This is bad

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Photo by Gianfranco Grenar on Unsplash

Over the last few years, I hope this website has taught readers a lot about economics and policy. When writing, I try to find interesting stories and convey to readers why they matter. I often highlight problems, such as the lack of supply in America’s housing market, because problems have solutions I can advocate for and problems are more fun to write about. I always enjoy writing about bad economic takes or poorly drawn charts - taking down bad arguments is something I relish. At the same time, I don’t want this site to be a litany of complaints and grievances. I always recommend solutions to problems. I also write about good policies, like the FAA rule allowing children to sit on laps on airplanes. One of my favorite articles is about how great the Dominican Republic is doing.

Regardless, I try to write posts that are engaging, informative, and fair. While not letting people pump their own gas is irksome, and the New York Times trying to claim Venezuela is capitalist annoying, but ultimately minor. It’s tempting to describe everything as a catastrophe because that’s what gets clicks. Remember the Russian professor who predicted the US would break up by 2010? He became famous by simply taking the maximalist view. The internet has turbocharged the politics of outrage, incentivizing content creators to be as extreme as possible. Instead, I try to provide measured evaluations, calling balls and strikes without too much sensationalism.

So, with that in mind, take it seriously when I say that the Trump tariffs are the worst economic policy enacted by the United States since the federal government’s failure to counteract the Great Depression during the Hoover Administration. They will be ruinous. This is how I felt after hearing the news on Wednesday:

These tariffs are unparalleled in harmfulness and scope. Governments enact bad policy all the time. Some policies are terribly harmful, such as Biden’s decision to block Nippon Steel’s takeover of US steel, but the scope isn’t that large. That decision will hurt the American steel industry in the long-run and accelerate its descent into obsolescence, but that scope of harm is limited. It would be nice for the steel industry to get a shot in the arm and become more competitive, but it’s not the end of the world. The Biden plan to forgive $10,000 of student debt was vast in scope but would have caused limited harm. It was regressive, helping the rich more than the poor and would have increased the budget deficit. It was bad policy, but it’s also bad policy to spend $20 a month on lottery tickets.

The Trump Tariffs, on the other hand, are both tremendously harmful and the scope is massive. It’s tough to find the words to explain how much this could hurt the United States’ economy, geopolitical standing, and stature in the world. This is the event that everyone feared. The type of policy even Trump supporters sweated, but insisted steady hands around the administration would prevent. It is, as the economist Tyler Cowen puts it, the “worst economic own goal I have seen in my lifetime.”

It’s hard to know where to even start with these tariffs. First, tariffs are bad. As I wrote several weeks ago, declaring tariffs to be good is like saying vaccines cause autism or climate change is fake or that airplane contrails are filled with chemicals designed to pacify the population. Are there some economists who think broad tariffs are beneficial? Yes, just like some doctors believe vaccines cause autism. There are always kooks and cranks, especially when becoming a crank gets you access to the President of the United States.

Even if tariffs were good, and there are some decent arguments for using targeted tariffs in limited circumstances, that’s not what Trump did. Instead of determining the tariff rate other countries have on American goods, Trump believes that any country that doesn’t have balanced trade must be a sign of unfairness. Any trade imbalance must be stopped. This is akin to thinking a business must be taking advantage of you because you buy more from them then they buy from you. But it gets worse. The Trump tariffs don’t maintain internal logic because there are many countries with which the US has a trade surplus. Thus, under Trump’s mindset, we must be taking advantage of them. Yet even those countries had a 10 percent tariff put on them. Official government trade policy is now nothing more than a paranoid fever dream of a man who has lost touch with reality.

One of the most galling aspects of all this is most Republicans know what’s happening. It’s obvious in their lies. It took all of four hours for a random guy on Twitter to figure out that the “tariff rates” that other countries charge the United States was really just the trade deficit divided by imports. Does the White House admit this? No. Instead, the deputy press secretary claimed that the tariff rates were calculated by a more complex equation that determined effective tariffs. In reality, that equation is just trade deficit divided by imports, multiplied by one. I’m not joking. It would be funny if it wasn’t the logic underpinning the largest increase in tariffs a wealthy country has ever enacted.

Next, we have the chair of the Council of American Advisors, Stephen Miran, lying through his teeth, claiming that because the less flexible party bears the burden of a tax, and other countries are less flexible than the United States, other nations will pay the entirety of the tax. This is untrue for three reasons. First, it isn’t clear that the US is the more flexible party. In some trade partnerships it likely is, in others it won’t be. Second, the US can only switch to other countries if other countries don’t have tariffs on them. Since Trump put tariffs on every country, our only remaining option is to start importing goods from Mars. Third, Miran is correct that the less flexible party will pay for a majority of the tax, but not the whole thing! This is taught in Econ 101.

Finally, we have Treasury Secretary Scott Bessent claiming the decline in the stock market is a good thing because recent economic crashes are usually preceded by stock market gains, so by getting rid of the gains we are preventing the crash. I don’t even know where to start with that one. It’s equivalent to saying wartime is usually preceded by peacetime, so even though things are peaceful we should start a war now to prevent one later. Unhinged.

I’m not an alarmist. For the first time, however, I think it is more likely than not the America of five years hence will be a poorer, weaker, and worse place than the America of today. After eight years of telling my Republican friends that Obama wasn’t going to destroy America, then spending four telling my Democratic friends the same about Trump, I fear for the future. I’m still not concerned about America being “destroyed” - I’m not even sure what that means. I still have hope things will turn around, that Trump will see reason once the tariffs begin to bite. There’s still time to make this a speed bump. But if he doesn’t, if Trump doubles down and continues to proclaim that tariffs will eventually make America stronger, it will be painful. At best, the tariffs will significantly decrease economic growth and contribute modestly to inflation. At worst, they will cause a global recession and increase inflation to Covid levels. It could be the worst year for the American economy in half a century.

Good luck everyone.