Gene Tunny and Nicholas Gruen dive deep into the economic implications of Trump's sweeping tariffs. They explore the micro and macroeconomic dimensions—from optimal tariff theory to trade deficits and geopolitical fallout. With humour, clarity, and urgency, they unpack why these tariffs will do more harm than good, both economically and politically. A video version of this episode will appear as an episode of the Uncomfortable Collisions with Reality podcast on Nicholas’s YouTube channel.

Please let Gene know your thoughts on Trump’s tariffs and any questions or comments regarding this episode by emailing Gene at contact@economicsexplored.com.

Update: As of Friday morning (GMT+10), 11 April 2025, Trump’s reciprocal tariffs on countries other than China have been delayed 90 days.

Timestamps

Introduction and Purpose of the Podcast (0:00)
Micro and Macroeconomics of Tariffs (3:17)
Optimal Tariff and Economic Models (6:30)
Challenges of Tariffs and Adjustment Costs (49:45)
International Macroeconomic Implications (50:06)
Historical Context and Policy Responses (1:06:52)
Conclusion and Future Outlook (1:10:22)

Takeaways

Tariffs Are a Tax—Mostly Paid by Domestic Consumers: While Trump claims foreigners pay, economic models show that domestic consumers typically bear the burden.
Optimal Tariff Theory Has Limits: While large economies might, in theory, benefit from some tariffs, real-world retaliation, adjustment costs, and supply chain complexities negate most benefits.
Rule of Law Undermined: Trump's unilateral imposition of tariffs under national security justifications breaks trust in U.S. international agreements and damages credibility.
Macroeconomic Drivers Are Key to Trade Deficits: Tariffs are a microeconomic tool used to address a macroeconomic problem—high consumption and low savings—which misses the real issue.
Supply Chains Suffer from Tariff Shock: Modern manufacturing depends on intricate global supply chains. Tariffs disrupt production and create uncertainty for businesses.

Links relevant to the conversation

Nicholas Gruen and Gene Tunny’s article “Why Trump’s tariffs are better than you think — and much worse”:

https://www.crikey.com.au/2025/03/06/donald-trump-tariffs-impact-global-economy/

Nicholas’s YouTube channel which hosts his Uncomfortable Collisions with Reality podcast:

https://www.youtube.com/@NicholasGruen

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Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

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