Notes on Tariffs, Trump and Trade
I just listened to the All-in podcast that had Larry Summers (former US Treasury Secretary) and also Ezra Klein (podcast host and currently trying to convince the Democratic Party to take on a more pro-growth positive-sum approach, aka abundance agenda).
The episode itself is perhaps 7/10 – lots of cross talk – but I give 10/10 for airing strongly opposing views.
Here are some of my latest thoughts on the three Ts. I’m trying to write them down more because there’s a tendency to selectively forget what I’ve said before – and it’s interesting to look back.
I didn’t think Trump would actually impose tariffs, but now I think he genuinely sees tariffs as a solution. He has said that for decades and I now feel wrong not to have believed that.
Trump’s standpoint on trade is through that of a businessman trying to do trade in China – which is, and was, a hard thing to do. He’s perhaps right about a lot of asymmetries between the US and China, but wrong because a) tariffs are not the solution and b) even if trade dynamics aren’t symmetrical (and they are probably pretty symmetrical between the US and allied countries), trade dynamics probably aren’t what is holding the US back (it’s more so regulations? – especially around housing and infrastructure/energy). FWIW regarding whether the US is being “held back”, unemployment in the US is low (although it’s a problem in regions, and not to be discounted) and US productivity overall is good and growing, with many strengths (e.g. software, pharma).
The podcast does expose an interesting doer (Chamath, Sacks) vs thinker dichotomy (Summers, Ezra) – or at least thinker/state official/academic. This is a criticism both ways. In favour of doers, I tend to think – much more than the average person – that just closing things down is required to cut waste in a system. Systems have a lot of inertia, and if you pause to justify or explain everything, you will not make progress. So I have time more time than most for where an initiative like DOGE is coming from. I also believe merit based government services (Singapore style) – rather than permanent job services – provide better overall outcomes for societies. But, I don’t know the detail of what DOGE has done or is doing. I get a few views from MarginalRevolution, e.g. it seems USAID had problems, but on balance was an asset. So need to read more before saying much more here about DOGE, but I prefer to be working on AI research instead.
Good negotiators make their objectives clear. I get that there’s game theory, but my experience in business has been that the best negotiators have clear goals and principles and they lay them out. One day the tariffs are real and going to stay, the next they are on hold. This doesn’t match up to me.
The tariff narrative doesn’t make sense to me. Sometimes the tariffs are about brining back jobs [I don’t get that, because there are many other factors – regulation, education, culture, business districts nearby – to creating jobs than the incentives shift posed by tariffs]. Sometimes the tariffs are about protecting key industries, like semiconductors and rare metals – but if that’s the case, why are the tariffs broad based (10%) and then giving waivers for those specific key industries? My current view is that tariffs or protection probably hurt more than help, but the fact pattern of current tariffs isn’t even consistent for someone with the opposite of my views. So it’s a negotiation tactic? Then see point 4.