Trump’s Early Tariff Wins Mask Future Risks
The president’s trade policies may have unintended hazards, ranging from stagflation to the erosion of US influence on the global stage.
Terms of trade.
Photographer: Anna Rose Layden/UPI/Bloomberg
When President 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.