I have made no secret of my deep skepticism about President Trump’s tariff policy since he announced the “Liberation Day” tariffs in April 2025. My first “Thoughts on Trump Tariffs” blinked a few days after the announcement was well received, and I have posted a follow-up on the topic several times. For an overview of economic thinking on the subject, I recommend the six-paper symposium on tariffs in the summer 2026 issue Journal of Economic Perspectives (where I work as Managing Editor).
Of course, I’m sure all readers of this blog have studied the paper in depth. But if you’re working on other plans when the issue is published in August, it’s worth mentioning here. I will not try here to summarize the paper in depth, but only to tell you interesting things about each.
In “US Tariff Policy since 1789,” Miguel Acosta, Lydia Cox, Andrew Greenland, John Lopresti, Christopher M. Meissner, Martin Rotemberg, and Sharon Traiberman describe the effort to build a detailed database of tariffs going back through 1789–a monumental task that involved classifying products in a consistent manner at the same time as Congress 19 and then the tariffs. document. They emphasize the three R’s of historical tariff policy: “the use of tariffs as the main revenue stream before the Civil War; tariffs restricting the newly emerging industrial economy after the Civil War; and the period of “reciprocity” that emerged from the 1930s. I was intrigued by how tariff policy has over time come to focus on very specific goods (say, a type of cheese) as a way to focus tariffs on some countries over others. be more detailed.
In “Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses,” Rafael Dix-Carneiro and Brian K. Kovak provide evidence on patterns of job losses to trade over time. He argues: “The main finding is that trade liberalization and import competition can lead to considerable and very localized labor market disruptions. In particular, labor and income losses tend to be concentrated in certain areas, sectors, and occupations, and the adjustment is often slow, with effects that go beyond the workers directly affected to all local communities.” In analyzing the pattern of adjustment, they show that the costs fall especially heavily on older workers with less flexibility to move their lives. They also found that when industries were protected from import competition by tariffs, they often responded by investing more in capital equipment and earning higher profits, rather than maintaining high employment. He made the case for “smooth policies,” to reduce the shock costs of trade for those with the highest costs, with the goal of helping facilitate the longer-term benefits of trade for the economy as a whole.
In “Are We Taxing Trade? A Pigouvian Perspective,” by Arnaud Costinot and Iván Werning point out that it is easy to create a model that shows that those who create trade disruptions also have to pay social costs—but real-world trade policy is not easy either. He suggested the “Principle of Targeting”: “The economy can be distorted and government intervention can be done. But one cannot conclude that the tariff is optimal without making it compete with other available instruments. The Principle of Targeting suggests that trade policy is acupuncture with a fork and asks to use a needle. assuming that there are no other policy instruments available to achieve this goal, as Rodrik (1995) said, “It says that trade policy exists because it can transfer income to the favored group, as I mentioned that Sir Edmund Hillary climb Mt. Everest because he wanted to get mountain air. There must be an easier way to achieve that goal. The takeaway is that arguments for specific tariff policies that focus on narrow geopolitical or economic goals may be more persuasive than sweeping, general pro-tariff arguments.
In Incidence of Tariffs: Rates and Reality, “Gita Gopinath and Brent Neiman explain the question of whether tariffs are paid by foreign producers-as President Trump promised in April 2025-or whether they raise prices for US consumers. They point out that through the end of 2025, the actual tariff rates paid because” statutory rates, announced is only half of the rates.[s]hipment lags, product and company-specific exemptions, the use of the US-Mexico-Canada Agreement (USMCA), and evasion and heterogeneous enforcement all contribute to the large gap between the statutory and real rates. With these factors in mind, the estimate is that more than 90% of these tariffs are passed on to US buyers – a finding that is consistent with several other studies.
In “Global Imbalances, Tariffs, and Industrial Policy, Pierre-Olivier Gourinchas, Gene Kindberg-Hanlon, Manasa Patnam, Lorenzo Rotunno, and Michele Ruta work on the question of whether tariffs or industrial policies in general can reduce the trade deficit. They reaffirm the conventional argument (among economists) that tariffs only have an effect on the trade deficit because the trade deficit is not the same as the trade deficit. The macroeconomic results are driven by domestic savings and the level of investment. macroeconomic industry” involving financial repression and forced savings.
The term “financial repression” refers to a group of policies. It may include limiting the interest rate available on deposits in the domestic banking sector or limiting the availability of other financial assets, in order to reduce financing costs, and also limit the level of debt for loans to businesses in the targeted sector. These policies are often combined with forced savings policies that can include restrictions on dividend payments by companies (to encourage higher retained earnings), reserve requirements for export earnings, mandatory savings requirements in pensions or similar products, or even social safety net provisions that require high personal savings for insurance purposes.
The purpose of rules and incentives that discourage savings and limit investment options for households is to make it cheaper and easier for domestic companies to raise investment capital. China is certainly a prime example of such a policy. By stifling domestic savings and investment, these policies may lead to trade surpluses – but lower consumption policies and limited financial investment opportunities are unlikely to be political winners for US politicians.
In Evaluating Fiscal Implications and Rate Distribution, “Kyle Pomerleau and Erica York look at how important organizations like the Congressional Budget Office, the Tax Policy Center managed by the Brookings Institution and the Urban Institute, the Yale Budget Lab, the Penn/Wharton Budget Model, and the Tax Foundation formulate estimates for the total amount of income 2 (at least 2 values). of these organizations formulate estimates of who pays the rate in the income distribution In the first question, the rate at the level of 2025 more-or will raise about $2.5 trillion in revenue in the next 10 years-that is, an average of $250 billion per year-or people less if the model takes into account how rates will be slower in the economy and low-income households, and less than those close to the income distribution.
As I write back in April 2025, President Trump has tariffs. They implemented them without Congress passing new laws, and when the courts told them they didn’t have the legal power to do so, they gave different legal reasons. He made extravagant promises about the tariffs: for example, when President Trump spoke about the upcoming tariffs, he said: “All I know is this: We will take hundreds of millions of dollars in tariffs, and we will be rich, you will not know where to spend all the money! I tell you – you just have to watch. great.” As I wrote in April 2025: “President Trump’s claims about the benefits of tariffs appear to be based on false beliefs. … I admit to darker thoughts. Part of me hopes that Trump will keep the tariffs in place until the common costs are visible to all, so that the modern awareness of why this approach cannot be applied for the next few decades.