The Good News on the Tariffs

Maybe it really is 3-D chess? A guest post from an old friend.

Editor’s note: My old pal David W. Kruetzer, a retired economist, abhors tariffs and trade restrictions like most everyone with a grounding in free market economics. But that may not be the whole story. David sends along the following thoughts that are roughly congruent with my own, and graciously gave permission to share them with readers here.

—Steve

By David W. Kreutzer

Here’s the good news on the Liberation-Day tariffs: They are incredibly bad.

They are incongruent with economic logic, economic history, common sense, and with the ivory-tower-wishful-thinking optimal tariff theory. I know some of the people in the White House who are solid, free-market types. They had to have been pulling hard for small tariffs that could easily be negotiated away. If so, Trump sided with the lunatics instead. Or maybe it’s 3-D chess.

Because the tariffs are so obviously terrible, the impact on the markets has been huge. The good news here is that we can now be confident that Trump’s aggressive push for smaller government, lower taxes, and reduced regulatory burdens is what generated the pre-COVID economic boom in his first term and was responsible for the market bump following his second election. We no longer need to debate whether the relatively minor tariffs in his first term aided or hindered economic growth. They hindered it, but not enough to undo his other policies. This knowledge is important.

The abused-by-all emergency authority, under which Trump imposed the tariffs, may not survive a court challenge and can be overturned by Congress with a 2/3 majority. Had he sought approval before implementing the tariffs, his ability to strongarm reluctant Republicans in Congress would have been greater. However, tariffs just became radioactive, and the free-trade wing of the Republican Party just got stronger. There is no way a majority of Congress will support these tariffs and there may even be veto-overriding opposition. Further, all the attention, from those who wish him ill and others, is focused on these nearly comical tariffs and is no longer focused on fighting against slashing the bureaucracy, extending the income-tax cuts, unleashing energy production, DOGE and so much more. For the economy, American greatness, and freedom in general, it’s all to the good. Three-D chess.

And in a sort of political double-negative, the left-wing’s hate of Trump is also strengthening the free-trade wing of the Democratic party. Three-D chess.

There may be months of harmful disruption and possible further declines in the stock markets, but at some point, the markets may reflect the likely death of the tariffs. How long will it take to recover from the turmoil? Nobody knows, but moving forward with a pro-market freedom agenda, unshackled by the continuing threat of tariffs, is a promising future.

For now, just repeat, “It really is 3-D chess. It really is 3-D chess. It really is 3-D chess…”

David W. Kreutzer, Ph.D, was a senior research fellow with the Heritage Foundation, senior economist for the Institute for Energy Research, and senior adviser at the Environmental Protection Agency in the first Trump Administration.