FACT: U.S. drug overdose deaths down 21.7% from 2023 to 2024. 

THE NUMBERS: CDC estimates of U.S. deaths by drug overdose –

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week.

FACT: The world economy is growing and ‘normalizing’ in 2025. Or else not.

THE NUMBERS: World economy at the end of 2024 – 

	2020	2024
Population	7.8 billion	8.2 billion
Absolute poverty rate	9.7%	9.0%
GDP (real 2024 dollars)	$93.8 trillion	$110.7 trillion
(U.S.)	($25.4 trillion)	($29.2 trillion)
Trade flows	$22.7 trillion*	~$33 trillion
Operating satellites	~2,500	~9,500
Live submarine cables	400	600
Container-ship capacity	25.8 million TEU	32 million TEU
Widebody freighter air fleet	2,010	2,340

* Anomalously low due to COVID-19 economic closures. The 2019 total was $25.0 trillion.

WHAT THEY MEAN:

Peering into the near future in its “World Economic Outlook” update last Thursday, the International Monetary Fund sees a “normalizing” 2025 for the world economy. The Fund’s mighty banks of computers, integrating figures on savings rates, energy costs, retirements, fiscal balances, investment levels, debt loads, and the like, arrive at projections of worldwide growth of 3.3%, fading inflation, and interest rates possibly trending down. Economic Counsellor Pierre-Olivier Gourinchas summarizes the “data-driven” outlook:

“We project global growth will remain steady at 3.3% this year [as against 3.2% in 2024 and 2023], broadly aligned with potential growth … inflation is declining, to 4.2% this year and 3.5% next year, which will allow further normalization of monetary policy. This will help draw to a close the global disruptions of recent years, including the pandemic and the Russian invasion of Ukraine.”

Dr. Gourinchas goes on to note some variability of growth among big economies, noting that the U.S. and China are the relatively strong-growth big economies, though both with some asterisks. China’s boom era is past: its 4.5% growth projection is now similar to the 4.2% the IMF sees for other “emerging economies” and the 4.1% for low-income countries, and well below India’s 6.5%. Benefiting from relatively high productivity growth, meanwhile, American living standards are “pulling away from those of other advanced economies”; but the U.S. has higher inflation risk than its peers for other reasons: a likely rising budget deficit, plus immigration and tariff plans seen as stagflationary.* Continental Europe, on the other hand, is slower than it should be, with 1.0% growth — a bit below the 1.6% for the U.K. and the 1.1% for Japan.

The projections suggest general calm, a prospering if not booming world, and the sort of problems that usually come up in normal times. Data cited above from other venues — trade flows, rising air and maritime logistical capacity, rapid satellites and fiber-optic cable deployment, a slowly falling rate of deep poverty — all seem to say this needn’t stop any time soon. So here’s J.M. Keynes in The Economic Consequences of the Peace (1919) to remind us of how quickly and badly things can go wrong when — despite equations, data, and rational predictions drawn from them — governments and publics make poor choices:

“What an extraordinary episode in the economic progress of man that age was, which came to an end in August, 1914! … [For] the middle and upper classes, life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.”

“[H]e regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life.”

Back to the IMF for the last word: Dr. G. is more alert to this sort of risk than was Keynes’ wealthy and oblivious Londoner just before the First World War. His closing comment steps back from data-driven optimism to anxiety about policy and human choices:

“Finally, additional efforts should be made to strengthen and improve our multilateral institutions to help unlock a richer, more resilient, and sustainable global economy. Unilateral policies that distort competition—such as tariffs, nontariff barriers, or subsidies—rarely improve domestic prospects durably. They are unlikely to ameliorate external imbalances and may instead hurt trading partners, spur retaliation, and leave every country worse off.”

* Direct quote on mass deportations and tariff increases: “Will play out like negative supply shocks, reducing output and adding to inflation.”

FURTHER READING

The IMF’s Gourinchas on the year ahead.

… and the full “World Economic Outlook” update.

Keynes’ Economic Consequences of the Peace (1919).

And the Biden administration’s last word on the economy.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week.

FACT: The last big U.S. tariff increase: Herbert Hoover’s, in June 1930.

THE NUMBERS: U.S. tariff rates* –

1929	13.5%
1933	19.8% (modern-era peak)
1940	12.5%
1960	7.1%
1980	3.1%
2000	1.6%
2010	1.4%
2015	1.5%
2020	2.8%
2023	2.4%
2025	?

*Trade-weighted” averages, dividing tariff revenue by goods import value.  U.S. International Trade Commission, at https://www.usitc.gov/documents/dataweb/ave_table_1891_2023.pdf.

WHAT THEY MEAN:

The incoming administration has — it says — a plan for the first big U.S. tariff increase since Herbert Hoover’s in 1930.  But as PPI’s Ed Gresser observes in Tariffs and Economic Isolationism: Four Principles for a Response today (borrowing some post-Hoover lyrics) even at this late date, a week before the inauguration, whatever this plan might be ain’t exactly clear.  With a detailed response still premature, his piece offers four principles as a foundation:

1. Defend the Constitution.
2. Connect tariffs and trade policy to American family living standards, growth, and work.
3. Stand by America’s neighbors and allies.
4. Offer a positive alternative.

Some background first, then a bit more on each:

Trump campaign documents, and more recent transition statements, float at least five tariff plans, mostly incompatible: (i) a higher overall tariff, of 10% or possibly 20%, probably stacked on top of the current 2.4%, imposed by decree after a declaration of “emergency”; (ii) threats to impose tariffs on particular countries over unrelated policy issues, also presumably by decree; (iii) a new “Rube Goldberg” tariff schedule in which every U.S. HTS-8 line is equal to or higher than the precisely comparable line in every other customs territory; (iv) a Congressional bill like Hoover’s; (v) tariffs on products administration officials decide are especially sensitive. Since it isn’t clear which (if any) of these is the “real” plan, for now, critics need no detailed analysis or response. But we can start with two basic observations and principles applicable to all:

Tariffs and their uses: Tariffs have some valid uses. They can provide temporary protection for industries trying to rebuild competitiveness, for example, or help to economically isolate an aggressor state. But they always raise costs for families and goods-using businesses, incite foreign governments to retaliate against American farm and manufacturing exporters, and often reward good lobbyists more than good products. As Laura Duffy points out in her PPI report last fall, tariffs are also inequitable and regressive as both consumer and business taxes. So they’re generally poor policy, and governments should reserve them for the unusual cases where they’re really necessary.

The Biden record and its lessons: Critics should not be bound by “Bidenomics,” and, in fact, should make some clear breaks with it. President Biden’s 2021-2024 program had many good results — steady growth, low unemployment, a strengthened semiconductor industry,  and progress on decarbonization. But it ended as a political liability, and his approach to tariffs contributed to this.  Despite several useful trade innovations (e.g., the Commerce Department’s export promotion ideas and the Treasury’s “friendshoring” concept), the administration abandoned the market-opening, liberalizing values of Roosevelt-to-Obama Democrats and tried instead to blur differences with Trumpism by leaving Mr. Trump’s 2018/19 tariffs mostly untouched. This cost the Biden team a chance to bring down prices by cutting tariffs; left it unable to assign the first Trump term its appropriate share of blame for the post-Covid inflation burst; and (as we warned in mid-2023) by 2024, lacked the positive growth-and-living-standards agenda that should have complemented Vice President Harris’ forceful critique of Trump’s tariff hikes.

Now back to the four principles:

1. Defend the Constitution. The Constitution gives Congress full authority to set “Taxes, Duties, Imposts, and Excises.” For good reason: if a president can create his or her own tariff system by decree, not only do impulsive and ill-considered decisions become more likely, but all future presidents would face standing temptation to use tariffs in corrupt ways to reward supporters and cronies, or punish critics and rivals. Attempts to impose tariffs by perverting existing laws meant for wholly different purposes – emergency actions meant for a sudden crisis, trade negotiating leverage, etc. – and rule by decree rather than legitimate (even if ill-judged) legislation breach the separation of powers and harm the Constitution, and should be opposed on principle.

2. Connect tariffs to American family living standards, growth, and work. Tariffs are usually poor policy. As consumer taxation, they hit single moms much harder than stockbrokers, and average families much more than wealthy households. As business taxes, they raise costs for goods-purchasers — manufacturing, retail, restaurants, farms, building contractors — more than for investment- and services-heavy industries like real estate and finance. And as trade policy, they invite retaliation against America’s $3 trillion export sector — top in the world for agriculture, services, and energy, and second in manufacturing — whose factories and farms deserve better than to have an administration turn them into trade-war cannon fodder.

3. Stand by America’s allies and neighbors. America’s alliances with democracies and close relations with neighbors are strategic assets built over decades. Mr. Trump’s use of his free time in these past months to pick fights, including through tariff threats, with allies and neighbors from Canada and Denmark to Mexico and Panama has thus been an especially corrosive and disturbing part of this transition period. Economics apart, these countries have stood with the U.S. when it counted a lot — not long ago, and at a considerable cost. Remember, for example, that Denmark lost 43 soldiers in Iraq and Afghanistan and Canada 158. Neither deserves repayment with bullying and economic threats. The right policy is to deepen and strengthen these relationships, and to oppose attempts to erode and weaken them through tariff threats.

4. Offer a positive alternative. Though the incoming administration’s plans are uncertain, and there’s no need yet for a detailed alternative, it’s useful even now to consider the shape it might take. The essay suggests three lines of policy:

* International engagement: Modernized trade agreements to deepen and strengthen economic relationships with friends, neighbors, and allies. These can include U.S.-Europe agreements with the United Kingdom as an immediate choice; a return to the 15-country Trans-Pacific Partnership, now functioning very well as the “CPTPP” for Japan, Australia, Canada, and other allies, including the U.K.; and using the 2026 “USMCA” “review” to broaden that agreement to Caribbean, Central, and South American countries.

* Domestic reform to cut costs: Cut the cost of living for hourly-wage families by scrapping especially regressive, discriminatory, and sexist tariffs, with the Pink Tariffs Study Act introduced by Representatives Lizzie Fletcher and Brittany Pettersen as the starting point.

* Constitutionally appropriate policymaking: Here the Prevent Tariff Abuse Act introduced in December by Reps. Suzanne DelBene and Don Beyer, which excludes tariffs from actions presidents can take under the International Emergency Economic Powers Act, sets the example.

Here’s the piece.

FURTHER READING

Gresser on Tariffs and Economic Isolationism: Four Principles for a Response.

More from PPI on trade policy, tariffs, and America in the world economy:

Gresser’s December 2024 testimony to the Joint Economic Committee on the implications of a higher national tariff.

…and from early 2023, his warning (in response to a disquieting speech by the National Security Advisor) about the Biden administration’s poor tariff-and-trade positioning for a rematch with Trumpism.

Laura Duffy’s It’s Not 1789 Anymore explains why, though tariffs were the best of a poor set of options for the first Congress in 1789 and remain important for revenue in very low-income and troubled countries today, they’re a bad form of taxation — high rates and narrow base mean they can’t raise enough revenue, also opaque, regressive, and inequitable.

Yuka Hayashi’s The U.S. Wants Manufacturing to Drive Growth. Foreign Friends Can Help on pooling economic strengths with allies.

And just for the record …

What happened the last time the U.S. government tried a general tariff increase?  Herbert Hoover’s “Tariff Act of 1930”, colloquially known as “Smoot-Hawley” for its Congressional authors Sen. Reed Smoot and Rep. Willis Hawley, passed on a rainy June day in 1930.  Metaphorically, the rain continued for years:

U.S. GDP, 1929*:	$1.191 trillion
U.S. GDP, 1930:	$1.090 trillion
Real GDP growth, 1930:	-8.5%
Real GDP growth, 1931:	-6.4%
Real GDP growth, 1932:	-12.9%
U.S. GDP, 1933:	$0.877 trillion
Unemployment, 1933:	24.9%

* Bureau of Economic Analysis, GDP in ‘real’ 2017 dollars; U.S. 2024 GDP by this measure is now $23.4 trillion.

Modern economic historians view this tariff increase not as a main cause of the Depression – conventionally dated as starting eight months earlier, with the stock market crash of late October 1929 — but as a bad idea that made it deeper and longer. (Depending on one’s preference, “main causes” include financial-system collapse and serial bank failures without deposit insurance, absence of a “lender of last resort” for distressed but viable sectors, failure of government to respond with fiscal stimulus as household spending collapsed, Federal Reserve interest policies, the “gold standard” as an international factor, and so on.) The tariff increase created no jobs or investment, and the foreign retaliations it brought helped wreck the export sector and seal potential routes to relief. Four looks at the experience:

Charles Kindleberger’s analytical The World in Depression, 1929-1939

J.K. Galbraith’s The Great Crash, 1929 on the view from Wall Street in the months before Smoot-Hawley.

Franklin D. Roosevelt’s 1936 Address to the Inter-American Conference on the Maintenance of Peace in Buenos Aires, looks back six year later on rising trade barriers, the collapse of trade, and their effects on peace and security.

And Douglas Irwin’s Peddling Protectionism has a contemporary take at the Hoover administration, Congress, the Tariff Act of 1930, and its consequences.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week.