Tariffs

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(1) Phil Gramm and Larry Summers, A Letter on Tariffs From Economists to Trump. Wall Street Journal, Jan 31, 2025 (op-ed).
https://drt.cmc.edu/2025/02/01/p ... es-against-tariffs/
("In the long history of the country, there is little evidence to substantiate the claim that America prospers more when trade deficits fall than it does when they rise. During the Reagan recovery [Reagan administration consistently ran huge federal budget deficit], as the level of economic growth surged, foreign investment rushed into the US and the trade deficit soared. The same phenomenon occurred during the Clinton boom: So strong was the attractiveness of investing in America that the trade deficit continued to grow even as the federal government ran budget surpluses. The annual real trade deficit nearly doubled during the four years in which the U.S. government was running a budget surplus. When the economy started to grow faster in 2017 and 2018 during the first Trump term, the trade deficit rose despite the tariffs that were imposed in mid-2018")

(2)
(a) Trade | Why Tariffs Will Make America poorer; Donald Trump’s favorite policy is bad for the world, too. Economist, Jan 25, 2025, at page 9 (in the section "Leaders")

two consecutive paragraphs:

"Mr Trump's deployment of tariffs in his first term did nothing to narrow America's trade deficit. One reason is that they tend to strengthen the dollar. Tariffs reduce American demand for imported goods, leading to less demand for foreign currencies. But when fewer dollars are sold, the greenback's value increases, which in turn depresses global demand for American exports. * * *

"The record of recent tariffs also proves that they do not magically create jobs in American factories. Manufacturing as a share of American employment has fallen since Mr Trump's first tariffs went into effect. Companies in industries directly protected by tariffs during Mr Trump's first administration -- notably steel and aluminum -- did indeed increase theuir revenues. But that gain came at the expense of thousands of downstream companies that suffered from higher input costs [because these companies lacked access to cheap imports].

(b) Do Tariff Raise Inflation? Usually. But the bigger problem is that they harm economic growth and innovation. Economist, Jan 25, 2025, at page 63.

two consecutive paragraphs:

"In the absence of foreign retaliations by erecting tariffs on American imports to those countries: So tariffs raise prices. Does that mean they cause painful inflation? Not necessarily. A one-off increase in prices might create only a short-term pop in inflation, not a sustained rise. Tariffs erode consumers' overall spending power * * *  

"Worse still, tariffs also crimp economic growth by creating 'dead-weight loss,' as demand is skewed towards domestic companies even when they are less efficient. As a consequence, resources are wasted on production that is more expensive than it otherwise would have been. The result is a vast economic distortion and lower income throughout the economy.


(3) Ana Swanson, Trade Deficit in Goods Hit Record $1.2 Trillion as US Imports Surged; A nation's exports also achieved a milestone, reaching $2.1 trillion. New York Times, Feb 6, 2025, at page B4 (B is Business section).