42: Trump and Tariff Tweets: It's More Complicated Than That

Episode Summary

Executive Summary: The episode explains why comparing tariff levels across countries is harder than it sounds. It shows that the U.S. is not uniformly less protectionist than other rich economies: tariffs vary by product, countries trade off concessions across sectors, and average tariff measures can mislead by excluding major duties like antidumping or Trump-era national-security tariffs. Overall, most rich-country tariffs are low, but the true picture depends on how they’re measured.

Main Topics: Why product-by-product tariff comparisons are misleading (Priority: 5/5): The hosts argue that focusing on a few headline sectors, like Canadian dairy or U.S. pickup trucks, hides the broader bargaining logic behind trade negotiations and makes reciprocity look simpler than it is. Tariff averages: trade-weighted vs simple averages (Priority: 5/5): The episode walks through two main ways to measure overall tariff levels and explains how each can understate or overstate protection depending on trade patterns and zero-import categories. Historical reciprocity and negotiated trade-offs (Priority: 4/5): Tariffs were reduced over decades through GATT/WTO rounds, with countries trading concessions across sectors rather than eliminating every tariff product-by-product. What official tariff statistics miss (Priority: 5/5): Standard tariff averages omit antidumping, countervailing, safeguard, and some Trump administration tariffs, meaning published averages understate actual protection. Sectoral exceptions and political economy (Priority: 4/5): Examples like dairy, sugar, autos, and pickup trucks show how politically sensitive sectors retain high tariffs or subsidies despite broad liberalization. Broader non-tariff barriers (Priority: 3/5): The episode closes by noting that quotas, rules of origin, labeling, and regulatory differences may matter more than tariffs in many rich-country trade relationships.

Key Arguments: U.S. tariffs are not simply the lowest in the world; the answer depends on how tariffs are measured and on whether one looks at official commitments or actual duties applied. Bilateral trade negotiations are based on reciprocity across sectors, not identical tariffs on each product, so high tariffs in some areas can coexist with low tariffs elsewhere. Trade-weighted averages can understate very high tariffs because prohibitive duties reduce imports to near zero, giving those items little or no weight. Simple averages can overstate protection because they count every product equally, including items with negligible trade significance. Published WTO/World Bank averages exclude important defensive tariffs such as antidumping, countervailing, and safeguard duties, which are widely used by the U.S. Trump-era steel, aluminum, and threatened auto tariffs would raise the U.S. average tariff rate materially if fully implemented, but the true effect depends on import responses. For many rich-country trade relationships, non-tariff barriers are at least as important as tariffs in shaping market access.

Data Points: U.S. trade-weighted average tariff: 2.4% - Cited as the U.S. average tariff rate under the trade-weighted measure EU trade-weighted average tariff: 3.0% - Compared with the U.S. trade-weighted average Canada trade-weighted average tariff: 3.1% - Compared with the U.S. trade-weighted average U.S. simple average tariff: About 3.5% - Presented as an alternative averaging method EU simple average tariff facing U.S. exporters: About 5.2% - Compared against the U.S. simple average China trade-weighted tariff facing U.S. exporters: About 5.4% - Compared with China’s tariff level facing imports from the U.S. U.S. trade-weighted tariff facing imports from China: About 3.0% - Used in the U.S.-China comparison Products under EU-U.S. TTIP offer: 97% - The EU reportedly offered to cut tariffs on 97% of products in the proposed TTIP deal Tariff-free trade between U.S., Canada, and Mexico: 99% of products at zero tariffs - Described as the broad outcome under NAFTA/USMCA-style trade liberalization U.S. special tariffs on imports from China: About 9% of imports - Estimate of imports covered by special duties such as antidumping/countervailing measures U.S. special tariffs on imports from others: About 3% of imports - Estimate of special duties on imports from non-China sources Steel and aluminum tariffs impact: U.S. tariff rate could rise from 2.4% to 2.7% - Back-of-the-envelope estimate if those tariffs are included Potential auto tariffs: 25% on $350 billion of cars and car parts - Estimated to potentially almost double the average U.S. tariff rate if enacted and if imports fell as assumed Tariff revenue concentration: 6% of imports generated 51% of tariff revenue - Textiles/clothing/shoes and luggage accounted for a disproportionate share of U.S. tariff revenue in 2017 Canadian dairy tariffs: Very high above-quota tariffs - Used as an example of supply management and restrictive market access Illustrative tariff example: 50% tariff on $10 billion of cars; 0% on $90 billion of cheese - Used to explain how trade-weighted and simple averages differ

Pivotal Quotes: "People can't charge us 270 percent and we charge them nothing. That doesn't work anymore." — President Trump (quoted in transcript): Introduced as the political motivation behind the tariff discussion "There really is no one right answer to thinking about this." — Samaya Keynes: Explaining why tariff averages can differ depending on the methodology used "These averages are certainly better than anecdotes. But unfortunately, even these average figures have some problems with them as well." — Chad Bown: Transitioning from simple comparisons to methodological limitations

Implications: Headline tariff comparisons are often misleading. Listeners should look beyond averages to sector-specific policy, hidden duties, and non-tariff barriers, especially when evaluating trade conflicts or claims of unfairness.