International trade 101

Paul Krugman of the New York Times summarizes the findings of a group of economists from Columbia, Princeton, and the Federal Reserve: “The conclusion: to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall. …

“Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.”

One thought on “International trade 101

  1. Trump’s tariffs have worked pretty well if you’re a steelworker or an aluminum worker, though.

    I’ve been surprised that Trump hasn’t targeted imported autos. There were big protectionism fights over those in the 70s, 80s, and later. But a lot of voters buy imported cars now, so it might not work politically. And a considerable fraction of US auto production is non-UAW, so he wouldn’t have an automatic union ally. (My understanding is that primary metals are still heavily unionized.)

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