The author challenges the Trump administration's approach to setting reciprocal tariffs, questioning the methodology used to calculate the high rates. The author points out that the administration's use of an academic paper was misrepresented; the study's findings actually suggest significantly lower tariffs.
A core criticism is the administration's goal of eliminating trade deficits with each trading partner individually. The author argues that such deficits can arise from various factors unrelated to unfair competition, such as differences in resource availability, comparative advantage, and development levels. Analogy to a barber's chronic deficit with a customer is used to illustrate this point.
Even accepting the goal of eliminating trade deficits, the author questions the effectiveness of the proposed reciprocal tariffs. The article lacks a conclusive statement on the success or failure of the tariffs in achieving their stated goal due to the truncation of the provided text.
My first question, when the White House unveiled its tariff regime, was: How on earth did it calculate such huge rates? Reciprocal tariffs, after all, are supposed to treat other countries the way they treat us, and foreign tariffs on American goods are nowhere near these levels.
The next day it got personal. The Office of the U.S. Trade Representative released its methodology and cited an academic paper produced by four economists, including me, seemingly in support of its numbers. But it got it wrong. Very wrong. I disagree fundamentally with the government’s trade policy and approach. But even taking it at face value, our findings suggest the calculated tariffs should be dramatically smaller — perhaps one-fourth as large.
Let’s start with the biggest mistake. The office said it calculated its reciprocal tariffs at a level that would theoretically eliminate trade deficits with “each of our trading partners,” one by one. Is that a reasonable goal?
It is not. Trade imbalances between two countries can emerge for many reasons that have nothing to do with protectionism. Americans spend more on clothing made in Sri Lanka than Sri Lankans spend on American pharmaceuticals and gas turbines. So what? That pattern reflects differences in natural resources, comparative advantage and development levels. The deficit numbers don’t suggest, let alone prove, unfair competition.
There are some reasonable arguments in favor of reducing the overall trade deficit, such as to reduce risks from our debt. But these arguments don’t apply country by country. The Nobel laureate Robert Solow explained why when he quipped, “I have a chronic deficit with my barber, who doesn’t buy a darned thing from me.” Mr. Solow also surely ran a chronic surplus with his students, and these imbalances reveal nothing about trade barriers in hair care or higher education, nor would they speak to his financial health.
For the sake of argument, let’s grant President Trump his goal of eliminating all trade deficits, no matter how destructive that would be. Could these reciprocal tariffs succeed?
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