Trump’s Early tariff wins mask future risks
Donald Trump said that tariffs, his favorite word and “the most beautiful” one in the dictionary, would be used to pursue multiple objectives, many economists quickly warned that the US risked falling into the trap of using a single economic tool to target too many outcomes. In the last few days, it has become clearer that the administration is iterating toward a multi-pronged tariff strategy that promises quick wins on several fronts, albeit with the risk of longer-term damage depending on both how frequently duties are used, and how companies, households and other countries respond to them.
A “rule” widely attributed to Jan Tinbergen, the first Nobel laureate in economics, has come to be interpreted as the need for policymakers to use at least one policy instrument to meet each individual objective.
Put another way, policymakers could well find themselves in the muddled middle if they pursue too many outcomes with only one tool — only partially meeting their objectives, if at all.
This conventional wisdom was the basis for many economists’ pushing back last October against the notion that the Trump administration could use tariffs to generate budgetary revenue while protecting domestic industry and placing political pressure on both allies and adversaries. After all, successfully protecting domestic firms from competition with foreign products would translate into lower imports and, therefore, limited incremental revenue.
