Ramesh Ponnuru (Washington Post), Where’s the economic sense behind Trump’s tariffs? Not even Treasure Secretary Scott Bessent can convincingly defend the president’s trade policy.
Ramesh Ponnuru is a senior fellow at the American Enterprise Institute and editor of the National Review. He writes,
If you think tariffs are painful, try watching President Donald Trump’s aides and supporters attempt to defend them. Whenever they come up with a rationale for his policies, however dubious, he immediately says or does something to contradict it. They say Trump’s trade strategy is all about containing China — then he slaps tariffs on the allies we would need to do so. They explain that the law lets him impose tariffs on Canada to protect our national security, only for him to let slip that he’s mad about Canadian dairy policies.
The truth is that Trump just likes tariffs and people who tell him they make sense. His trade adviser, Peter Navarro, thinks imports harm the economy because he doesn’t understandhow gross domestic product data is calculated. The administration has no grand trade strategy.
But the demand for sophistry in defense of Trump’s tariffs is apparently inexhaustible. Scott Bessent, the treasury secretary, tried out another argument at the Economic Club of New York last week.
The president, Bessent said with a straight face, “sees the world not as a zero-sum game but as interlinkages that can be reordered” to help Americans. (If this were a college paper, the professor would scrawl “citation needed.”)
Bessent argued that the tariffs are designed “to rebalance the international economic system” and “[level] the playing field.” He’s not just making the standard complaint that other countries place tariffs on U.S.-made products. Although true, that fact does not go very far toward justifying Trump’s policies. In fact, many countries place lower tariffs on our exports than we do on theirs — yet Trump wants to hike tariffs on them anyway.
The treasury secretary has a broader view of the imbalances that need to be fixed. “The United States,” he says, “provides reserve assets, serves as a consumer of first and last resort, and absorbs excess supply in the face of insufficient demand in other countries’ domestic models.” Most economists think the United States runs a trade deficit because investment outstrips savings. Bessent looks at it differently: Other countries force trade deficits on America by undervaluing their currencies and investing their excess savings with us.
Bessent sketched his case briefly in New York, but others have developed it in greater detail. Manufacturing employment has shriveled because of all this currency manipulation, these theorists say, but tariffs can undo these distortions by encouraging increased production at home.
Bessent alluded to this idea in the most quoted remark from the speech: that “access to cheap goods is not the essence of the American Dream.” He believes that the global economic order has pushed us to consume too much and produce too little. Perhaps a man with assets above $500 million should have found a better way to phrase this opinion.
But set aside the bad PR. The argument itself is a chain with several links — and not one is solid.
Trade balances don’t indicate which economies are succeeding and which are failing. The United States ran a trade deficit for most of the 19th century while rising as an industrial power. Nor is it true that trade surpluses can keep a country from losing manufacturing jobs. Every developed country — including Germany, which has a trade surplus — has seen the same downward trend.
Tariffs are not a reliable means of increasing domestic production, either. That’s partly because they tend to cause the currency to appreciate. Bessent himself has told us so: During his confirmation hearings, he tried to allay fears that tariffs would raise prices by saying that a rising dollar would soften the blow. But a stronger dollar also reduces demand for U.S. exports — which is the very reason Bessent complains about currency manipulation.
Tariffs also tend to raise the price of goods that U.S. manufacturers use, which makes it harder for them to make and sell their own products. Study after study has found that the tariffs Trump imposed during his first term caused manufacturing employment and output to shrink. Moreover, those tariffs didn’t even reduce the trade deficit.
What Bessent’s case for tariffs has in common with all the other rationalizations is that the president has given no indication he believes it. If Trump believed it, he would want a weaker dollar and an end to its status as a global reserve currency. He doesn’t; he has talked about punishing countries that try to displace the dollar.
The purpose of these theories is not to cohere. It’s to sound just plausible enough to distract from the unsettling truth: The president has an obsession with tariffs, and it is impervious to facts and logic.
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