Why Trump’s Tariffs Won’t Work

Key takeaways

Trump's tariff strategy is rooted in a belief that it will bring American manufacturing jobs back, despite contradicting evidence.
The burden of tariffs primarily hits American consumers, raising living costs on a variety of goods.
Historical data suggests that previous usage of tariffs has not resulted in significant job creation or economic benefit.
Integrated supply chains make it difficult for tariffs to achieve their intended positive effects without causing widespread economic disruption.
Current economic policies under the Trump administration raise concerns about long-term implications for the American economy and global trade relationships.

Summary

Trump’s Tariff Strategy: An Overview

The episode begins with Ezra Klein discussing Donald Trump's unexpected victory in the 2024 election and the response from Wall Street. Many believed Trump would not follow through on his harsh tariff promises, but as reality sets in, he doubles down on these tariffs, warning of a 'period of transition' in the economy. Klein reflects on Trump's understanding of the electorate and how grocery prices played a crucial role in his successful campaign.

Impacts of Tariffs on the Economy

Kimberly Clausing joins the conversation to clarify what tariffs are and how they function, emphasizing that they are taxes on imports which lead to increased prices for consumers. Clausing explains that the burden of these tariffs primarily falls on American buyers, contradicting Trump's assertion that foreigners will pay for them. She discusses the estimated cost increases for American households and how the tariff strategy can lead to significant losses within the economy.

Trade Dynamics and Economic Theory

The discussion shifts towards the theoretical goals of Trump's tariffs and the contradictions within them. Clausing explains how raising tariffs on imports should ideally reduce them but can paradoxically decrease government revenue if imports drop significantly. The conversation also touches on historical effectiveness of tariffs, with Clausing asserting that previous waves of tariffs provided little evidence of job growth and often disrupted local industries.

Consequences of Protectionism

As the conversation deepens, Klein and Clausing highlight the risks of interfering with the established trade relationships, particularly in the automotive industry, which relies heavily on integrated supply chains across North America. Clausing notes that the intricacies of production mean that tariffs could lead to increased costs for consumers without effectively protecting American jobs.

Long-Term Implications of Current Policies

The episode concludes with reflections on the U.S. response to global economic dynamics and what could happen should current tariff policies continue. Clausing warns that the immediate consequences may lead to long-term economic harm, and there is skepticism about the ability of tariffs to rejuvenate American manufacturing as promised.

Show notes

Wall Street thought Donald Trump was bluffing about his tariff plans. The stock market rallied after his election. But the reality has started setting in. Trump is doubling down on tariffs, even as he warned Americans that the economy may experience a “period of transition,” insisting this is just short-term pain.

So what exactly is Trump’s theory here? And how much pain should we expect?

Answering those questions requires a bit of a tariffs primer. And the economist Kimberly Clausing kindly agreed to come on the show, walk through the basics, and help me make sense of what Trump is doing here. Clausing has modeled the possible costs and consequences of the tariffs Trump has proposed, and she breaks down how much you and I might end up paying. Clausing is a senior fellow at the Peterson Institute for International Economics, a professor at U.C.L.A. and the author of “Open: The Progressive Case for Free Trade, Immigration, and Global Capital.”

This conversation contains strong language.

Note: This conversation was recorded on Wednesday, March 5.

Mentioned:

We’re taping an “Ask Me Anything” episode soon. You can email me at ezrakleinshow@nytimes.com with a question. Please use the subject like “AMA.” We’ll consider any questions that are shared by the end of the day on Tuesday March 18.

“The Real Reason President Trump Pushes Tariffs” by Kimberly Clausing

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Book Recommendations:

The Undoing Project by Michael Lewis

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The Worldly Philosophers by Robert L. Heilbroner

Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.

You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs.

This episode of “The Ezra Klein Show” was produced by Rollin Hu. Fact-checking by Michelle Harris. Mixing by Isaac Jones, with Efim Shapiro and Aman Sahota. Our supervising editor is Claire Gordon. The show’s production team also includes Elias Isquith, Kristin Lin and Jack McCordick. Original music by Pat McCusker. Audience strategy by Kristina Samulewski and Shannon Busta. The executive producer of New York Times Opinion Audio is Annie-Rose Strasser. Special thanks to Pat McCusker.

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