Doug Irwin, a Dartmouth Professor specializing in global trade, shares insights on the complexities of U.S. trade policies and the shift of tariff powers to the executive branch. Gautam Mukunda from Yale analyzes the political ramifications of the trade war, questioning if there’s any bipartisan will to resolve it. They delve into the economic impact of tariffs on North American supply chains, the troubling dynamics within both political parties, and how leadership decisions are shaping the ongoing conflict and investor sentiment.
Douglas Irwin emphasizes the need for Congress to reclaim its authority over trade policies to protect constituents from harmful tariff measures.
The podcast discusses the extensive ripple effects of tariffs on global supply chains, highlighting the modern complexity of the integrated economy.
Deep dives
Reasserting Congressional Authority on Trade
Congress has historically ceded significant power over tariffs to the executive branch, often assuming that the president will act in the national interest. This delegation has led to a concerning trend where Congress is less involved in tariff-setting decisions. Douglas Irwin emphasizes that Congress should reassert its authority over trade policies, as many constituents are affected by detrimental tariff measures. By standing up and reclaiming its role, Congress can better respond to the potential harm caused to various sectors, especially those critical to voters.
The Modern Context of Tariffs
The discussion highlights the complexity of tariffs in today's integrated global economy, contrasting it with the simpler trading landscape of the past. Tariffs now disrupt intricate supply chains where components are sourced globally rather than just final goods being imported or exported. Doug Irwin points out that proposed tariffs could have extensive ripple effects, undermining the interconnected economic relationships among North American countries. As companies become increasingly reliant on international production networks, the consequences of tariffs can be far-reaching and damaging.
Myths Surrounding Economic Growth and Tariffs
Douglas Irwin debunks the myth that high tariffs were a key driver in the U.S. industrial power during the late 19th century. He argues that factors like massive immigration, capital inflows, and technological adoption played a more significant role in U.S. economic growth. While high tariffs may have promoted some manufacturing, productivity improvements were largely realized in the service sector. This misconception about tariffs can lead to misguided policy decisions that do not consider the broader economic landscape.
Inflationary Pressures and Economic Impacts of Tariffs
While tariffs may not lead to sustained inflation, they can cause short-term increases in consumer and industrial prices, impacting purchasing power. Doug Irwin notes that businesses and consumers are already experiencing price increases due to anticipated tariffs, leading to a direct rise in costs. For instance, the looming taxes on imported goods have prompted businesses like Irving Oil to predict higher bills for consumers. This immediate effect on prices, without clear benefits from tariffs, complicates the economic outlook and has potential political ramifications.
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyFebruary 3rd, 2025 Featuring:
Doug Irwin, Dartmouth Professor of Economics and global trade expert, on the US trade war
Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, talks about the early reaction from investors on the trade war
Gautam Mukunda, professor at Yale School of Management, discusses the political impact of the trade war and if there's any political will to stop it from either party, as well as other political headlines