Economist: This Is Why President Trump Thinks Tariffs Are A Good Idea

2 days ago

Clifford Winston, Senior Fellow at the Brookings Institution, joined "Forbes Newsroom" to discuss the trade war after President Trump imposed tariffs on other countries.

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Transcript

00:00I'm curious on you said there's no winner. I want to talk about where we are right now because as I said that 25% tariff on

00:07Imported steel and aluminum went into effect today the EU and Canada announced how they are going to respond and that's going to be slapping

00:15retaliatory tariffs on billions of dollars against the United States products on

00:20Wednesday President Trump said he intends to respond to that retaliation. So it's tit-for-tat

00:25It's a ping-pong game back and forth whiplash really as we've been talking about who is the winner in these types of trade wars?

00:34Well, that's an empirical question. You're asking me and there's and the evidence is no one

00:40No one, you know if something could point to

00:45credible evidence

00:47That this kind of strategy would beneficial to the u.s

00:51Or even beneficial to another country, but the u.s. Would still gain to that'd be one thing but there is none

00:57So here's what Trump does Trump says? Well, you know

01:00late 1800s

01:03America

01:04advanced as an economy

01:07Because we did have tariffs

01:10All right. Yeah, and he doesn't want to engage with the evidence and serious scholars who've looked at this who include what happened was

01:17Yes, the economy advanced

01:19But it did so despite tariffs not because of tariffs and that's you know, that's consistently with the evidence shows

01:27It's just it's not a good strategy. Again. I keep on harping on this if you want to improve

01:33output and productivity of your country

01:36This is not the way to do it, you know putting on taxes, which is basically what you're doing

01:41You know, it's a disincentive for consumption and obviously it's going to lead to retaliation

01:47You know, this is just not something that we have compelling evidence and practice to do

01:53You're saying we should not be rationalizing this. This is downright crazy your words

02:00President Trump himself hasn't ruled out a recession

02:03So when you're thinking about that, is this a self-imposed recession because of these tariffs if there if we get to that point

02:12What remember this is now becomes macroeconomics

02:15I'm a micro economist so I don't want to overstate, you know things with much confidence, but we do know

02:23that a key part of a session is a fall in consumption fall in demand and

02:28The people and firms become uncertain lose confidence and what's going on?

02:35Decided to cut back consumption

02:37Firms say I think we're gonna cut back producing you hear airlines saying, you know, we're gonna cut back

02:43We think travel is gonna be down. We'll probably cut back our outlook certainly and maybe cancel flight

02:50so all this can just continue to snowball and

02:54You know, this is where you then you get this kind of demand induced

02:59Recession just out of uncertainty and fear

03:03Now, let's not overdo it because you can exaggerate this and you know, we have to think of real phenomena at work and

03:11Yes, a real phenomena is fear and uncertainty

03:15But I think that's that's the thing at this point that I think Trump needs and his advisers need to focus on

03:21Look, this is crazy. You're getting people nervous if they're not certain what to do. Why would they take a risk?

03:27They may start cutting back their plans laying off people

03:31That's snowballs, this is just not the way you want to really be running an economy at the same time

03:37Let's forget, you know, the Fed is in the middle of this

03:40so here you are trying to run monetary policy in this crazy environment and

03:46You know, that's gonna make things difficult to you're not gonna release you sure, you know, what's gonna happen? I don't want to overshoot

03:53I don't want to undershoot all this kind of thing can be difficult and trying to set interest rates and monetary policy also

Economist: This Is Why President Trump Thinks Tariffs Are A Good Idea

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