Trump economist: tariffs are “a success” | The Economist

Tariff Levels and Scope

• Effective tariff rates average between 9% and 10%, representing a threefold increase from early 2025 levels but remaining relatively low by historical standards.
• Tariffs are currently the highest in nearly a century, applied broadly to imported goods across various sectors.
• Tariff justifications are bifurcated: statutory national security measures (sectoral tariffs) versus retaliatory measures against unfair trading practices.

Economic Burden and Pass-Through Data

• The speaker characterizes tariffs as revenue raisers similar to a consumption tax, though the ultimate burden is a mix of payers rather than falling solely on consumers.
• Micro-studies indicating complete tariff pass-through are accepted as accurate regarding relative price changes but are insufficient for determining the full economic burden.
• Cited studies (Journal of Economic Perspectives, Quarterly Journal of Economics, New York Fed) show tariff pass-through rates of 90% to 92% through February 2026.
• A full economic assessment requires general equilibrium analysis accounting for effects on domestic and foreign wages, rather than just relative price shifts.

Fiscal and Macroeconomic Impact

• Congressional Budget Office (CBO) scoring originally estimated tariffs would raise approximately 1% of GDP.
• Macro benefits are expected to include deficit reduction and potential positive effects on domestic wages and productivity.

Manufacturing and Employment Trends

• Manufacturing value added and productivity showed an uptick starting from the beginning of the administration, viewed as success indicators for domestic production goals.
• September 2025 manufacturing employment was lower than January 2025 levels, with real wages rising only 0.3% and failing to keep pace with inflation in recent months.
• Manufacturing employment decline slowed in 2025 compared to 2023–2024, with a reported increase in 2026.
• Employment growth is specifically noted in fabricated metals, transportation, and chemicals, alongside a broader trend of declining employment in the sector under previous administrations.
• Construction growth in 2026 is driven significantly by AI data center development.

Investment Drivers and Future Outlook

• Investment increases are attributed to a combination of the "big beautiful bill" tax incentives, tariff signals, and corporate supply chain diversification away from China.
• The speaker rejects the notion that tariff impacts are the sole driver of investment, citing a necessary disentanglement of tax incentives, geopolitical shifts, and sector-specific growth (e.g., data centers).
• Forward-looking signals suggest continued investment in the U.S. driven by the convergence of fiscal policy, protectionist measures, and global supply chain restructuring.