Economist Discusses How Trump's Trade Policies And Tariffs Are Working
AUDIE CORNISH, HOST:
We're going to turn now to Douglas Holtz-Eakin. Aiken. He was the chief economist for President George W. Bush. He was director of the Congressional Budget Office and the director of economic policy for Senator John McCain's 2008 presidential campaign. Welcome to ALL THINGS CONSIDERED.
DOUGLAS HOLTZ-EAKIN: Thanks for having me.
CORNISH: So you have experience with this of course because George W. Bush imposed tariffs of upwards of 30 percent on several countries - right? - related to steel. How did those work out? Help us understand how tariff or trade war can work out.
HOLTZ-EAKIN: Here was the dynamic. Inside the White House, there was a division. That's not something new today. It was true then. I was among the economists arguing that this was a bad idea, that we could document the damage to steel-consuming industry as being greater than any gains the steel producers might have, that it was quite likely that our trade allies would retaliate against us if we did this, and that these would not survive scrutiny by the WTO.
As it turned out, the president went ahead and imposed the tariffs. The damage was incurred by the U.S., was a net loser economically. The World Trade Organization said, these are in violation of your agreements; you have to get rid of them. And they were dropped. And the retaliation that took place - some of that remains in place today. So it was a step backward from trying to open up global trade. And I think it was a bad idea then and probably a bad idea now.
CORNISH: So what does that mean? What pitfalls do you see the U.S. falling into in taking this same path all these years later?
HOLTZ-EAKIN: I see no particular defense of the steel and aluminum tariffs. I am nervous about how the renegotiation of NAFTA turns out. And I'm prepared to be convinced that this new strategy toward China actually works. The old strategies didn't. China is a problem. So I'm going to wait and see position on that one. I think the president selected the right target. And we hope this works. But it carries great risk, and that's my concern.
CORNISH: At the same time, doesn't it appear at least that the president may have gained some kind of leverage, say, with Europe?
HOLTZ-EAKIN: Until you get the outcome, you can claim all the leverage you want. But leverage is only useful when you get the result. And we've got no result.
CORNISH: You know, you tweeted yesterday, if tariffs are the greatest and trade wars are easy to win, why do you have to buy the political silence of farmers? And I guess you're referencing the $12 billion package of emergency aid to American farmers. Is that what you see that as, buying of silence?
HOLTZ-EAKIN: The midterms are coming. That's a key constituency for the president and for Republicans who are up in the midterms. It sure looks that way to me. And if you take the strategy at face value, it says we, united Americans, will suffer some near-term harm. You know, we the administration are going to tell you that's coming. These tariffs have some harm. But it's worth it. And we'll get these improvements in trading, and we'll all prosper. Why then single out the farmers to get $12 billion? What about the fisheries? What about the manufacturers? It doesn't really hang together. The logic of it is a little bit troubling to me.
CORNISH: You've had to do, like, budget predictions - right? - with the Congressional Budget Office. If we continue, if the U.S. continues down this path, what do you see? What kind of forecast is there?
HOLTZ-EAKIN: It's easy to see what happens. Tariffs are just taxes. And so the purchase price of things goes up. That'll create some inflation in the economy. We haven't had a lot. But this is a way to get a quick jolt of inflation. The economy's roaring right now. It's growing quite rapidly, lots of jobs. This goes the other direction. Big tax increase slows the economy down, runs the risk of slipping back into recession. There isn't any real upside in the tariffs themselves. The president's claiming that tariffs lead to something that's better, but the tariffs are bad news in and of themselves.
CORNISH: Douglas Holtz-Eakin, thank you so much for speaking with us.
HOLTZ-EAKIN: Thank you.
CORNISH: And Douglas Holtz-Eakin is the president of the American Action Forum.
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