Marketplace What will Trump's trade war do to labor productivity?
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May 1, 2025 Adam Posen, President of the Peterson Institute for International Economics, dives into the complexities of global trade imbalances and the effects of tariffs initiated during Trump’s trade war. He warns that these policies may hinder labor productivity and economic growth by causing businesses to hesitate on major investments. The discussion also touches on Coca-Cola's unexpected earnings amidst tariff challenges, the GOP's proposal to tax electric vehicle owners for road maintenance, and the cooling trend in the Sunbelt housing market.
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Trade Imbalances and Tariff Limits
- Trade imbalances mostly stem from unsustainable US fiscal policies, not unfair trade practices.
- Tariffs are unlikely to fix imbalances without severe economic fallout like recession.
Separate China Trade Strategy
- Treat China trade issues separately from global trade to better collaborate with allies.
- Tone down the trade war to avoid making all economies worse off.
Tariffs' Broad Economic Cost
- Tariffs raise the cost of living beyond just product prices, affecting all Americans.
- They erode income by making everyday things and jobs harder, leading to real income losses for many.