Economics and Politics of Tariffs

What do experts say? A curated reading list

In recent years, when teaching my senior policy capstone course I would often pivot the course on short notice to discuss current events, updating the readings on the syllabus, and often inviting guest lectures from relevant experts. Among such pivots were Covid-19, Russia-Ukraine, the U.S. elections, October 7th, and more.

Part of my motivation of course was that I wanted my students fully engaged and informed on important topics. Another part of my motivation was also selfish — I too wanted to learn more about the issues that were unfolding but sat outside (a little or a lot) my own expertise.

I’ll continue that practice here at THB. Today’s topic — Tariffs, what do experts say?

Experts are not always correct simply by virtue of being credentialed, as THB readers well know. That said, if we want to understand the world we live in — crucial for moving together into the future — then we ignore experts at our peril.

To that end, below I am sharing some valuable perspectives that I’ve come across in recent weeks that have helped me to better understand the trade wars being launched by the Trump Administration. These perspectives come from a very wide range of ideological perspectives, and you’ll find below some making a case against tariffs as trade policy and others making a case for tariffs as trade policy. I also include some relevant research and reports for those wanting a deeper dive.

If we were back in my classroom I’d share the following discussion questions along with the readings, to focus the students on policy thinking and to kick off our discussion:

1. Tariffs are policy. What problem(s) are they justified as addressing?

2. By what metrics would you suggest that we evaluate the effectiveness of trade policy with respect to their justifications? With what data? Collected by whom?

3. How long until we would know the effectiveness of changes to trade policy with respect to addressing the problem(s) that justified them in the first place?

4. Similarly, how would we know if tariffs are not working as justified?

5. How do we make sense of tariffs as policy (a course of action) versus tariffs as politics (bargaining, negotiation, and compromise)?

These question seek to push students beyond the promotion of policy alternatives and toward thinking about implementation and evaluation.

One last thing before jumping into the readings — I invite your discussion, debate, and expecially suggestions for other good materials. As is usual here at THB, I expect healthy disagreement and a range of perspectives. THB has some of the smartest, thoughtful, and respectful discussions anywhere online, and it takes us all to keep that going.

With that, let’s get to the readings . . .

• In the Wall Street Journal, Tariffs on Screws Are Already Hitting Manufacturers:

Rising costs for screws are rippling through manufacturing supply chains.

President Trump’s tariffs implemented this month on steel and aluminum imports have scrambled the supply chains of companies that make everything from car parts to appliances and football helmets to lawn mowers.

Unlike a similar Trump levy in 2018, the latest ones cover a wider range of imports, including the screws, nails and bolts that serve as the connective tissue in manufacturing.

That has set off a hunt to find domestic supplies of some of manufacturing’s smallest components. Tariffs on imported steel and aluminum are already driving up the costs of foreign and domestic metal used to make those components. Manufacturing executives said the U.S. doesn’t have the plants to churn out the amount of steel wire or screws and other fasteners needed to displace imports.

• In The New York Times, Jason Furman, Harvard University, and was chairman of the White House Council of Economic Advisers from 2013 to 2017 under President Obama:

[T]he one argument Mr. Trump has returned to again and again is that other countries are taking advantage of the United States. He measures the degree to which they are doing so by the magnitude of our trade deficit with them — that is, how much more money we spend on another country’s goods and services than we get from selling it our goods and services.

In this reckoning, the reason those deficits arise is that other countries erect tariffs and other trade barriers against the United States. It follows from this analysis that the solution is to reciprocate by erecting our own tariffs, which will either protect the United States or else get other countries to lower their barriers, either way reducing or eliminating the trade deficits.

Every step in this chain of reasoning is wrong.

• Scott Lincicome, of the libertarian Cato Institute:

Among the most common economic justifications for tariffs today is that they’re needed to shrink a U.S. trade deficit that has long cost us jobs and dragged down economic growth. On both the left and the right (including the current occupant of the White House), trade balances—both overall and with specific countries like China or our new mortal enemy, Canada—are treated as a scoreboard for quickly judging the success or failure of U.S. trade policy and globalization more broadly. And seemingly every time the government releases the latest trade balance figures, at least one business journalist—and usually many more—will earnestly write that the U.S. trade deficit “improved” (shrunk) or “worsened” (increased), and that the deficit is a drag on economic growth.

Yet little that I just wrote is actually correct.

• In the Wall Street Journal, John Michaelson, Michaelson Capital Partners:

The case for tariffs . . . [B]ringing business investment and supply chains back to America involves long-term decisions, and what America also needs is a long-term approach.

Tariffs have many advantages in this project. They are simple and require little bureaucracy. They allow private actors to find the best solutions to clear new price signals. As with any tax, they imply a recognition that a person has to pay for some collective benefit. And as with any dangerous tool, tariffs should be used carefully.

Tariffs must be high, consistent, sustained and predictable so that businesses can plan. They must also be imposed across the board rather than selectively by country or type of import, with exceptions only for our few real friends such as the U.K. and Australia and for a few vital raw-material imports.

• Oren Cass, founder and executuve director of the American Compass, makes the case for tariffs:

I think we need to replace the current baseline of free trade with a default where there are in fact going to be tariffs, and then let's figure out who wants to be essentially inside a U.S.-centered trading bloc. Part of being in that bloc is you have to play by the rules that we're going to define, but if you're in that bloc, then certainly there's no need to have those tariffs on you. But you're also going to need to maintain a consistent policy that says the countries outside the bloc can't just cheaply import things into Canada instead and then get them into the U.S. that way. You've basically got to have the onside team and the offside team.

• Kimberly Clausing, at the Peterson Institute for International Economics, UCLA, and former Deputy Assistant Secretary for Tax Analysis in the US Department of the Treasury:

The Trump administration has marked April 2 for its next big tariff announcement, one centered on countering unfair trade practices abroad and imposing reciprocal trade protection. The administration may invoke reciprocity in at least four areas: value-added taxes, corporate income taxes, digital sales taxes, and foreign trade barriers. In each case, US tariffs would not be a wise policy response.

• Hanson and Moretti 2025. Where Have All the Good Jobs Gone? Changes in the Geography of Work in the US, 1980-2021. NBER Working Paper 33631

We focus on a period of momentous changes in the US labor market. Over the last four decades, the industries that generate good jobs for American workers changed in profound ways. The two most important shifts that we document were the decline of good jobs in manufacturing and the rise of good jobs in human capital-intensive service industries. Between 1980 and 2021, the share of good jobs held by manufacturing workers was cut in half. This decline was caused by the collapse in the overall size of the manufacturing sector, not the relative decline of manufacturing wages, as the share of good jobs within manufacturing remained surprisingly stable. During the same period, the share of good jobs in business and professional services quadrupled, both because the sector’s employment expanded and because an increasing fraction of its workers earn high salaries.

These nationwide industry shifts had important and well-documented impacts on local communities. Their overall effect on the geography of good jobs was complex.

• Autor et al. 2024. Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States, NBER Working Paper No. 32082

We study the economic and political consequences of the 2018-2019 trade war between the United States, China and other US trade partners at the detailed geographic level, exploiting measures of local exposure to US import tariffs, foreign retaliatory tariffs, and US compensation programs. The trade-war has not to date provided economic help to the US heartland: import tariffs on foreign goods neither raised nor lowered US employment in newly-protected sectors; retaliatory tariffs had clear negative employment impacts, primarily in agriculture; and these harms were only partly mitigated by compensatory US agricultural subsidies. Consistent with expressive views of politics, the tariff war appears nevertheless to have been a political success for the governing Republican party. Residents of regions more exposed to import tariffs became less likely to identify as Democrats, more likely to vote to reelect Donald Trump in 2020, and more likely to elect Republicans to Congress. Foreign retaliatory tariffs only modestly weakened that support.

• PGIM Global Asset Management, 2025. A New Era of Globalization: Shifting Opportunities in a Dual-Track World.

2024 was a year of change, with roughly half of the world’s population voting in national elections across more than 60 countries. One theme dominated almost universally: dissatisfaction with a global economy that favors others over us. Nationalist rally slogans like “Les notres avant les autres”, “America First” and “Make in India” resonated strongly with voters. In a wave of populist-fueled discontent, presiding governments had their worst electoral performance in over 100 years. From South Africa, Uruguay and India to France, Japan and the US, incumbents lost electoral support or were thrown out of office altogether.

On the surface, these election results – and the swirling headlines around tariffs, migration crackdowns, beggar-thy-neighbor policy and supply chains aligning along geopolitical fault lines – would suggest the high-speed globalization train barreling down the tracks since the 1990s has been utterly derailed as the world de-globalizes. However, today’s reality is far more nuanced.

We argue instead that the world has entered a new era where globalization has essentially splintered into two distinct and separate tracks.

• DHL Global Connectedness Tracker, March 2025

Global connectedness is holding steady at a record high level based on the latest data available in early 2025, highlighting the resilience of international flows in the face of geopolitical tensions and uncertainty.

International trade remains a central pillar of the world economy. In 2023, 21% of the value of all goods and services produced was traded internationally, just shy of the all-time high of 22%.

U.S.–China ties continue to diminish, but they comprise only a small part of the world’s international flows. Direct trade between the U.S. and China fell from 3.5% of global goods trade in 2016 to 2.6% in 2024 (Jan–Nov).

Rival geopolitical blocs show some evidence of weakening ties, mainly because of shifts in Russia’s international flows. The share of world trade crossing between close allies of the U.S. and China and the opposing bloc fell from 12.5% in 2016 to 10.6% in 2024, but excluding Russia only from 11.1% to 10.5%.

Countries that are neither close allies of the U.S. nor of China grew their share of world trade from 42% in 2016 to 47% in 2024, with the United Arab Emirates, India, Viet Nam, Brazil, and Mexico seeing especially large trade share gains over this period.

Regionalization is not overtaking globalization. During the first eleven months of 2024, goods trade traversed the longest average distance on record (4,980 km) and the share taking place inside major world regions remained at a record low of 52% (considering data extending back to 2001).

Comment and discussion are welcomed!

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