The Opinions - Are Trump’s Tariffs Trying to Solve a Problem That Doesn’t Exist?

Episode Date: May 12, 2025

Jason Furman, an economist who was an adviser to President Barack Obama, believes that trade is an unmitigated good — a rarely heard opinion on the right or the left these days. In this episode of ���The Opinions,” David Leonhardt, the director of the Times editorial board, pushes Furman on the downsides of trade and asks him to explain its benefits — for both Americans and the rest of the world.Thoughts? Email us at [e-mail] episode of “The Opinions” was produced by Jillian Weinberger. It was edited by Alison Bruzek and Kaari Pitkin. The rest of the show's production team includes Derek Arthur and Vishakha Darbha. Mixing by Efim Shapiro. Original music by Pat McCusker and Isaac Jones. Fact-checking by Mary Marge Locker. Audience strategy by Shannon Busta and Kristina Samulewski. The director of Opinion Audio is Annie-Rose Strasser. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

This is The Opinions, a show that brings you a mix of voices from New York Times opinion. You've heard the news. Here's what to make of it. I'm David Leonhardt, the director of the New York Times editorial board. I've been reporting on trade in recent months to figure out how my colleagues and I should editorialize about President Trump's tariffs. It's quite clear to us that Trump's tariffs are a bad idea. It's less clear what an ideal trade policy would look like. For a long time, economists have argued that trade is good and that the country should want more and more of it.

But the evidence isn't so clear. As trade has increased in recent decades, economic inequality has soared. And a lot of once-thriving communities have really struggled. President Trump and Vice President J.D. Vance claimed that their tariffs will turn those communities around. For 40 years, we've had an economy that rewards people who ship American jobs overseas

and raises taxes on American workers, and we're flipping that on its head. We're going to cut taxes for American workers and for American companies that build here. We're going to make it harder to ship American jobs overseas. My guest today, Jason Furman, thinks that this is a terrible idea. Jason is an economist who's a contributing writer for Times' opinion,

and Jason spends a lot of time thinking about how to explain complicated economic ideas to non-economists. He teaches the huge intro E-co. on course to Harvard undergraduates, and he's long been advising Democratic politicians, including Barack Obama. Jason is no Pollyanna, but he's pretty positive about trade, certainly more so than many American voters are. So I wanted him to come on the opinions today and make a case that trade is good and explain

how it really has benefited our country. And when I invited Jason to come on, I was honest with him. I said, I'm going to ask skeptical questions and push him. to give a more persuasive case in favor of trade than many of his fellow economists have managed to do. Jason, thank you for joining us. Thanks for having me. So let's start by helping people understand how we got here. How would you define the modern era of trade roughly when did it begin and what has it actually changed?

So let's go back a while. Trade kept increasing up through World War I as transportation. cost fell. Then it fell dramatically, fell even more when there was a set of tariffs called Smoot-Hawley in the United States in 1930. And then from basically the end of World War II through 2017 tariffs kept going down and down and down. They went down through global trade agreements. They went down through individual free trade agreements. The cost of trade went down. And as all of that happened, trade went up and up and up. It reached a peak around 2008, and it's basically plateaued since then. I've told you before that I think a lot of economists have done a bad job making the case for trade. I think

their arguments are often technocratic, and they talk about trade deficits and economic models. And so I'd like you to be more tangible, if you can be. Can you help people understand how is it that you think this era of high trade? of recent decades has improved the lives of Americans. Right. It is just unimaginable that we could live anything resembling the lives we live without massive, massive amounts of trade. For example, you wake up and you pick up your toothbrush. It was made in Vietnam.

You put some toothpaste on it. The ingredients came from Germany. You get a shirt. The cotton was grown in the United States, spun in Mexico. died in Indonesia and sewn in Bangladesh. You pick up your phone. It was designed in the United States. The chips came from Taiwan, the display from Korea,

the gyroscope from Switzerland. You get your morning coffee. That came from Ethiopia. Eat it with a banana that came from Guatemala. And I'll skip the rest of the day, just culminating in when you go to sleep in your IKEA bed with a German memory phone mattress and sheets made in Egypt.

Everything I just described, is much more important to low and moderate income households than high-income households. High-income households are spending a bunch of money on travel, restaurants, getting massages, and the like. These are, for the most part, services. It's lower-income households that are disproportionately dependent on everything that I was talking about. The final thing I'd say is imagine an alternative world where all of those different things, from your toothbrush through your memory foam mattress, were made in the United States. United States. Those would be much worse jobs than the jobs we have. They would pay much worse,

and those products would just be much, much more expensive for all of us. And so trade frees us up to have better jobs. It is part of our living standard, and it is especially important to the most hard-pressed Americans. When I think about that theoretically or logically, it makes some sense to me, but this is the big stumbling block I keep running into. By most measures, life for lower income and middle income people in this country has improved much more slowly in recent decades, either than it did in the past or certainly than it has for upper income people. And so when I look at the overall trends over the last few decades, things haven't really been that good for lower income and working class Americans.

That doesn't mean trade is the reason, but I'm kind of curious, do you reject the story I just told, and do you actually think, no, life is much better for most Americans than I just suggested? Or do you fundamentally accept that story, but think actually trade is the exception

that has really helped ordinary Americans, and without high trade, things would be even worse for lower income and working class Americans. Or maybe there's a third story. So, first of all, I think we're always very quick to blame trade for things. If you look at mass layoffs, for example, back when we used to collect the data, we don't anymore. About two or three percent of them were due to trade and outsourcing.

Every year, there's 20 million American workers that lose their jobs, and just a tiny fraction of them are due to trade. So I do think we create this greater importance, and I think some of that is just a deep-seated philosophical nativism we have, that we want to blame things on other countries and foreigners rather than taking responsibility for our own choices. So first of all, I'm thinking about the broad trends. I think trade is a secondary or tertiary thing. I think it's more of a positive than a negative. In terms of evaluating those trends, if I roughly grouped the United States in

to blocks of a quarter century. The best quarter century was 1950 to 1975, very rapid income growth, not much inequality. The second best was 2000 to 2025, where we had the second most rapid income growth and ambiguous inequality, and the worst by far was 1975 to 2000, which happens to be the period before the rise of China and most of the period before NAFTA as well. And that's when you saw a real explosion of inequality and a real stagnation of wages at the bottom. And so maybe to try to wrap up this part of the conversation, I think I hear you saying, look, whatever big economic problems we have in this country for people of lower incomes and middle incomes, too, trade isn't causing them. And in fact, trade on net for most Americans really has been positive.

And we shouldn't blame trade for other problems that we have. Yes. So first of all, I think things are getting better economically, incomes rising, different measures of inequality, unclear. They're not getting better as fast as they were in the past, but we are making progress. And yes, trade is helping with that progress, not hurting with it. Okay. So we've been talking about the benefits. Let's talk a little bit about the costs. Academic research has shown that trade with China alone appears to have cost more than 2 million jobs in the 2000s.

And when economists talk about that, they say, look, trade is always going to have winners and losers. How do you think about the real costs of trade? And how could we have done a better job helping people who, in fact, have borne the brunt of the costs of trade? Yeah, so that $2 million number came from a very influential paper. It was the terrific paper, but it was the beginning of a long literature. They only studied the gross job changes. And even there, let's put them in perspective, 2 million out of over that same period, 250 million people were laid off or discharged from their job.

So even over that period, you're talking about less than 1% of the job loss was due to trade. They didn't study the ways in which expanded trade with China increased our exports, and they certainly didn't incorporate the price effects and the consumer side. So take all of that together. I think it's completely plausible that the net effect of trade on manufacturing jobs was roughly neutral over the last 25 years. Wait, let me stop you there. So neutral because even if it cost the two million jobs, it added manufacturing jobs. jobs, how? Two ways. One is, it's very hard to have a successful manufacturing industry.

If you don't have good machinery to make stuff with, you don't have raw materials. And all of those increased as a result of trade. And second of all, exports. And so I think it is perfectly plausible that we lost manufacturing jobs. I think it's also perfectly plausible that it was net neutral. And just a gut check on the whole thing, the manufacturing job. share has been declining basically continuously since the 1950s, and you don't notice any break at all around NAFTA or around China's entry to the WTO.

I mean, manufacturing job loss is a very old story, and if anything, it's stabilized a little bit in recent years. We've been talking about the United States. Let me ask a little bit about the rest of the world here. It seems to me that for much of the rest of the world, trade has been enormously positive in recent decades, that we've basically seemed to have the most rapid decline in poverty and recorded history since 1990. And a huge portion of that is people in places like China and India and Latin America being able to have jobs that come from trade. They now work in factories and they

export things to the United States and Europe and other countries. And that has played a really important role in the decline of global poverty. And that even for people who are more alarmed about the effects of trade within the United States, it's important to recognize the huge benefits it's had globally. Is that a fair story, do you think? I think that's incredibly fair story. And when things turn out differently than you expect, you should update. In 1999, there was a real reaction against globalization.

It was the battle in Seattle at the WTO ministerial in Seattle. And partly that was people concerned about what it would do to the United States, but a lot of it was this argument that trade is exploitation. It's going to hurt poor countries. It's going to enrich global corporations at the expense of the global poor. And that was just completely wrong, completely, completely wrong. When we write the economic history of the world, the quarter century from 2000 to 2025 might be the best period in the history of the global economy. So you really want to update your views in that respect.

I like the idea that we should update our views in the face of new evidence. And so here's one that I think is less convenient for centrists, which is a lot of advocates of trade either suggested or promised that it would spread freedom and democracy in other countries. I mean, it was part of the bipartisan consensus that we heard from Bill Clinton, for whom you worked, both George Bush's was a world that trades more will be a freer, more democratic world. That prediction just seems to have been wrong, and it seems to me important that centrists update their views and acknowledge that whatever the economic benefits of trade, it really doesn't seem to have had the political benefits that many of its advocates predicted.

Do you think I'm being unfair there? I think you're right there. let's distinguish between two things. One is just trade promote international peace? There's an enormous amount of research in international relations, and it is pretty consistently found that when countries trade more,

they're less likely to go to war. It's not foolproof, but it does help. And I think war with China is less likely today because of all the trade we have with them. Then your question, though, was about democratization and the like. Absolutely. That was the theory with China. You were encouraging the reformers, plus you were putting cell phones and internet into hands of people in China, which would expose them to freedom and ideas from around the world. It hasn't worked out. And I think it was worth a try and it was worth a shot. And I'd do it again for only that reason. But it is the case that the relationship between trade and democratization is more ambiguous.

Let me ask you one more backward-looking question before we look to the future. One frustration that I have sometimes is that I think that there are some trade advocates who say, well, maybe we should have done some things differently back in the past, but now we have the world that we have and we can't put the genie back in the bottle, to use the cliche. And that's true, but I do wish that from advocates of trade, I sometimes heard some more humility and reflection. I do think both the ways in which it didn't increase democracy around the world and the devastating. that it caused in some communities in the United States, that it appears to have contributed to frustration and anger and political polarization. Do you think there are things we could have done differently in the 90s and early 2000s to have reduced some of the downsides from trade

and increased some of the upsides? I agree with you that if your view is it is okay to trade as long as you do all these other things. And then you don't do the other things, then you should be against that trade liberalization. And so my view really is that if you do the trade part without doing the other parts, you're a lot better off,

you're even more better off if you do the other parts. Just to put, again, some numbers on that, if you take that Auditoron and Hanson work, they found that using one of the leading estimates of the price declines due to what's happened with China, that 6% of the population in the United States lives in areas that got hurt from that trade, and 94% lived in areas that benefit from that trade.

In some sense, if you look at the history of the global economy or the U.S. economy over the last centuries, it's because we're constantly confronted with new things that benefit 95% of people and harm 5% of people. That could be a new invention, a new way of organizing work, a new system of education, a new way of reducing discrimination against one group, or trade.

And if you turn down every opportunity to make 95% better and 5% worse, or even, by the way, every opportunity to make two-thirds better and one-third worse, you're going to end up collectively just much, much poorer. In terms of what I would do, I don't think I'd do anything specific related to As I said, most job loss is not related to trade. So more things to prepare people educationally for jobs, to better connect them to jobs through things like apprenticeship programs, to help them find jobs and retrain, and there's evidence that some of that really does work, to wage insurance for older workers.

So if you lose your job and only find a new one at lower pay, you get some of that compensated. I would do all of that, but I wouldn't have any of that linked to the reason that. that you lost your job. You don't really care if you lost your job due to trade technology or just you know, idiocy on the part of your boss. Well, to state the obvious, President Trump does not share your analysis of the benefits of trade in recent decades. And so he has pursued a very different policy from what you would advise. Now that we are here, what do you expect over the next year or so? And I think I mean that in two different ways. How much do you think Trump will? will actually reverse himself and withdraw his tariffs.

And either way, how much effect do you think his tariffs are going to have on the U.S. economy? In the short run, the tariffs will mean higher inflation and higher unemployment. The exact magnitudes of both of those is quite uncertain. I'm betting a bit more on inflation than unemployment, but we'll see. Over the longer run, we were talking about the long sweep of globalization. it seems almost certain that we're going to end this term with much higher tariffs than the United States has had at any point since the 1940s. So what will that mean? It'll mean the U.S. import share is lower for the obvious reason, tariffs you buy less imports. It also will mean that the U.S. export share is lower because resources are devoted and shifted from making stuff that you used to export to stuff that you used to stuff that you use.

used to import because the exchange rate will change and because of the retaliation from other countries. So we'll be a bit less globalized coming out of all of this. And then the big question in all of that is, does this outlast his term and become a new normal, or is it just a three-year aberration? Okay, let's end here with asking you what should be the Democratic Party's position on tariffs going forward. You've played a central role in helping craft democratic agendas in the past, including for Barack Obama. So let's imagine, we'll call it Project 2029. Let's imagine you're helping devise the agenda for the next Democratic president. And she or he says to you, what should be my trade policy? I already know you're going to say, promise to repeal the Trump tariffs on day one. What else is on the agenda?

So I would really distinguish between China and the rest of the world. For the rest of the world, the greater the integration, the better. That's true economically. I think that's true politically. And if we just went back to where we were on January 20th, 2021, that was pretty good. That would be fine with me. If we could do better than that with trade agreements with different countries around the world, that would be even better. With China, I actually think the Biden administration got the rhetoric right, which was small yard, high fence.

We're going to focus on things related to our national security and that are central to our national security, and we're going to be really strict about them, like microchips and the like. And then things outside that umbrella, like toys and furniture, we're going to not be strict on those and make sure that we're continuing to get the benefits economically. and then there's a whole gray zone in between, like electric vehicles, solar panels, and the like, where I'm not totally sure how I personally would weigh the national security on the economic side.

But finally, I think Democrats or anyone should not continue to distract people by pretending that our problems were made overseas and instead focus on all the ways in which we have made problems here in the United States and need to fix them. And that is what autocrats, dictators and even democratic demagogues around the world do.

They always blame their problems on foreigners. And that is always a distraction from solving those problems. That's always a way of keeping the status quo. And I hope Democrats don't fall into that trap. Jason, thank you for coming on. You've given me a lot to think about. And I suspect you've also done so for many of our listeners. Thank you.

If you like this show, follow it on Spotify, Apple, or wherever you get your podcasts. The Opinions is produced by Derek Arthur, Sophia Alvarez-Boid, Veshaka, Christina Samuelski, and Jillian Weinberger. It's edited by Kari Pitkin, Alison Brousick, and Annie Rose Strasser.

Engineering, mixing, and original music by Isaac Jones, Sonia Herrero, Pat McCusker, Carol Sabro, and Afim Shapiro. Additional music by Amon Sahota. The fact check team is Kate Sinclair, Mary Marge Locker, and Michelle Harris.

Audience Strategy by Shannon Busta and Christina Samuelski. The executive producer of Times Opinion Audio is Annie Rose Strasser.