Why Trump’s Tariffs Won’t Work

Why Trump’s Tariffs Won’t Work

The economist Kimberly Clausing explains the possible costs and consequences of Trump’s tariffs.

This is an edited transcript of an episode of “The Ezra Klein Show.” You can listen to the conversation by following or subscribing to the show on the NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.

Wall Street was thrilled when Donald Trump won the election. And it was thrilled for a very simple reason: It thought he was lying.

Business leader after business leader said that Trump wouldn’t actually lay down his tariffs. And they had fair reasons for thinking it. Trump, in his first term, was exquisitely sensitive to the stock market. He loved bragging about how high it had run on his watch. The belief was that the market would be a check on Trump’s behavior: He wouldn’t do anything that would harm it. He certainly wasn’t going to do anything that would harm the real economy or drive prices up. Trump knew why he won the election.

The stock market shot up when Trump won. On Tuesday, March 11, the Dow was lower than it was on Election Day. Trump has vaporized trillions of dollars in stock market wealth. He’s done that by doing exactly what he said he would do on the campaign trail: laying down tariffs and injecting all kinds of uncertainty into the economy.

Trump’s advisers will tell you that Wall Street isn’t Main Street. And they’re right about that. But the fact that they — like every economic forecaster I know — is starting to talk about the possibility of a recession reveals an obvious truth here: These tariffs are a problem for not just Wall Street. They’re battering Main Street, too.

A hedge fund can go invest in foreign companies and currency trades if America’s economy begins to shake. A food supplier that imports some of its produce from Mexico and relies on food American farmers grow using Canadian fertilizer cannot.

The Trump team thinks the pain will be worth it: This is a period of economic detox. The tariffs will bring more manufacturing jobs back; they will strengthen supply chains; they will persuade other countries to give us better deals. Will they?