A Tumult Over Tariffs

What is it about President Trump’s tariff ideas that so riles the left-wing economic establishment? Feature the twin-barreled denunciations just out from the ex-chief of the New York Fed, William Dudley, and the Times’s Paul Krugman. Mr. Dudley contends voters will “be in for a shock” if they think Trump’s tariffs “will make them better off.” Mr. Krugman warns that Trump’s “radical” proposal for higher levies “could wreck our economy.” While there are grounds for caution when boosting duties, as these columns noted, pointing to the consequences of the infamous Smoot-Hawley tariff, the vociferousness of this wave of criticism suggests that Trump’s ideas deserve a fairer hearing than they’re getting in the press. Plus, too, the fact that tariffs — which had been written off by bien pensant economists as a relic — are being debated at all is a signal that Trump has struck a nerve on this head.Mr. Krugman professes to be flummoxed by the former president’s enthusiasm for the import levies: “It has never been entirely clear why Trump has a thing for tariffs,” he says. The Nobel laureate surmises that Trump “sees everything in terms of winners, losers and punishment.” Mr.Krugman speculates that Trump has an idea of “the good old days of high tariffs” as a means to “punish foreigners.” It would “turn back the clock,” Mr. Krugman writes.For all Mr. Krugman’s skepticism, he at least gives Mr. Trump credit for being “consistent” in his advocacy of tariffs over the years. Mr. Dudley, who avers that “across-the-board higher tariffs would both raise inflation and hurt growth,” casts doubt on Trump’s sincerity — and even his competence. Even if Trump is “a true believer in the wisdom of raising tariffs,” Mr. Dudley says, “voters need to recognize that he doesn’t know what he’s talking about.”Trump, though, has had a track record of confounding critics who underestimate his fidelity to his vision. So what of the meat of the criticism of Trump’s tariff plan? Mr. Krugman contends that a 60 percent levy on imports from Communist China, plus 20 percent on products coming from the rest of the world, would yield a “3 percent rise in the cost of living.” He calls that, “in effect,” a “strongly regressive tax increase.”Mr. Krugman, too, waves off Trump’s claims that tariffs could fuel a domestic manufacturing renaissance here, pointing to a study by Mr. Dudley’s New York Fed. The research concluded that since “American manufacturing relies heavily on imported components,” boosting tariffs “would substantially raise manufacturing costs.” Yet in both of these observations Mr. Krugman’s pessimism about costs ignores the dynamic potential of Trump’s tariff ideas. The point of Trump’s tariff ballyhoo is not actually to impose higher levies, but to use them as a cudgel to advance American interests in the arena of global trade. “Reciprocity is the new free trade,” is how our Lawrence Kudlow, who headed Trump’s National Economic Council, puts it. He writes that the “economics profession unfortunately still clings to the kind of post-World War II pure free trade approach whose time is long gone.”As Mr. Kudlow explains, “the very tariffs that the liberal economic establishment hates so much” are actually “the pathway to free trade.” That’s because, as he puts it, “Countries with unfair trading practices will be denied access to the great American market unless they lower their trade barriers.” Mr. Kudlow notes that “Trump is a master negotiator at this,” and so “the worst-case high tariff rates will never actually come to pass.”So much, then, for the economics establishment’s Chicken Littles, who seem to be using Trump’s talk of tariffs more to frighten voters — and plump for Kamala Harris — than to foster a substantive dialogue on trade policy. And no wonder. It was the same feckless free traders who, as Trump pointed out in his winning bid for the White House in 2016, presided over the decline of America’s industrial heartland. Could it prove to be a winning issue again?

A Tumult Over Tariffs

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