President Donald Trump is describing this Wednesday, April 2 as “Liberation Day” — the day Trump’s steep new tariffs are scheduled to go into effect if he doesn’t postpone them again. But many economists, liberal and progressive as well as conservative and libertarian, are saying that there’s nothing liberating about the sharp price increases the tariffs will bring for everything from fruits and vegetables to computers to vacuum cleaners to beer and wine.
Trump argues that the tariffs are necessary because trading partners have been taking advantage of the United States for too long. But Dr. Jason Furman, an economist at Harvard University in Cambridge, Massachusetts and ex-chairman of the White House Council of Economic Advisers under former President Barack Obama, dismantles that argument in an op-ed published by the New York Times on March 31.
“Mr. Trump has cycled through numerous rationales for tariffs: They will raise revenues, with foreigners footing the bill,” Furman explains. “They will help American manufacturers and national security. They will provide leverage against Mexican fentanyl and Canadian sovereignty. In all of these cases, there is a bit of truth and a lot of falsehood. But the one argument Mr. Trump has returned to again and again is that other countries are taking advantage of the United States.”
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Furman continues, “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…. Every step in this chain of reasoning is wrong.”
But trade, the Harvard economist emphasizes, brings the U.S. considerable benefits.
“Start with the fact that imports are good, not bad,” Furman writes. “They offer consumers greater variety, such as avocados from Mexico, lower prices on cars from South Korea or greater quality, including champagne from France. American companies are able to offer better products at lower prices and be globally competitive because they use imported steel, auto parts and precision machinery.… In recent years, the United States exported more to Brazil than it imported — a fact that had more to do with Brazil’s appetite for American oil and airplanes than any trade barriers.”
The “reciprocal tariffs” Trump is proposing, according to Furman, “will lessen the overall volume of trade.”
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“The United States will import less because foreign goods and services will become more expensive,” the Harvard economist observes. “It will also export less, because the tariffs that other countries erect against us will make our stuff more expensive for them.”
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Dr. Jason Furman’s full New York Times op-ed is available at this link (subscription required).
