It is a lie to claim that the United States now has a tariff or an industrial policy. It just has a chaos monkey making chaos, and a bunch of grifters trying to cover up and rationalize that reality. The effects will be bad. How bad? That is very hard to guesstimate…
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I did a show for CGTN, playing it straight. I think I saw the host wince at one point—and I believe that what I said then was cut. But I may be wrong: I do not form many long-term memories while on panels.
I am told that “CGTN is under the control of the Central Propaganda Department of the Chinese Communist Party and is part of China Media Group. It has a broad reach via television, mobile platforms, apps, and social media, with millions of active users globally. The network's stated mission includes telling China's story well and showcasing China’s role on the world stage, while also providing diverse perspectives on global news”.
And, all in all, simply telling it straight right now is beyond what would a decade ago have been the wildest dreams of the most enthusiastic CCP propagandist, after all.
When uncertainty replaces strategy, every nation looks elsewhere for partners. Without trust, treaties crumble—and economies suffer. For tariffs without a plan are not policy; they are chaos, and not even chaos weaponized for any comprehensive or intelligible end.
The window to prevent an American analogue to Brexit, with concommitant damage, has already slammed shut. The window to avoid larger full-economic damage from Trump's chaotic tariffs is closing fast. The prosperity globalization built is at risk for the United States, but other countries will be less affected. They can cushion the damage by replacing trade links with the United States by trade links among themselves. But Trump has made it well-nigh impossible for the U.S. to do anything but see all of its trade with everywhere shrink.
<https://www.cgtn.com/tv/replay?id=CFAFfcA>
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Highlights of what I said:
Brad DeLong: I would say there are two aspects, and in one aspect time has run out, and in the other time is running out.
The time that is running out is the time to avoid the actual imposition of high tariffs that will do severe damage to the highly, highly productive globalized division of labor. They will make all countries poorer by breaking substantially their trade links. We have all benefited enormously from globalization and will continue to benefit, provided it is not disastrously managed.
[The time that has run out is this:] Countries that have tried to move away from [integration in the global division of labor], of which the most prominent was Great Britain with its Brexit in 2016, have suffered substantially. The current estimates are that Britain is now 10 percent poorer than it would have been had it not broken its trade links with the European Union back in 2016.
The European Union, by contrast, is little poorer. The European Union did a lot of things for Britain that Britain could not do for itself, but what Britain did for the European Union can largely be done and is now being done in other parts of the European Union.
So figure that the United States in a decade is likely to be 10 percent poorer than it would have been otherwise, like Britain is, simply because we have created huge amounts of uncertainty about the extent to which we are committed to the international economy. As a result, every single one of our counterparties is now looking for other potential suppliers and customers to replace the United States, because the United States has become an unreliable partner in globalization.
And that is if the tariffs are never actually imposed, if Trump continues to threaten them one day and reverse them the next.
[But if tariffs actually are imposed and stick—]if he mposes some tariffs on limited sectors now, and takes those tariffs off later when, say, Tim Cook brings to him the case that these will be substantially disastrous for American consumers, but then three days later says no, they will come back on, because there will be another round of semiconductor tariffs coming, [then things will be considerably worse].
So the window that is closed has been the window to avoid a United States equivalent of Brexit, which has been a disaster for Britain. The window that is closing is the window to back off and not impose any of these tariffs, but instead to simply say: let's pretend this did not happen…
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Brad DeLong: I would like to reinforce that last point.
In his first term, Donald Trump demanded that Mexico and Canada renegotiate the North American Free Trade Agreement, which he said was the worst trade agreement the US had ever had. And Canada and Mexico agreed. And so there were negotiations, led by Robert Lighthizer. The end result was the United States-Canada-Mexico agreement, which Trump said was the greatest trade agreement the United States had ever made, and promised to honor.
Lo and behold, January 21, 2025 comes along. Donald Trump is back in the presidency. Does he honor the U.S.-Mexico-Canada agreement?
No.
What has having made an agreement with Trump in the past gained Mexico and Canada, in terms of their relationships with Donald Trump?
Nothing.
If you make an agreement, if you make a concession, to Donald Trump, he doesn't even say thank you. He then forgets that he has made the agreement. He makes new demands.
So I do not see how Trump can negotiate.
In order to negotiate, people have to believe that your word is good and that what concessions they make will be matched by concessions you make, and that those concessions will then be honored, that the agreement is in fact an agreement, rather than something that he will break tomorrow when he wakes up having not slept very well the previous night.
And Trump simply cannot do that…
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Brad DeLong: As you say, Peter Navarro wants one set of things. Scott Besant wants a second. Kevin Hassett wants yet a third. Stephen Miran had an interesting, but I thought highly unsound, working paper last year. It had a fourth set of things.
And Donald Trump wants either none of those or all of these, or whatever the last person he talked to said.
And so with five factions within the U.S. government, none of which can commit the agreement of any others, there is no one to negotiate with.
Henry Kissinger used to have a line: You could not negotiate with Europe because there was nobody to talk to when you picked up the phone. That applies much more to the Trump administration today than it ever did to the European Union...
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Brad DeLong: Again, it is not coherent. It is not as if there is a consistent and coherent theory of the economy underlying the proposals that Trump has made.
Suppose one seriously believed—as some do—that there were important economic and political and social externalities from having manufacturing jobs. Manufacturing jobs are good ways to redistribute economic increasing returns to scale rents to a broader proportion of the population. They are also a source of social cohesion: the manufacturing working class has been a principal agent in world history for more equalization of income and for more opportunity, the kinds of things that Marx and Engels thought wer importan. Hence the need to get manufacturing jobs in order to make a country move properly ahead, out of the commercial age into the steam power modern age.
And suppose one believed—as I do—that having manufacturing plants and jobs in your country is a very good spur to the development of communities of engineering practice that then enable widely based technological progress.
If you believed either, you would provide for various subsidies for those activities likely to bring the communities of engineering practice and the large base of manufacturing jobs to your country that you thought were more advantageous than simply market prices allowed. But such calculations are complicated. Such calculations involve an awful lot of staff work. Such calculations would not involve putting enormous tariffs on coffee producers, because there is no way that America is ever going to get the climate to grow significant amounts of coffee.
Now, Scott Bessent, Treasury Secretary, says it was never intended seriously. That is, that the reciprocal tariffs are not supposed to be put into effect ever. They are just a way of getting other countries' attention so that they come to the negotiating table and negotiate.
To which my friend and patron, former Treasury Secretary Larry Summers, responded: Well, yes, if you want to get someone's attention, to run up to them and hit them in the nose with your fist. That will certainly get their attention. But that's not the type of thing you want to do, if then you want to have a friendly and productive negotiation afterwards.
And yet that's what the Trump administration did...
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Brad DeLong: Tariffs have historically played a role in helping to industrialize countries in the United States itself, but also in other major industrializers, whether it is Germany or Japan or where have you. So tariffs are not unimportant, but they do not work on their own. They can only work when they are paired with a sensible industrial strategy. In the case of the United States, there is absolutely no such plan...
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