I see repeated references to this assertion. As Jason Furman points out, relative to “Liberation Day” announcement, he didn’t, insofar as the increase in tariffs on Chinese goods rose from 54% to 125% even as reciprocal tariffs were delayed 90 days, thus pushing up the effective tariff rate (with no quantity response) to essentially where it was going to.
I guess in the sense that Mr. Trump seems to want to add on additional tariffs on the merest of whims, he did blink. Kind of.
Here’s a picture of the effective tariff rate, assuming Chinese imports into the US are halved by the 125% tariffs.
By the way, after looking at the USTR’s (?) formula ,
I gotta say the stupidity amazes even a jaded person like me. No wonder no one wants to take credit/blame for it.
Corinth and Veuger (AEI) have a concise takedown of the formula’s issues. Many have pointed out that bilateral zero balances make no sense. I want to go beyond that to say even an aggregate zero balance (on the current account, numerically roughly equal to the trade balance) makes no sense. Essentially that rules out intertemporal trade, which as shown below is Pareto inferior to free trade.
(This equilibrium is by the way the basis for the Coalition for a Prosperous America’s calculation of “fair exchange rates”, as discussed in this post.)
Finally, I am curious where CEA is. CEA’s role has been to “kill bad ideas”; and there have been plenty of bad ideas — trade-wise — floating around Washington DC for as long as I can remember. Maybe they’re fighting the good fight behind the scenes; if so, good for them.
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