The Economics of Tariffs and Trade (with Doug Irwin)

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May 5, 2025

This conversation features Doug Irwin, an economist from Dartmouth College who specializes in trade policy. He tackles whether the U.S. is a victim of trade and unpacks the complexities of trade deficits. Irwin also clarifies misconceptions about tariffs and their impact on manufacturing jobs. Additionally, he discusses the evolution of manufacturing amidst globalization and technological changes, urging innovative solutions for affected workers. The episode emphasizes the intricacies of trade dynamics and cautions against simplistic views on protectionism.

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INSIGHT

Understanding Trade Deficits

A trade deficit occurs when a country imports more than it exports, creating dollar outflows.
However, those dollars return as purchases of U.S. goods, services, and assets, balancing the flow.

INSIGHT

Trade Changes Job Types, Not Numbers

Trade changes the composition of jobs but does not reduce the overall number of jobs in the economy.
Economic transitions require policies to help workers adjust and soften the impacts of dislocation.

ANECDOTE

Triangular Trade Explains Deficits

The U.S. runs bilateral deficits with some countries due to triangular trade flows, not unfair barriers.
Countries trade different goods in complex cycles rather than balanced one-to-one exchanges.

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