March 2025 Friday’s e-links: An Economist’s Tariff Explanation

Every once in a while, (and sometimes each day) I listen to a great podcast, enjoy an article, or see a good video that I want to share with you. These are my e-links.

Last updated 3/14/25

For those of us that are concerned with current tariff policy, I quote Harvard professor and former chair of the Council of Economic Advisers, N. Gregory Mankiw. He was responding to White House economic adviser, Kevin Hassett’s comments during an ABC News interview. Hassett had said that it’s better to have a Buick produced here because then it gets counted in the GDP while an imported car does not.

Mankiw’s response:

“No, Kevin, that’s not the way we do it in Econ 101. What happens when Americans switch from buying German cars to buying American cars is that these consumers supply fewer dollars in the market for foreign-currency exchange. As a result, the dollar appreciates. That appreciation makes U.S. goods more expensive compared with foreign goods, reducing U.S. exports and raising other U.S. imports.

Trade restrictions do not increase GDP. Indeed, by interfering with the international marketplace and the forces of comparative advantage, they reduce productivity and thereby GDP.

Please, Kevin, stop invoking Econ 101 to support President Trump’s trade policies. It misleads the public, and it insults those of us who have spent our lives teaching (and writing textbooks for) Econ 101.”