Opposition to President Donald Trump’s steep new tariffs is coming not only from liberal economists like Paul Krugman and Robert Reich, but also, from many conservatives and libertarians — some of whom are quick to note how vehemently critical the late economist Milton Friedman was of tariffs.
Critics of tariffs, both left and right, are citing a variety of negative repercussions high tariffs can have — from increasing prices to supply-chain issues. Another is stress on the United States’ currency.
In an article published by the conservative National Review on June 16, journalist Desmond Lachman examines the state of the U.S. dollar — and he sees problems on the horizon.
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“Something troubling is happening to the dollar,” Lachman warns. “Despite many reasons to think that the dollar should be appreciating, since the start of the year it has depreciated by around 10 percent. President Trump would be well advised to pay attention to the causes for the dollar’s decline before he proceeds with his budget-busting tax-cut proposal that could precipitate a real dollar crisis.”
Lachman adds, “With his import tariffs likely to exert upward pressure on prices, the last thing that Trump needs is for a dollar decline to add more inflationary pressure and for it to add to the government’s borrowing costs.”
Foreign governments, according to Lachman, may be “beginning to lose confidence in American economic exceptionalism.”
“Further stoking the fear of future inflation is Trump’s frequent demands that Federal Reserve Chair Jerome Powell cut interest rates aggressively, even at a time when inflation is running above the Fed’s 2 percent inflation target,” Lachman explains. “Powell’s current term as Fed chair ends in May next year, when a more dovish Fed chair might be appointed — a fact of which international investors are very well aware.”
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Lachman continues, “The other way that Trump is undermining confidence in the government bond and dollar markets is by raising the possibility that the United States might not fully honor its government-debt commitments. Foreign investors seem to be particularly alarmed at Section 899 of the One Big Beautiful Bill. According to that section, Trump would be able to impose a tax of up to 20 percent on the interest earnings of our foreign creditors in countries that are deemed to be pursuing tax policies unfair to U.S. interests.”
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Read Desmond Lachman’s full article for The National Review at this link.
