Connects the dots, and warning that with neofascist tariff pluto-populism the big losers are the ordinary households of America. If you think tariffs are a clever way to shore up American industry, think again. Recognize that the institutional wreckage wrought by Trump’s trade wars is likely to be the big source of damage. And recognize that a United States launching trade wars against the entire world has no reliable trading partners to do the things it cannot do most efficiently in a globalized division of labor, while every single other country can easily find reliable trading partners to substitute for the U.S. in its role. Thus the rest of the world is likely to escape not scot-free but low-scot from the bad consequences of Trump’s chaos-monkey international economic policy. The U.S., however, cannot and will not…
I learned back in the 1990s, back when I was working for the US Treasury, that every single honest technocratic cut you take at the issue reveals that tariffs are an extraordinarily inefficient and regressive way of raising money. Just whatever analytical take we took, the inevitable conclusion was that cutting our tariffs was the way to go. This held true even without any reciprocity in terms of trade barrier reduction by other countries. Yes, it would be better if other countries reduced their trade barriers also. But it was very hard to get a benefit-cost minus unless you assumed that other countries would raise their trade barriers to our exports when we reduced ours against their imports. And it is completely impossible to get an increase in our trade barriers producing benefits either in terms of productivity, efficiency, income distribution, or national economic welfare if you incorporate any reciprocal increase in other countries’ trade barriers at all.
And so this is very nice to see. It is Adam Posen in front of a Senate Spotlight Forum <https://www.youtube.com/watch?v=AvTPW1-46AQ> on Capitol Hill:
Adam Posen: The Household Impact of Trump’s Tariffs <https://www.piie.com/commentary/testimonies/2025/household-impact-trumps-tariffs>: ‘Compared to other forms of taxation, tariffs create chaos and uncertainty for small businesses, individuals, and consumers while encouraging corruption and abuse driven by taxpayers seeking deals and exemptions…. The middle quintile of the U.S. income distribution would pay $2,600 a year in additional taxes, in lost… real after-tax income. That number goes up, the further down the income distribution you go…
Plus the policy chaos has been further amped-up by Trump’s refusal to take the G-7 seriously. Together the rest of them outweigh the U.S. economically and diplomatically, and have the potential to do so militarily as well within a decade. And now the G7 has been, de facto, replaced by a U.S.-excluding G6.
Adam Posen: The Household Impact of Trump’s Tariffs <https://www.piie.com/commentary/testimonies/2025/household-impact-trumps-tariffs>: ‘What has in the past been a formidable showing of unity across seven countries is now a shadow of its former self…
And because Trump’s word is no good, there is no way any additional channels can be used to coordinate policy.
The most important of Adam’s points here are, I think, institutional. Trump’s tariffs are, for institutional reasons, even an order of magnitude worse than the garden-variety permanent, consistent tariffs the Treasury’s Office of Economic Policy spent its time analyzing back in the 1990s. It is the lies about projected fiscal benefits—1.5%-points of GDP in revenue, supposedly—and the downsides for when those chickens come home to roost.
I am beginning to think that my guess that TRUMPXIT will be like BREXIT is too low. I am now thinking it is likely to be a more than 1%-point of GDP per year growth headwind for the United States over the next decade.
Tariffs are bad. Neofascist populism is bad. Neofascist tariff populism is worse. And neofascist tariff pluto-populism, as Martin Wolf calls it, is worst of all.
I think this is the place to draw the curtain. I confess that I do not understand the persistence of the fantasy that tariffs can serve as a clever lever to “shore up American industry”. It is, I think, a particularly persistent and damaging species of economic folklore. Yes, big losers from neofascist tariff pluto-populism include cosmopolitan elites and globe-spanning corporations with their globalized value-chains, but they buy from, sell to, and employ ordinary American households. They will find themselves paying higher prices, facing greater uncertainty, and watching the social safety net more than fray.
Trump’s trade wars, waged with the subtlety of a chaos-monkey let loose in the machinery of global commerce, will leave the United States increasingly isolated and bereft of reliable trading partners willing to coordinate with it on those tasks it cannot perform most efficiently itself. Every other country, faced with American unpredictability, can and will find alternative partners—substituting away from the U.S. in supply chains, trade agreements, and the informal networks of trust and cooperation that lubricate the world economy.
The rest of the world, I guess, will not escape the fallout entirely; but they will, as the British might put it, get off “low-scot,” finding new equilibria while the U.S. absorbs the brunt of its own folly.
The upshot, then, is a grimly asymmetric distribution of pain.
References:
Boller, Lysle, & al. 2025. “The Economic Effects of President Trump’s Tariffs.” Penn Wharton Budget Model, April 16. <https://budgetmodel.wharton.upenn.edu/issues/2025/4/10/economic-effects-of-president-trumps-tariffs>.
Butler, Creon. 2025. “What will global trade look like after the chaos of Trump’s tariffs?” The World Today, Chatham House, June 9. <https://www.chathamhouse.org/publications/the-world-today/2025-06/what-will-global-trade-look-after-chaos-trumps-tariffs>.
Guida, Victoria. 2025. “How Trump’s Top Economist Envisions Victory in the Trade War.” POLITICO, June 18. <https://www.politico.com/news/2025/06/18/trump-economist-stephen-miran-trade-war-00410450>.
Posen, Adam S. 2025. “The Household Impact of Trump’s Tariffs.” Peterson Institute for International Economics, June 11. <https://www.piie.com/commentary/testimonies/2025/household-impact-trumps-tariffs>.
Sfakianakis, John, James A. Haley, Wang Yong, & Héctor Cárdenas. 2025. “Trump’s Economic Disruption: The World Adapts.” Council on Foreign Relations, May 1. <https://www.cfr.org/councilofcouncils/global-memos/trumps-economic-disruption-world-adapts>.
Wolf, Martin. 2025. “For whom does Trump govern?” Financial Times, June 17, 2025. <https://www.ft.com/content/31f40bc4-9d19-41b8-ae4e-d3ef07a38b29>.
World Economic Forum. 2025. “US-China trade framework agreed and other trade news to know.” June. <https://www.weforum.org/stories/2025/06/us-china-deal-and-other-international-trade-stories-to-know-this-month/>.
It will be very worrying if the USA ends up pushing many of the globe's nations to prefer trading with China, thus hastening any change in global leadership. I cannot imagine any nation trusting the word of the USA again, in trade or defense. As long as there is any possibility of another chaos president and enabling party, no amount of sanity in the US government will be sufficient to reduce the uncertainty when dealing with the USA. As the saying goes, "It takes a lifetime to build a good reputation and just one day to destroy it." The risk premiums trading with the USA will be like the period when doing business in Africa in the 19th century and early 20th.
I have learned from my Republican relatives that the GOP is serious, business friendly, wishes for balanced budgets, a small non-intrusive government and a strong military.
Unfortunately, that is all complete bullshit. What Republicans really want is white supremacy, patriarchy, misogyny, and subservience. The great unwashed are to behave, worship the Republican Jesus of avarice and cruelty and to shut up.