The Trumponomics podcast, hosted by Stephanie Flanders, examines the Trump administration's re-emergence of tariffs and their complex economic and political ramifications. Recorded on July 29th, the episode highlights recent White House actions, including 10% tariffs on imports from over 80 countries (replacing previous ones ruled unconstitutional), new tariffs on Canada and Brazil, and pending Section 301 investigations that could lead to more import taxes. The central question is whether these tariffs, touted as tools for economic revival, have delivered on promises or merely act as a tax on US consumers.
Sean Donnan, a senior writer for Bloomberg, uses the "tin can" industry as a case study for the original 2018 steel tariffs. He recalls former Commerce Secretary Wilbur Ross's assurance that tariffs wouldn't affect soup can prices and would create thousands of jobs and millions in investment. In reality, the cost of canned fruits and vegetables has risen by almost 50% since March 2018, and empty can costs are up 80%. Domestic tin plate production declined, with mills dropping from twelve to three, and imports rising from 50% to 80% of can makers' steel needs. Steel industry jobs saw only a modest increase of 1,300, and overall manufacturing jobs are reportedly fewer than when Trump first took office. Donnan notes that the US industry has little interest in making tin plate, leading to unintended consequences like a tomato farmer reducing planting due to higher can costs.
Anna Wong, Bloomberg Economics' chief US economist, offers a nuanced perspective on manufacturing. While politicians focus on job numbers, economists also consider profits, investment, and productivity, with jobs often a lagging indicator. Wong acknowledges that manufacturing has seen improvements in output and productivity in recent years, particularly in durable goods like computers, aerospace, and high-value hardware, rather than China-exposed sectors. She suggests that while tariffs might not be the direct cause, they have acted as a "cost increase" for firms, prompting them to increase operational efficiency. Firms responded by selectively raising prices (sometimes reducing sales), increasing demands on existing workers (boosting productivity), and rejiggering supply chains. Sean adds that some can manufacturers adapted by making thinner, more efficient cans.
The podcast then examines the fiscal impact of tariffs. Anna Wong states that tariff revenues were around $200 billion last year, but approximately $80 billion has already been refunded due to court rulings, with potentially another $80 billion to follow. This significantly cut 10-year tariff revenue projections from $3.3 trillion to about $2 trillion, impacting the fiscal deficit. Sean Donnan emphasizes that refunds are ongoing, with June even showing a net outflow from the Treasury. He also points out that the long-term durability of these revenues is questioned due to ongoing legal challenges and the theoretical outcome that successful reshoring would diminish import duties.
Finally, the discussion turns to broader economic and political consequences. Unlike initial fears, there hasn't been widespread retaliation from other countries, nor have tariffs meaningfully driven US inflation (though consumers often link them to higher costs). Both guests agree that tariffs are unpopular. Anna Wong suggests the administration views them as a "less painful" way to raise revenue. Sean Donnan notes that Democrats are using tariffs as a political vulnerability for the President, arguing that Trump's economic policies have created chaos and failed to deliver on promises, leading to low approval ratings for his economic management. The conversation concludes by recalling the historical cyclical nature of tariff popularity and unpopularity in US politics.