles today starting at $22/​hour with benefits), annually produces more than 400,000 vehicles, and was the United States’ top automotive exporter by value ($10 billion) last year.

Domestic automotive manufacturing also entails far more than assembly. In fact NHTSA data show that the engines/​motors in 80 of 143 US-assembled models are made entirely (64) or partly (16) in America, while 82 of those same models have transmissions made here (75 in full; 7 in part).

Collectively, these data reveal the interdependent and complementary nature of US and global automotive production and trade: vehicles and parts are made here; vehicles and parts are made abroad; and both producers and consumers are better off for it.

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As Lincicome detailed in December, these and other data show why industry insiders and analysts uniformly agree that open markets—not costly Reagan-era protectionism—have fueled the growth and stability of North American automotive production since the 1990s and helped American companies and workers better compete against automotive supply chains in Europe and Asia. By permanently reducing trade barriers, trade agreements like NAFTA have been credited with attracting more foreign investment and boosting overall industry competitiveness by lowering production costs (e.g., via imported inputs), utilizing national comparative advantages, and opening overseas markets. In fact, US automotive manufacturing output and employment were stronger in the 1990s and early 2000s than in the quota-ridden 1980s and stronger than US manufacturing overall during that latter period.

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Tariffs will also limit consumer choices. History shows that manufacturers facing new tariffs often reduce available options or eliminate certain models altogether due to higher costs and potential retaliatory tariffs from trading partners. This helps to explain why, thanks to a longstanding 25 percent US tariff on imported pickup trucks, many smaller truck models aren’t available here. And just today, Reuters reported that industry analysts expect automakers to “spread [tariffs’] cost between US-produced and imported models, cut back on features, and in some cases, stop selling affordable models aimed at first-time car buyers, as many of those are imported and less attractive if they carry a higher price tag.”

As is so often the case with tariffs, the biggest losers will be lower- and middle-income Americans.

Jim Bacchus decries the Trump administration’s reckless and dishonorable refusal to have the United States “pay its agreed share of the budget of the embattled World Trade Organization (WTO).” Three slices:

So far, no one in Geneva is saying much about this latest insult by the Trump administration to trade multilateralism (following Trump’s previous insults and those of Joe Biden for nearly a decade). The 165 other member countries of the WTO are doing their best to pretend the United States is not acting as badly as it is in international trade governance, as they have been doing for some time now. But it is getting harder for them to pretend that all is still well with the rules-based multilateral trading system that the United States played a major role in creating but seems now to be bent on wholly abandoning.

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Of course, the Trump administration looks askance at these international trade rules, much as it does at almost everything relating to international institutions of all kinds. Beginning under Barack Obama, intensifying under Trump, continuing with Biden, and now worsening significantly under Trump now that he has returned to the presidency, the United States has betrayed its history and its ideals by becoming a scofflaw in international trade. It has weakened the international rule of law in trade by undermining the WTO dispute settlement system. It has ignored a series of WTO rulings that have rightly gone against it. And it has shown little or no interest in modernizing the trading system to make it more fit for purpose in the 21st century.

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Sen. Josh Hawley (R‑MO) has already announced that he will be submitting a resolution soon calling for US withdrawal from the WTO. The Trump administration has not yet taken a position on this proposed resolution. If Trump endorses this effort, and if this withdrawal happens, then it would be by far the worst mistake yet by Trump—among many, many—on international trade.

Meanwhile, the other members of the WTO are reportedly working on a “Plan B” if, following the conclusion of its current contributions review, the United States ultimately decides not to pay its dues. As part of this emerging plan, expect China to step up and offer to pay more while perhaps also assuming the chairmanship of the WTO budget committee. It is unclear how this would be in the national interest of the United States of America, in trade or otherwise.

David Henderson responds to my response to his response to my intrepid Mercatus Center colleague Veronique de Rugy’s description of the relationship between imports and exports.

Arnold Kling writes insightfully about the realities of “the roundabout society.”

Romina Boccia rightly applauds the award of the 2025 Milton Friedman Prize for Advancing Liberty to Charles Koch, who has indeed done enormously good work over more than half a century to advance the cause of the liberty and the liberal market order.

Jeffrey Miron and Jacob Winter offer evidence that “immigration benefits the destination country.”

GMU Econ alum Dominic Pino reports that the Polish people’s embrace of the market order in their country is serving them well.

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… is from page 614 of Deirdre McCloskey’s new paper “Globalization, Long May It Reign,” which is a chapter in the collection Free Trade in the Twenty-First Century (edited by Max Rangeley & Daniel Hannan, 2025):

The ethical case for globalization is not simply that it enriches us all, though it does. It’s also that permitting arbitrage is an implication of allowing you to buy and sell with anyone you wish. It’s elementary liberty. And liberty is liberty is liberty. The liberty to trade is a piece with the liberty to speak and read and vote and live and love.

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Here’s a letter to the Wall Street Journal.

Editor:

You report that Pres. Trump’s hike in taxes on Americans’ purchases of imports – which taxes, by the way, haven’t been this high since 1948 – is inflicting such damage on the U.S. economy that foreign investors are souring on it (“How the Reversal of the ‘American Exceptionalism’ Trade Is Rippling Around the Globe,” March 29).

Mr. Trump’s plan to achieve his long-cherished goal of eliminating U.S. trade deficits is working!

Because foreigners can’t invest in the U.S. any dollars they spend on American exports, the more attractive is the U.S. economy to foreign investors, the more they invest here relative to purchasing American exports. U.S. trade deficits swell as global capital pours in. To reverse this intolerable situation of foreigners contributing more capital to the U.S. economy than Americans contribute to foreign economies – in short, to eliminate U.S. trade deficits – the president is making the U.S. economy less productive and, hence, less attractive to global investors. As these investors sour on America’s economy, they’ll invest less here and soon Americans will finally, after a half-century, again have balanced trade.

Of course, the damage inflicted by Mr. Trump’s protectionism on the U.S. economy will also worsen the economic fortunes of ordinary Americans. No matter. They will – despite falling wages, higher prices, and slower economic growth – surely be grateful to the president and his fellow Republicans for fulfilling his campaign promise to eliminate U.S. trade deficits.

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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GMU Econ alum Dominic Pino – who, I boast, was a student in my Spring 2020 seminar on The Wealth of Nations – wrote the cover story for the latest edition of National Review; it’s titled “Free Trade Is How You Live Your Life.” Two slices:

Every free trader has heard it: Sure, we’d all love for there to be free trade, sounds nice in theory, but in the real world it can’t happen. Supposedly free trade is a utopian position, and protectionism is the pragmatic, realistic alternative.

This common framing of the issue of international trade is exactly backward. Protectionism is a utopian theory based on the assumptions that individuals and businesses will act contrary to their self-interest, government will act in the national interest, and special interests will stay on the sidelines. Free trade is how you live your everyday life.

In The Wealth of Nations, Adam Smith endeavored to show how people acting in their self-interest could benefit others. The mechanism by which that happens is the division of labor. When people specialize in what they do best and trade for the rest, they make themselves and the people they trade with richer than they would otherwise be.

This insight lies at the heart of economics. It is not obvious in the abstract, but experience has shown it to be true. Countries where people don’t specialize and trade — countries where people grow their own food, make their own clothes, build their own houses — are the world’s poorest. The country that elevated self-sufficiency to a foundational national principle and has almost completely isolated itself from international trade — North Korea, with its Juche deology — is a communist police state.

North Korea has to be repressive to prevent trade, because trade is natural to human beings. “In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature,” Smith wrote in The Wealth of Nations. He imagines the absurdity of dogs deliberating over trade in bones.

“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only,” Smith wrote. “He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them.”

This is the first area where protectionism’s utopianism shows. Protectionism says that the natural human regard for self-interest that undergirds trade is actually a disease in need of treatment. It posits that people need to act contrary to human nature to really thrive and that therefore their desires and preferences must be reformed.

The agent of that reformation is the government. Protectionists must hold a very idealistic view of government and must place an extraordinary amount of trust in government to execute their plans. If the government is not as competent or as beneficent as they believe, their plans won’t work.

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If the protectionist argument is right, why is it right only for countries? Many U.S. states are larger than many countries, so it’s not a geographic or population issue. It’s not as though there isn’t significant variation in wealth between states: Massachusetts has roughly double the GDP per capita of Mississippi and an average hourly wage over $14 higher.

If anything, the case for protectionism between the states should be stronger than between countries because it’s much easier to move production to another place under the same laws where the people speak the same language and have access to many of the same public goods than it is to train new workers on a different continent. The manufacturing center of the U.S. has in fact moved: historically, from the Northeast to the Midwest, and now, from the Midwest to the South.

If the Constitution didn’t prohibit it, should Massachusetts have tariffs to protect its workers from Mississippians? Maybe some protectionists would be consistent, but it’s doubtful. When the level of analysis is changed from international to interstate — or, even more absurdly, intercity — it’s clear that free trade is superior, even though it will also result in job losses for some people as production moves from place to place.

Trump gives away the game on this when he talks about how tariffs would disappear if Canada became a state. He’s right, they would, but that would mean that the same people would be buying and selling the same stuff, so the basic economic picture wouldn’t change at all. The biggest difference would be that around 30 million Canadians would be voting in U.S. elections, swinging our politics sharply leftward. It seems better to have the economic gains without the political consequences by having a free trade deal with Canada, which is exactly what the U.S. has done, starting under Reagan in 1988.

The Editorial Board of the Wall Street Journal rightly criticizes Trump for threatening corporate executives to keep their prices artificially low in order to protect him from the inevitable consequences of his disastrous trade ‘policy.’ Three slices:

One bad policy decision inevitably leads to another to compensate for the damage, and that’s already true of President Trump’s new 25% tariffs on auto imports. The Journal’s news pages reported late Thursday that Mr. Trump threatened auto executives on a call this month not to raise prices if he went ahead with his tariffs.

At least he recognizes in private that his tariffs aren’t cost-free for business or consumers, which wasn’t previously clear. But like his Democratic predecessors, he apparently thinks he can browbeat CEOs to cover up for them.

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During last year’s campaign, Kamala Harris proposed letting the Federal Trade Commission dun food companies that raise prices too much. Mr. Trump responded by noting that “after causing catastrophic inflation, Comrade Kamala announced that she wants to institute socialist price controls.”

Well, now Mr. Trump seems to be imitating Comrade Kamala to prevent catastrophic price increases from his auto tariffs. It’s hard to predict the magnitude of the price impact, though Ford Motor CEO Jim Farley warned last month that “long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the US industry that we’ve never seen.”

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Businesses were optimistic when Mr. Trump returned to the Oval Office because they thought he understood how markets work. They may have been mistaken.

Jeff Luse reports that Trump’s disastrous trade ‘policy’ is undermining the administration’s efforts to free-up U.S. production of energy. A slice:

It’s not just Trump’s rhetoric that has the energy industry on edge; it’s his trade policies, too. One respondent noted that tariffs “immediately increased the cost of our casing and tubing by 25 percent.” Another said, “Washington’s tariff policy is injecting uncertainty into the supply chain.”

GMU Econ alum Mark Perry makes a good point on his Facebook page:

Reversing a 75-year trend of lower tariff rates, Team Trump’s tariffs are expected to take tariff rates to 8.4% this year, the highest since 1948.

Reminder: There is NO example in the history of advanced economies when sweeping tariffs had the positive effects the protectionist Trump team believes are waiting for us on the other side of this tariff push and trade war. Not. One.

Phil Magness makes a good point on his Facebook page:

Trump’s decision to suspend US contributions to the WTO undercuts his oft-stated complaint that European powers are not meeting their contribution obligations to NATO.

My intrepid Mercatus Center colleague, Veronique de Rugy, reflects insightfully on libertarians and DOGE. A slice:

I got to thinking a lot about what a weird bunch we libertarians are. On one hand, we are radicals — we oppose a great many government programs and actions that most people support. At the same time, we also have a principled attachment to process and the rule of law. And, in addition, we recognize that who does what matters enormously. The ends don’t justify the means, and all that. In other words, we want to achieve radical ends but in very disciplined — shall we say, nonradical — ways.

Johan Norberg writes about “the Swedish origins of ‘liberal’ as a political label.” A slice:

Most interestingly for our purposes, this revolution was initiated by the individual who was probably the first Swede to describe his philosophy as liberal. In a speech for the Royal Academy of the Sciences on July 25, 1804, on free markets and economic development, Georg Adlersparre described his ideas as “liberal” again and again. He wrote about “a higher and more liberal economic maxim” in contrast to monopolies and tariffs, described economic openness as the result of “refined and liberal economic principles” and argued that wealth is created by “a lively liberal and active economic spirit” of hard work and freedom of enterprise.

My Mercatus Center colleague Jack Salmon unpacks “the real sources of America’s fiscal imbalance.”

My GMU Econ colleague Bryan Caplan talks with Catholic University economist and Hannah’s Children author Catherine Pakaluk about high-fertility women.

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… is from page 30 of H. Geoffrey Brennan’s and James M. Buchanan’s 1981 monograph, Monopoly in Money and Inflation: The Case for a Constitution to Discipline Government:

Money performs a function of real value. It is not merely a veil. Persons will voluntarily exchange real goods and services for money units, even if they have no intrinsic worth and cannot be directly consumed or utilised. Money is valued for its instrumental usage in facilitating future exchanges.

DBx: Yes. And so to understand why people voluntarily produce and sell and accept money in exchange for the fruits of their efforts one must always keep in mind the “future exchanges” part of the process.

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Here’s a letter to Business Standard.

Editor:

You report that “in a high-stakes call with top US automakers earlier this month, US President Donald Trump issued a warning: Do not raise car prices in response to his new tariffs” (“Trump warns auto industry: No car price hikes after tariff shake-up,” March 27). This warning, like his tariff policy, is inconsistent with Mr. Trump’s stated goal of helping ordinary Americans and improving the U.S. economy.

Because the tariffs will at least initially make automobiles more scarce in the U.S., the market value of automobiles will necessarily rise. By demanding that automakers not raise their prices to reflect this increased market value – this tariff-induced greater scarcity – Mr. Trump is demanding that automakers provide political cover for him by arranging for posted prices to lie to the public about the fact that his tariffs make automobiles more scarce.

This heavy-handed attempt to restrict automakers’ pricing decisions strikes at the very heart of the market order, the price system. And in doing so it virtually ensures that Mr. Trump’s desired increase in production in the U.S. by foreign automakers will be insufficient to offset the decrease in automobile imports caused by the tariffs.

Foreign automakers – and, indeed, also domestic automakers – will anticipate that additional production in the U.S. might very well be rendered unprofitable by White House pressure to keep their prices from rising to reflect the higher costs of whatever new government interventions this president and his successors might impose. This rational anticipation makes the U.S. a less-attractive place to establish and expand operations. Ordinary Americans will suffer as the economy stagnates.

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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Reason‘s Eric Boehm explains what should not – but, alas, what today nevertheless does – require explanation: Not only are Trump’s tariffs taxes on Americans, these taxes are economically destructive. Three slices:

If there’s one positive thing to be said about President Donald Trump’s latest tariff announcement, perhaps it is this: Few trade policy moves are more abundantly counterproductive and costly than tariffs on cars and car parts.

That’s a lesson the Trump administration is apparently determined to learn the hard way. On Wednesday, Trump announced a new set of 25 percent tariffs that will apply to imported cars and the components that go into cars built in the United States. Trump says those moves will promote domestic auto manufacturing, but that seems unlikely. Instead, the tariffs will make cars and light trucks more expensive, and will likely reduce the number of cars made and sold in America. They are bad news for auto workers, auto dealers, and consumers.

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In the wake of Wednesday’s announcement, Jonathan Smoke, a chief economist at Cox Automotive told The New York Times that 25 percent tariffs on cars and car parts would add an estimated $3,000 to the cost of cars built in the United States, with higher price hikes likely for foreign-made cars. He estimated that American factories will produce about 30 percent fewer cars as a result of the tariffs and that the industry is prepared for “disruption to virtually all North American vehicle production.”

But why would even American-made cars be impacted by the tariffs? Because there really is no such thing as a fully American-made car. According to an annual survey published by American University, there was not a single car brand that sourced all its parts domestically in 2024. New tariffs on car parts will hurt some brands more than others—Tesla, notably, seems poised to be hurt less than most of its competitors—but the damage will be widespread.

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Three decades after the North American Free Trade Agreement (NAFTA) was signed, the supply chains for American automakers stretch across the whole continent. “Ultimately, a vehicle is considered an import when it is shipped to the United States after undergoing final assembly in another country. But many vehicles—including those assembled in America—are composites of parts that come from all over the world,” notes The New York Times in an explainer about the modern automotive manufacturing supply chains that someone at the White House probably ought to read.

Drawing these political distinctions between domestic and foreign cars is pretty silly in a marketplace that is increasingly integrated. Is a BMW built in South Carolina a foreign car because of the name on the hood? What about a Toyota truck assembled in Tennessee? What about a Ford that’s built in Mexico with parts sourced from every corner of the globe? None of these questions are as black-and-white as the Trump administration wants to make them, and that’s just fine—we should trust the market, not politicians, to build the best car.

Unimpressed with Trump’s trade ‘policy,’ my intrepid Mercatus Center colleague, Veronique de Rugy, is also unimpressed with Jared Bernstein’s and Dean Baker’s proposed alternatives to that policy. Three slices:

In the Wall Street Journal, Jared Bernstein and Dean Baker have a piece about how the Trump administration’s sweeping agenda of protective tariffs, meant to restrict imports to create a manufacturing renaissance, will fail. These authors propose instead a sprawling array of subsidies, tax credits, and federal grants aimed at coaxing domestic production in “strategic” industries. These are the two dominant industrial-policy frameworks today — and they are both deeply flawed.

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Further, the fantasy of full-scale reindustrialization of the workforce is just that. Let’s even imagine that higher import taxes on manufacturers and producers — making the inputs they use more expensive — will convince most of them that investing in the U.S. is a good deal, leading to more manufacturing on our shores. Even in this unlikely scenario, there will be no boom in manufacturing jobs. That’s because the drive to be efficient — the competitive pressure to produce more and better at lower costs — will require more automation.

The alternative is one that the proponents of industrial policy for the sake of job creation in manufacturing haven’t considered. If manufacturing were to re-employ a large number of workers, it would mean that they must diminish their automation and, in doing so, lower their productivity. And lower productivity means lower real wages.

Yet those who clamor for reindustrialization (whatever that means, considering that industrial output and capacity today are at all-time highs and manufacturing output is 177 percent higher than the last time the U.S. ran a trade surplus in 1975) naively suppose that government-engineered increases in manufacturing employment will, by some miracle, not reduce manufacturing wages. America specializes in high-value production. That’s what happens when you are a rich country: Your workers are highly productive and have good employment options, so their wages rise. The closer we’ll get to restoring the American economy of the 1950s the closer we’ll get to reducing Americans’ real wages — and to worsening Americans’ work conditions — to what these were 70 years ago.

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Ultimately, tariffs and subsidies are two sides of the same costly coin. Both cases rely on the idea that politicians and bureaucrats are better at allocating resources than the market. Both underestimate the dynamism and adaptability of private enterprise. And both overpromise: tariffs will not bring back 1950s-style manufacturing employment, and subsidies will not create a resilient, self-sustaining industrial base or the “industries of the future.”

If the goal is genuine economic strength, we should stop trying to micromanage the economy through protectionism or top-down industrial policy. Instead, we should focus on creating the conditions for broad-based growth: a stable fiscal environment, low barriers to entrepreneurship, and a regulatory framework that encourages investment rather than punishing it. Oh, and also a commitment to a policy of free trade.

Industrial policy, whether dressed up as tariffs or as handouts, distracts from these fundamentals. And in doing so, it undermines the very prosperity it claims to build.

The Editorial Board of the Wall Street Journal decries the dangerous reality that Trump – who seemingly admires the economic acumen of Jawaharlal Nehru – is “dead set on remaking the economy on his import substitution model.” Two slices:

So much for the idea that President Trump views tariffs as a negotiating tool to reduce everyone else’s tariffs. That was always implausible, and the illusion went poof Wednesday with Mr. Trump’s executive order imposing 25% tariffs on all imported cars and trucks. He wants border taxes for their own sake, so get used to it.

“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” the President said in unveiling the tariffs. It’s pointless trying to persuade him that nobody is stealing Americans’ lunch and that trade can be good for both parties. But readers should know they are about to pay more for their cars and have less choice to boot.

Mr. Trump justifies his car tariffs as a “national security” threat under Section 232 of the 1962 Trade Expansion Act. As we wrote in 2019 when he tried this gambit, he apparently fears the attack of the killer Toyotas.

Canada and Mexico, those global menaces, account for about half of U.S. auto imports. U.S. allies in South Korea, Japan and Europe account for almost all the rest. Imports give Americans more choices, and at lower prices, than they would otherwise have if all cars sold in the U.S. had to be made domestically. Americans as a result can afford more and better cars than they could a few decades ago. This is a security threat to whom exactly?

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Car makers have already invested countless billions in efficient supply chains to make cars that middle-class Americans can afford. They will now have to spend hundreds of billions more that could be invested in more productive ways. And all because Mr. Trump has an economic development model based on the fantasy of “import substitution.” That model kept India poor for decades.

President Biden sought to transform the U.S. economy based on his vision of government industrial policy. Mr. Trump is also trying to transform the economy according to his industrial vision.

GMU Econ alum Dominic Pino describes Trump’s “Fact Sheet” on tariffs as Bidenesque. Three slices:

It would be nice if economically illiterate White House “fact sheets,” a regular occurrence under the Biden administration, were a thing of the past. But Trump’s fact sheet justifying auto tariffs is positively Bidenesque.

Like Biden, Trump is abusing economic powers of the president intended for national defense to do something he wants to do regardless of any defense concerns. Biden used the Defense Production Act to support green energy, and now Trump is using Section 232 national-security tariffs to protect the car industry.

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Trump thinks it’s worth it to abuse the process in this way because, as the fact sheet says, “Studies have repeatedly shown that tariffs can be an effective tool for reducing or eliminating threats to impair U.S. national security and achieving economic and strategic objectives.”

What studies? Let’s go through them one by one:

• “A 2024 study on the effects of President Trump’s tariffs in his first term found that they ‘strengthened the U.S. economy’ and ‘led to significant reshoring’ in industries like manufacturing and steel production.”
  • This is not a study, but rather an article on the website of the Coalition for a Prosperous America (CPA), a lobbying group that supports tariffs. To back up the claim of “significant reshoring,” the author lists three instances of companies creating a total of 1,345 jobs after the China tariffs and claims that the steel tariffs created 4,000 jobs. Granting for sake of argument that these numbers are correct, 5,345 jobs is hardly “significant,” accounting for 0.0033 percent of the roughly 163 million employed Americans. Other evidence provided is that the steel tariffs benefited steel companies, which . . . of course they did. Nowhere does the author consider the jobs lost due to higher input costs for manufacturers; in fact, he specifically rejects such analysis and says tariffs should only be “judged based on the targeted industries.” Of course tariffs can benefit the targeted industry, but the existence of concentrated benefits does not justify dispersed costs.

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This is the Biden economics playbook: Abuse national-security laws to do something you want to do anyway, purposefully ignore actual economic research on the topic, find other “research” from “experts” you like, and — bizarrely, coming from Trump — cite the Economic Policy Institute and Janet Yellen to support you.

Phil Magness, as a guest on the Reason Podcast, talks informatively about “the real history of tariffs and why Trump is so wrong about them.”

Scott Sumner ponders “the new China Shock.” Two slices:

There’s a widespread perception that trade with China caused increased unemployment in America. This is false. Imports from China did reduce jobs in some industries, but this did not have any effect on the overall unemployment rate, as even more jobs were generated in other industries.

Last year, the Chinese trade surplus rose to nearly a trillion dollars.  If the mercantilists were correct, then China should be experiencing a boom in manufacturing employment.  In fact, just the opposite is occurring—millions of manufacturing jobs are being lost and China’s unemployment rate is higher than ours.

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Automation was also the primary cause of job loss in US manufacturing.  Unfortunately, politicians have blamed the job loss on trade, and this has contributed to the global rise in nationalism.  If trade really were the issue, then China’s vast trade surplus would be generating lots on manufacturing jobs.  Instead, they’ve lost over 7 million such jobs, just since 2011

Fabian Wintersberger sensibly calls for an end to sugar tariffs and corn subsidies.

Speaking of sugar protectionism in the U.S., GMU Econ alum Mark Perry shares these data:

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… is from page 68 of Art Carden’s and GMU Econ alum Caleb Fuller’s forthcoming (in April 2025) book, Mere Economics (footnotes deleted; links added):

Trade skeptics overlook the dispersed benefits. Some find virtue in paying more for “fair trade” coffee, goods “made in America,” and local produce, but as twentieth-century economic journalist Henry Hazlitt reminds us, “the art of economics” means looking at the costs and benefits for everyone, not just the highly visible beneficiaries. It’s a variation on “love your neighbor as yourself.”

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After reading my most-recent letter sent to the Washington Post, Phil Gramm called me and left a voicemail message. (When he called I was in class.) He told me, correctly, that in my letter I failed to “put the final nail in the coffin” of the case that so-called “U.S. trade deficits” are phenomena that Americans should fear. That final nail is pointing out that when the U.S. government ran budget surpluses in 1998, 1999, 2000, and 2001, the real value of U.S. trade deficits rose.

Let me explain.

Government-budget deficits are genuine deficits; they necessarily put all taxpaying citizens of the country further into debt. In contrast, “trade deficits” are not genuine deficits. These “deficits” do not necessarily result in further indebtedness. In practice, some amount of “trade deficits” becomes debt, but not all of it does.

When trade deficits do result in greater indebtedness, they do so in one of two ways. One is when private individuals voluntarily borrow money from foreigners. If I, an American, borrow one-hundred U.S. dollars from a resident of Germany, the U.S. trade deficit is made $100 larger than it would otherwise be, and I am $100 in debt to a foreigner. Note that my increased indebtedness does not pull any other American into further indebtedness.

The second way that trade deficits result in greater indebtedness is when the government borrows money from foreigners. When such borrowing occurs in the U.S., all American taxpayers – current and future, and whether they like it or not – are pushed by their government into greater indebtedness to foreigners.

It is typically said that higher U.S. government budget deficits increase U.S. trade deficits, as foreigners are among the purchasers of U.S. treasuries. And so it is also typically said that one way to reduce U.S. trade deficits is to reduce U.S. government budget deficits: Reduced borrowing by the U.S. government means reduced purchases of U.S. treasuries by foreigners and, hence, smaller U.S. trade deficits.

While I decry the U.S. government’s inexcusable and dangerous fiscal incontinence, it’s not necessarily true that reductions in the size of U.S. government budget deficits will reduce U.S. trade deficits. This outcome might happen. But it’s possible that the opposite will occur – namely, greater fiscal responsibility by the U.S. government might cause U.S. trade deficits to increase. This counterintuitive outcome would occur if global investors judge improved fiscal policy in the U.S. as contributing to a stronger economy in the future. The anticipation of a stronger economy in the future might well heighten foreigners’ eagerness to make equity investments in the U.S., to buy more American land, or even to hold dollars – none of which increases Americans’ indebtedness but all of which increase U.S. trade deficits.

The U.S. experience of 1998 through 2001 is consistent with this latter possibility.