I have made no secret of me deep skepticism about President Trump’s tariff policies since he announced his “Liberation Day” tariffs in April 2025. My first-blink “Thoughts on the Trump Tariffs” from a few days after the announcement has held held up reasonably well, and I have posted follow-ups on the subject a number of times since. For an overview of economic thinking on the subject, I recommend the six-paper symposium on tariffs in the Summer 2026 issue of the Journal of Economic Perspectives (where I work as Managing Editor).
Of course, I’m sure that all readers of this blog have already scrutinized these papers at great depth. But on the off chance you were pursuing other plans when the issue was published in August, it seemed worth mentioning here. I will not try here to summarize the papers in depth, but instead just to tell you something interesting about each one.
In “US Tariff Policy since 1789,” Miguel Acosta, Lydia Cox, Andrew Greenland, John Lopresti, Christopher M. Meissner, Martin Rotemberg, and Sharon Traiberman describe their efforts to construct a detailed database of tariffs back through 1789–a monumental task which involves classifying products in a consistent way over long periods of time and then tracking down tariff rates as they were published in 19th century Congressional documents. They emphasize the three R’s of historical tariff policy: “the use of tariffs as a key revenue stream prior to the Civil War; the restrictive tariffs of the newly emergent industrial economy after the Civil War; and the period of “reciprocity” that emerged beginning in the 1930s.” I was intrigued by how tariff policy has over time come to focus on very specific goods (say, types of cheese) as a way of focusing tariffs on some countries rather than others. Here’s a graph showing the number of products with tariffs on them over time–a number that keeps rising as the tariffs become more detailed.
In “Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses,” Rafael Dix-Carneiro and Brian K. Kovak present evidence on patterns of jobs lost to trade over time. They argue: “A central finding is that trade liberalization and import competition can generate sizable and highly localized labor market disruptions. Specifically, employment and earnings losses tend to be concentrated in particular regions, sectors, and occupations, and adjustment is often slow, with effects extending beyond directly affected workers to entire local communities.” In analyzing patterns of adjustment, they show that the costs fall especially heavily on older workers with less flexibility to shift their lives. They also find that when industries are protected from import competition by tariffs, they often react by investing more in capital equipment and by earning higher profits, rather than by keeping employment high. They make a case for “smoothing policies,” to cushion the costs of trade shocks for those bearing the highest costs, with the goal of helping to facilitate the longer-run benefits of trade for the economy as a whole.
In “Should We Tax Trade? A Pigouvian Perspective,” by Arnaud Costinot and Iván Werning point out that it is straightforward to draw up a model showing that that those who create the disruptions of trade should also pay for the social costs–but that real-world trade policy is also not so simple. They suggest the “Targeting Principle”: “The economy may be distorted and government intervention may be warranted. Yet one cannot conclude that a tariff is optimal without making it compete with other available instruments. The Targeting Principle suggests that trade policy is acupuncture with a fork and calls for using needles instead. … Let us return once more to the case where domestic redistribution is the only motive for trade policy intervention. On the one hand, it is unrealistic to assume that no other policy instruments are available to achieve this goal. As Rodrik (1995) puts it, “Saying that trade policy exists because it serves to transfer income to favored groups is a bit like saying Sir Edmund Hillary climbed Mt. Everest because he wanted to get some mountain air. There was surely an easier way of accomplishing that objective.” The takeaway is that arguments for specific tariff policy focused on narrow geopolitical or economic goals are likely to be more persuasive than sweeping and general pro-tariff arguments.
In The Incidence of Tariffs: Rates and Reality,” Gita Gopinath and Brent Neiman dig into the question of whether tariffs are paid by foreign producers–as President Trump promised in April 2025–or whether they raise prices for US consumers. They point out that through the end of 2025, the actual tariff rates paid were only about half of the announced statutory rates, because “[s]hipment lags, product and company-specific exemptions, utilization of the US-Mexico-Canada Agreement (USMCA), and evasion and heterogeneous enforcement all contribute to the large gap between statutory and actual rates.” With these kinds of factors taken into account, their estimates are that more than 90% of the tariffs were passed though to US buyers–a finding that they point out is consistent with a number of other studies.
In “Global Imbalances, Tariffs, and Industrial Policy, Pierre-Olivier Gourinchas, Gene Kindberg-Hanlon, Manasa Patnam, Lorenzo Rotunno, and Michele Ruta work through the question of tariffs or industrial policy in general can reduce trade deficits. They re-affirm the conventional (among economists) argument that tariffs alone are unlikely to have much affect on trade deficits, because trade deficits are a macroeconomic outcome driven by domestic savings and invesment levels. Similar logic applies to targetted industrial policy. However, what they call “macroeconomic industrial policies” involving financial repression and forced savings raise different issues. They write:
The term “financial repression” refers to a group of policies. It may involve limiting the interest rates available on deposits in the domestic banking sector or limiting the availability of other financial assets, in order to reduce funding costs, while simultaneously limiting lending rates on loans to businesses in targeted sectors. These policies are often combined with forced saving policies that can include prohibitions on dividend payments by corporations (to encourage higher retained earnings), reserve requirements on export earnings, mandatory saving requirements in pensions or similar products, or even weak social safety net provision that requires high private saving for insurance purposes.
The goal of rules and incentives that drive up saving and limit investment options for households is to make it cheaper and easier for domestic firms to raise investment capital. China is of course a major example of such policies. By driving up domestic savings and investment, these policies can lead to trade surpluses–but a policy of lower consumption and limited financial investment opportunities is unlikely to be a political winner for any US politician.
In Evaluating the Fiscal and Distributional Implications of Tariffs,” Kyle Pomerleau and Erica York look at how prominent organizations like the Congressional Budget Office, the Tax Policy Center run by the Brookings Institution and the Urban Institute, the Yale Budget Lab, the Penn/Wharton Budget Model, and the Tax Foundation formulate their stimates for total revenue to be raised by the tariffs (at least as they existed in 2025), and also how some of these organzations formulate estimates of who pays for tariffs across the income distribution. On the first question, tariffs at more-or-less the 2025 levels would raise about $2.5 trillion in revenue over the next 10 years–that is, an average of $250 billion per year–or someone less if the model takes into account how tariffs will slow the economy. In distributional terms, the tariffs tend to weigh more heavily on middle-income and low-income households, and less on those near the top of the income distribution.
As I wrote back in April 2025, President Trump owns the tariffs. He imposed them without Congress passing any new laws, and when the courts have told him that he did not have the legal power to do so, he has then offered one different legal rationale after another. He made extravagant promises about how the tariffs: for example, when President Trump was talking about the tariffs to come, he said: “All I know is this: We’re going to take in hundreds of millions of dollars in tariffs, and we’re going to become so rich, you’re not going to know where to spend all that money! I’m telling you – you just watch. We’re going to have jobs, we’re going to have open factories, it’s going to be great.” As I wrote in April 2025: “President Trump’s claims about the benefits of tariffs seem based on demonstrably false beliefs. … I confess to a darker thought. Part of me hopes that Trump will keep his tariffs in place until the costs are broadly apparent to all, so that a modern consciousness of why this approach doesn’t work can take effect for the next few decades.”
