From Reuters<\/a>:<\/p>\n In an interview with NBC\u2019s Meet the Press that aired on Sunday, Trump said he did not believe that consumers ultimately pay the price of tariffs, adding \u201cI think they\u2019re beautiful.\u201d<\/p>\n<\/blockquote>\n Not sure where the first statement comes from. Tariffs for national security grounds are one thing (although I\u2019m pretty sure we didn\u2019t have much to fear from Canada depriving us of aluminum, in Trump\u2019s rounds of Section 232 actions). But getting rich? When? Where? How?<\/p>\n On the quote, well, if the United States is a large country in trade<\/em>, in theory a tariff can change the terms of trade so as to impose the de facto costs on the foreign country \u2014 or rest of the world (although legally<\/em><\/strong>, the payments to the US Treasury are made by the purchasers in America). Here\u2019s an edited version of the explanation, from Chinn and Irwin, International Economics<\/em> (Cambridge University Press, 2025)<\/a>:<\/p>\n Consider a country that imposes a tariff \u03c4:<\/p>\n Source<\/strong>: Chinn and Irwin, Chapter 9 (modified).<\/em><\/p>\n So, by imposing a terms of trade loss on the rest-of-the-world, Home welfare can be improved if<\/em> the area c-b is positive.<\/p>\n What\u2019s key is that P\u2019W<\/sub><\/em> is below PW<\/sub><\/em> by a substantial amount, and this is an empirical question. And the empirics suggest that this has not been the case in terms of the US vs. China<\/a>, or even the US vs. the rest-of-the-world<\/a>.<\/p>\n I don\u2019t think I\u2019m dogmatic about tariffs (there are second-best arguments for tariffs, infant industry arguments, etc.) which my coauthor Doug Irwin<\/a> discusses in the textbook at length. For me, I think second-best means second-best, first best would be better (subsidies to internalize externalities); and I don\u2019t think steel in the US is still an infant industry.<\/p>\n So, tariffs not so beautiful to me\u2026<\/p>\n<\/p><\/div>\n\n
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