Washington, D.C. — Today, Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute, released the following statement applauding Representative Lizzie Fletcher (D-Texas) and Brittany Pettersen (D-Colo.) for introducing the Pink Tariffs Study Act. This legislation directs the Treasury Secretary to review the American tariff system —for the first time in at least 70 years — with a focus on gender bias, regressivity, and its impact on Americans at different income levels and in different types of households.
“Tariffs are one of the seven major federal taxes, collecting over $80 billion in tariff money during the last fiscal year. Yet, Congress and executive branch agencies know far less than they should about who is paying the money. No systematic review of the tariff system has been done in 70 years, despite notable policy anomalies, ranging from higher tariffs on women’s clothing than on men’s, to higher rates on cheap steel spoons than on sterling silver.
“PPI applauds Representatives Fletcher and Pettersen and the New Democrat Coalition’s Trade Task Force for introducing the Pink Tariffs Study Act, requiring the Treasury Secretary to take a thorough review of America’s current tariff system in hopes to identify and correct gender biases, regressivity, and other impacts on U.S. taxpayers. It’s far past time for policymakers to correct unequal tariff taxation on American women.”
Gresser’s pathbreaking research has repeatedly analyzed U.S. tariff data to explain an opaque system and illuminate inequity in the country’s tariff taxation system, especially on women’s clothes. Gresser has worked closely with the New Democrat Coalition’s Trade Task Force to create a strong and proactive trade agenda.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
FACT: Tariff revenue in FY2023: $80 billion. Reps. Fletcher and Pettersen have some very good questions about who is paying this money.
THE NUMBERS: Tax revenue by source, Fiscal Year 2023* –
Tariff system:
$80.3 billion
Fuel tax for trust fund:
$42.2 billion
Estate and gift tax:
$33.7 billion
Tobacco excise tax:
$10.3 billion
Alcohol excise tax:
$9.5 billion
* Office of Management and Budget
WHAT THEY MEAN:
Who says Congress has no room for creative thinking? For fresh approaches to tired debates? Or for starting a project by seeking reliable facts and data first? Well, a lot of people might say those sorts of things. But here are Representatives Lizzie Fletcher (D-Texas, and Chair of the New Democrat Coalition’s Trade Task Force) and Brittany Pettersen (D-Colo.), proving them wrong today as they introduce a bill entitled the “Pink Tariff Study Act”. Their bill directs the Treasury Secretary to review the American tariff system — likely for the first time in 70 years — for gender bias, regressivity, and impact on different types of American households. Some background and significance of their idea:
Congress has two “trade policy” powers: (1) to “regulate commerce with foreign nations”, and (2) to “lay and impose Taxes, Duties, Imposts and Excises.” For nearly a century — since the New Deal-era Reciprocal Trade Agreements Act began America’s series of tariff-reducing and trade-opening agreements in 1934 — arguments over trade and trade policy have revolved mainly around imports, export opportunities, and in general the first power. For the first 150 years of U.S. history, though, it was mostly the opposite, with Congressional debates focused on the tariff system’s role as one of the major federal taxes. Though this aspect of tariff policy hasn’t recently got much attention, tariffs remain one of the seven major federal taxes, and are by no means the smallest. The Office of Management and Budget reports that in the last “Fiscal Year” — October 2023 to September 2024 — CBP officers collected over $80 billion in tariff money, nearly as much as their Treasury colleagues got from all the taxes on inheritances, gasoline, liquor, and tobacco put together.
Who exactly is paying this $80 billion? Is the division of payment fair? Has anyone recently looked systematically through the 11,414 tariff lines to see what the rates are? PPI’s work over the past year has done some of this, noting with dismay that the tariff system taxes women’s clothes more heavily than men’s, taxes cheap stainless steel spoons more than sterling silver, and so on. Some academic economists have done similar work — three excellent examples below — and independent modelers have examined Trump-era tariffs on metals and Chinese goods. But Congress and executive branch agencies, whose respective jobs include setting all these thousands of tariff rates and collecting the billions of dollars, haven’t looked in a long time. Congress’ last hearing on this system dates to the early 1970s; the Treasury Department’s last review is of uncertain date but probably during the Eisenhower presidency.
In this sense, the tariff system is like an old tax policy room boarded up decades ago, and not checked since for termites, dry rot, etc. Except that it takes in lots of money: $12 billion on clothes, $3 billion on shoes, $8 billion on electronics, and so on. Extending the metaphor, Reps. Fletcher and Pettersen are asking the Treasury Department to open the windows, air the room out, and look at what’s inside. Their bill is simple, hopefully non-controversial, and intended to seek information on four questions:
* Is the tariff system biased by gender, for example with respect to clothing?
* Is it a regressive tax, falling more heavily on lower-income families than on wealthy households?
* How does the tax burden it imposes fall by gender, household type, and income level?
* Are there other ways in which it might impose unequal taxation?
So: Reps. Fletcher and Pettersen are posing simple and important questions and demonstrating a well-founded concern for fairness and equity in taxation. And as they do, they are answering cynics with an example of Congressional policymaking which based on values, informed by data and analysis, and meant to do some good.
… and for some backstory, the NDC’s Trade Task Force, chaired by Rep. Fletcher, pledges last November to address gender bias and regressivity in the tariff system in their 2023 Trade Agenda.
Treasury Department’s Office of Tax Analysis reviews five categories of taxes — income, payroll, corporate income, estate, and a combined “excises and duties” column — for distributional impact.
Tariff system background:
And the U.S. International Trade Commission has the actual, 11,414-line-plus-special-programs U.S. tariff schedule.
PPI’s Elaine Wei and Ed Gresser on the gender bias of U.S. clothing tariffs.
… and the apparently inexplicable, but actually very typical, case of spoon tariffs (with a cameo by Secretary Yellen’s long-ago predecessor, the late Albert Gallatin, explaining in retirement (1833) why tariff systems are more likely than other taxes to evolve toward regressivity).
The University of Wisconsin’s Lydia Cox and Federal Reserve economist Miguel Acosta (February 2024) on the regressivity of tariff policy, its origins, and the potential pro-poor impact of reform.
The ITC’s staff paper (2018) on gender impacts and regressivity.
And Obama-era Council of Economic Advisors eminences Kathryn Russ, Jay Shambaugh, and Jason Furman reach similar conclusions.
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.
On April 9, 2024, Concurrences and CCIA released a new volume “The 2023 Merger Guidelines: A Review.” PPI’s Diana Moss is a contributing author with her chapter titled: “Antitrust Ideology and the 2023 U.S. Merger Guidelines.”
Introduction
In late December 2023, the U.S. antitrust agencies jointly issued new merger guidelines. The 2023 Merger Guidelines (“2023 Guidelines”) are the seventh substantive version since they were first issued 55 years ago by the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC). Promoting competition in the U.S. economy is a priority for the Biden Administration, as reflected in a 2021 executive order that set forth an ambitious plan to harness a “whole of government” approach. An uptick in resolving challenged mergers through injunctions, restructurings, and forced abandonments is visible evidence of this commitment. The same is true of a surge in monopolization cases, limited thus far to the digital sector, the outcomes of which will likely be determined by a future administration.
As part of the broader competition mandate under the current administration, the DOJ and FTC issued a draft of revised merger guidelines in mid-July 2023. After collecting comments and holding public workshops, the Agencies turned a final version of the guidelines six months later, which will replace the 2010 Horizontal Merger Guidelines. The
changes to the draft guidelines, which presumably reflected public input, were far from cosmetic. Indeed, they reflect pressure to move the draft version away from the far left of the ideological spectrum and towards the center. This tells us a lot about the debate over antitrust ideology in the U.S. is today.
Three suburban Colorado legislators last month introduced a bill designed to run public charter schools out of the state. Yet, most charter schools serve urban, not suburban, children. In Colorado, 49.5% of all charter school students live in a city. Not surprisingly, more than half are non-white. Additionally, almost 40% are eligible for a free or reduced lunch, which is how education systems measure low-income students. By way of contrast, just 2.5% of Colorado’s suburban students attend a charter school.
So, why are state Reps. Tammy Story and Lorena García, and Sen. Lisa Cutter crusading against a public education option preferred by minority families who aren’t their constituents?
It’s not as if they’re “bad” schools. The Program on Education Policy and Governance (PEPG) at Harvard University studied national test scores from 2009 to 2019. Colorado charter school students placed second in the nation. In a slightly different study by Stanford University’s Center for Research of Educational Outcomes, Colorado’s public charter school students benefitted from extra personalized learning each year — equal to 15 extra days of reading instruction and 13 days in math — when compared to district schools. That’s fantastic for the state’s 135,000 children lucky enough to get off of a waiting list and get a seat.
The Democrats’ eroding support among Hispanic, Black, and Asian American voters is making progressive heads explode. Aren’t voters of color supposed to be a solid pillar of the party’s base?
This development hastriggered much speculation among political scientists and journalists about whether the United States is undergoing a “racial realignment.” There’s no denying Biden’s sagging support among nonwhite voters, but it seems to have more to do with class than race.
According toaggregate polling results, the president’s advantage among Hispanic voters has fallen from 24 points in the 2020 election to just seven points. Among Black voters, it’s slipped from 83 points to 55.
Of course, polls aren’t election results. With favorable tailwinds from a vibrant economy, and Trump facing all kinds of legal jeopardy in civil and criminal trials, Biden could yet get his numbers among these voters, especially Black voters, back up closer to his 2020 level.
At the end of 2023, many economists and bankers predicted the Federal Reserve would cut interest rates several times over the course of 2024, leading to lower mortgage and credit card rates, and greater economic activity overall.
The Fed itself, according to its dot plot (a chart that records each Fed official’s projection for the central bank’s key short-term interest rate), projected three 0.25% cuts by the end of 2024. Yet, at the conclusion of the first quarter, the federal funds rate still remains locked in between 5.25% and 5.5%. While the stock market rally indicates that investors believe three or more rate cuts are still on the table for this year, history suggests that may not be the case.
The Progressive Policy Institute traveled to Australia and New Zealand in mid-March 2024 to present our latest report “Backdoors and Balance Sheets: The Consequences of Weakening Encryption on the Future of Work.” The paper was authored by PPI’s Colin Mortimer and guest author Joel Gladwin, a former Special Adviser to two Secretaries of State at the Department for Digital Culture Media & Sport (DCMS) between May 2021 and September 2022.
PPI has followed recent announcements made by the Five Countries Ministerial (colloquially known as the Five Eyes Alliance) that have called upon legislative bodies to weaken encryption protections currently offered to citizens on most personal communication and messaging applications. Among the concerns PPI has about these proposals affecting personal privacy, civil liberties and due process, we sought to elevate economic considerations as part of this debate as well. To get at this, we conducted a survey of 100 small-to-medium size (SME) business leaders across the Five Countries Ministerial – the United States, United Kingdom, Canada, Australia and New Zealand. Amongst the broad findings, our survey found:
99% of SMEs utilize encryption services which are very or quite important for use internally and/or with customers.
62% of business leaders would reduce hiring if encryption backdoors were implemented.
58% of business leaders would reduce their investment if backdoors were implemented.
52% of business leaders believe that the global standing of their country’s technology sector would be adversely impacted if backdoors were implemented.
We had the pleasure of presenting this report at eight events and salon dinners during our trip. A diverse audience attended our events and dinners, including MPs, high-level government staffers working on encryption issues, labor leaders, civic society and local academics.
The message at each event stressed the importance of economic considerations when it comes to encryption. Despite much of the conversation on this issue being centered around civil liberties and the considerations of “Big Tech,” much less has been said about how these changes will affect SMEs across the world. Encryption underpins much of the digital sector, facilitating safe and secure communication and commerce between consumers and businesses throughout the world. Without encryption, personal and sensitive data would be more susceptible to bad actors, such as foreign adversaries, ransomware groups and other criminals. Through our survey, we hoped ascertain where small businesses are on these concerns, and to expand the scope of this conversation to include the considerations world’s most sizable employers.
Melbourne(March 19, 2024)
Our first event in Melbourne was chaired by Rebecca Thistleton, Executive Director of McKell Victoria and Ed Cavanough, CEO of the McKell Institute. McKell is a progressive public policy organization in Australia that has long worked with Labour to implement practical policy reforms.
The event featured a moderated Q&A featuring the paper’s authors, audience questions and a VIP salon dinner featuring the high-level participants.
Sydney(March 20, 2024)
In Sydney, PPI had the pleasure of presenting our paper at an event to members of the NSW Parliament and staffers. Following the event, we were honored to receive an acknowledgement during a session of parliament itself!
Following our event in the NSW Parliament building, we had the pleasure of presenting our paper again under the view of the Sydney Harbour Bridge.The event was again chaired by Ed Cavanough, CEO of the McKell Institute. Similarly, the event featured a moderated Q&A, audience questions and a salon dinner following, which featured several NSW ministers in attendance.
Brisbane(March 21, 2024)
Finally we wrapped up our Australia leg with our event and dinner in Brisbane chaired by Sarah Mawhinney, Executive Director of McKell Queensland.
Auckland(March 25, 2024)
In New Zealand, we partnered with Netsafe to host a salon dinner to present the results of the paper and discuss New Zealand’s encryption regulations in an intimate, off-the-record setting. Our partner, Netsafe, is an important digital authority in New Zealand, appointed by the government to receive and investigate complaints of harmful digital content in the country.
In 2016, the U.S. began exporting liquefied natural gas. Only eight years later, it has become the world’s largest exporter of LNG, shipping 86 million tons internationally in 2023. The growth of U.S. gas production facilitated the retirement of coal plants domestically, bolstered U.S. exports, offered a powerful foreign policy lever, and offered employment to more than 4 million Americans. Furthermore, it allowed the U.S. to fill energy shortfalls in Europe following Russia’s invasion of Ukraine, which compelled European nations to reduce their usage of Russian hydrocarbons and caused Moscow to shut down Nord Stream 1 (which was then destroyed in suspected sabotage). As a result, Europe required new sources of natural gas, and the United States was perfectly positioned to mitigate these shortages. From 2021 to 2022, U.S. LNG exports to Europe increased a remarkable 119%. However, this came at the cost of U.S. LNG exports to Asia, which fell by nearly 50%.
Asia is the largest importer of liquefied natural gas and leads the world in primary energy consumption. In 2022, the top three importers of LNG were comprised of two key allies and Washington’s chief international competitor: Japan, South Korea, and the world’s largest GHG emitter, China. All three of these countries consume vast amounts of energy and are highly reliant on fossil fuel energy imports. Although a growing capacity exists to fill these needs with renewable energy, such resources are currently unable to fully meet the requirements for balanced electricity grids and industrial applications. The U.S. is not the primary energy supplier in Asia, but U.S. LNG supply plays a critical role in reducing these nations’ emissions, as U.S. natural gas emits less greenhouse gas than coal, oil, and most other natural gas supply chains. In addition, U.S. natural gas provides energy security to allies, such as Japan and South Korea, in case of disruption or conflict. Ensuring access to sufficient supplies of low-emissions natural gas, accompanied by other innovative, low-carbon, and exportable energy technologies, is vital to American interests. Therefore, the uncertainty created by the Biden administration’s LNG pause risks reducing energy security for U.S. allies in East Asia, weakening Washington’s national security, and exacerbating global climate change.
Richard Kahlenberg, director of the American Identity Project at the Progressive Policy Institute, said the shift away from race could help the MBDA focus more on socioeconomic status. But, he said, using a form to establish applicants’ disadvantage probably will not help the agency accomplish its goals, and he suggested the agency adopt an essay-writing process similar to universities and the SBA to help it focus on an individual’s need.
Kahlenberg, who testified for the plaintiffs in the Harvard case, has long criticized race-based affirmative action, arguing instead for a class-based approach.
“If you care about racial diversity, as I do, you want to find fairer ways to get to the same result,” he said.
“And it’s precisely because of the nation’s history of discrimination and the ongoing realities of discrimination by race that communities of color will disproportionately benefit from a needs-based approach to affirmative action,” he added. “And there’s no constitutional problem with that.”
FACT: The Port of Baltimore handles 10% of U.S. vehicle trade and 94% of Ethiopian birdseed imports.
THE NUMBERS: Arrivals of Ethiopian “noug” imports, 2023 –
Port of Baltimore:
7,095 tons
Port of New York:
429 tons
All other:
6 tons
WHAT THEY MEAN:
Last week’s destruction of the Key Bridge over the Patapsco River, after the 300-meter container ship Dali lost power and collapsed the main pier, closes the Port of Baltimore except for a temporary channel allowing barges and tugboats to enter and leave. The accident’s direct impact on the city’s economy will pretty certainly be its most important economic effect, and the loss of six construction workers’ lives its central human impact. The event also, though, is a bit of a stress test for American “supply chain resilience,” given Baltimore’s place as a large and especially versatile seaport. Some data, and a small-scale illustration of the way these events can touch people close to home and very far away:
America’s annual maritime commerce flows total, per NOAA, 2.3 billion tons of cargo and a symmetrical $2.3 trillion worth of trade. These big numbers, equivalent to about 8% of GDP and 43% of all U.S. trade flows, are distributed across 208 American ports handling over 250,000 tons of cargo a year. (With some left over for another 100 or so smaller border-crossings.) Baltimore’s 308-year-old port ranks in the top 25 on three different metrics — total cargo flow, dry bulk, and container transits — and handles about 2500 ship calls a year, with 50 million tons of cargo valued at $80 billion. Its particular specialization is automotive trade, with 750,000 annual incoming and outbound vehicles, but like other big ports it manages a very wide spectrum of consumer goods, natural resources, farm products, and more. As the wrecked Dali continues to block most ship transits, groups accordingly reworking their logistical arrangements range from manufacturers of half the 10,000 tractors Americans sell to Australian farmers and miners each year; to executives in electronics and automotive plants using the port for half of the U.S.’ 10,300 tons of matte cobalt arriving from Norway, Japan, and Madagascar annually; and on to garden-shop operators buying seed for nesting bluebirds and goldfinches this spring. A bit more on this last:
The relevant seed — known as Guizotia abyssinica to botanists, “noug” to Ethiopian farmers, and “niger seed” or the trademarked “Nyjer” for garden supply stores — is a small, thin black seed produced by a bright yellow flowering plant. Native like coffee to upland Ethiopia, noug has been harvested on the plateau for millennia as a source of cooking oil, with “a nutty flavor and pleasant odour and outraking sesame as Ethiopia’s most widely cultivated oilseed. About 800,000 upland farmers in Amhara and Oromia grow and harvest 300,000 tons each year. Biologically, its small size and high oil content make it attractive to popular and brightly colored U.S. songbirds such as the goldfinches and indigo bunting (reasonably but not precisely considered a bluebird*), millions of which will fly in from their winter homes in Mexico and the Caribbean for nesting this week. Hoping to attract them to backyard feeders, American bird enthusiasts purchase about 15,000 tons of noug from garden-shop operators for the past two decades. An Addis Ababa correspondent explains:
“Ethiopia uses the Niger seed for oil extraction for human consumption/cooking oil. A few years back some traders from Singapore, USA and Europe discovered the availability of this product and started to buy from Ethiopian exporters and ship it to the USA buyers. These USA buyers are major traders, by number not more than eleven. They have become the target for whomever wants to sell the Niger seed… We hear that Niger seed goes to the USA market for bird feed, which really amazes us because we know the product as for human consumption only.”
Exporting firms in Addis Ababa buy it from farmers in the field, sterilize and bag the seeds in 50-kilo sacks, and carry the sacks by truck or (since 2018) by rail to the Djibouti port — Baltimore’s partner in noug trade and the busiest Horn of Africa port. Last year’s exports earned Ethiopia $9.4 million. About 40% of each year’s annual shipments arrive in April and May, and about 94% of it — 7,095 of 7,530 tons last year — crosses Baltimore’s dry bulk dock. Shippers and garden shops are presumably looking hard for new paths, with their success — like that of their counterparts in autos, electronics industries, coal, metals, and more — one small test of the American economy’s flexibility and “resilience,” as well as something important in its own right for the livelihoods of East African farmers and this spring’s bluebird nesting.
* Ornithologically, the eastern U.S. is home to two bright-blue birds, the indigo bunting and the “bluebird” per se. Male buntings are blue all over and females a more modest brown; among bluebirds, both males and females are blue (though females are more grayish-blue), with a brownish breast. Current population counts estimate about 75 million buntings and 23 million bluebirds.
And the Port Authority of Djibouti, including a look at the 2018 opening of a rail link to Addis financed by the Djibouti and Ethiopian governments and the Chinese Ex-Im Bank.
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.
Bad policies rely on bad arguments. Rarely has that aphorism been put on clearer display than in Vermont, a state where advocates for banning flavored nicotine products claim their aim is to protect members of the LGBTQIA community disproportionally drawn to menthol nicotine products.
But just ask yourself: Does that make sense? How often in history have those claiming to care for a community frequently subject to discrimination and prejudice demonstrated that concern by banning products that community is more inclined to purchase?
Perhaps there’s something else going on.
Here’s the real story. Today, many flavored nicotine products — including pouches and vapes — have shown to be significantly healthier alternatives to smoking. And so their introduction to a market of consumers is meant primarily to be a less carcinogenic alternative to cigarettes.
And that’s the key: Nicotine, while addictive, is not responsible for lung cancer, emphysema and other diseases brought on by smoking. It’s the inhalation of toxic smoke and its byproducts — namely tar and other chemicals — that pose the most serious dangers to human health.
Tressa Pankovits, Co-Director of Reinventing America’s Schools Project at the Progressive Policy Institute, Priscila Dilley, Senior Officer at the Leadership Academy Network, and Dr. David Saenz, Chief of Strategic Initiatives and Partnerships at Fort Worth ISD come together to tell a unique and powerful story. The partnership between Leadership Academy Network, Fort Worth Independent School District, and Texas Wesleyan University epitomizes using the principles and practices of charter school authorizing to rethink improving public education more broadly.
FACT: Trump campaign proposes the highest U.S. tariff since 1937.
THE NUMBERS: U.S.’ “trade-weighted average tariff”* –
2022
2.8%
2016
1.5%
1990
3.3%
1960
7.2%
1937
15.6%
WHAT THEY MEAN:
The 2024 election’s core questions are more basic than policy choices. Such as: Can a person who has attempted to overthrow a settled election and called for “termination” of unspecified parts of the Constitution live up to an oath to “faithfully execute the office of President of the United States” and “preserve, protect, and defend the Constitution”? Or: Does the American public endorse a campaign based, as PPI’s President Will Marshall memorably put it last week, on “slandering America as a chaotic hellscape only he can rule”? But this point made, policy choices still have consequences. So here’s one:
The Trump campaign proposes to create a 10% worldwide tariff and a 60% tariff on Chinese goods, probably through a sort of decree. What should we expect from this? A bit of a historic perspective, then a pretty definite result, a very unlikely rationale, and a worst-case scenario:
Context: Highest Tariff Rate Since the Depression: The U.S. International Trade Commission records U.S. trade-weighted tariff averages — that is, “revenue from tariffs divided by goods import value” — going back 134 years, to 1890 and the administration of Pres. Benjamin Harrison. Their most recent figure, for 2022, has $91 billion in tariff revenue and $3.23 trillion in imports for a 2.8% average. This is about twice the 1.2% to 1.5% range before the Trump administration’s “301” and “232” tariffs, imposed in 2018 and 2019. Earlier rates rise steadily as time flows backward, from 3.3% in 1990 to 7.2% in 1960 and higher further back, to a peak of 19.8% in 1933 as Herbert Hoover left office. Rates began to decline as the Roosevelt administration cut tariffs through its Reciprocal Trade Agreements program, to averages of 16.8% in 1936 and 15.6% in 1937. Assuming the campaign’s 10% is (a) added on top of the existing tariff system rather than replacing it, and (b) that its 60% China tariff wouldn’t entirely wipe out U.S.-China trade but leave some continuing under very high taxation, the resulting rate would likely be somewhere around 15%. This would be the highest rate since sometime in the late 1930s.
1. Will Happen: Shift of Taxation Toward Goods-Buyers: One result is very clear. Tariffs are taxes on physical goods brought in from overseas and collected at the border. Tariff-payers are American companies and individuals who buy them. This means a U.S. tax system that relies more heavily on tariffs — in particular if, as campaign literature has suggested, they are used to “offset” revenue losses from lower taxes on corporate and individual incomes — would shift some of the tax burdens. Industries that earn money through financial transactions (e.g. real estate, law firms, financial services) would pay less, while families shopping for goods and businesses that buy and sell goods or use them to make things (e.g. retailers, manufacturers, restaurants, building contractors, repair shops, and farmers) would pay more. This latter effect is magnified, since tariffs generally enable competing local producers to raise their own prices as well.
2. Not Likely to Happen: Policy Rationale Unsupported by Experience: What is the purpose? Essays by former Trump trade officials Peter Navarro in the Heritage Foundation’s “Project 2025” policy book in 2023 and Robert Lighthizer in the Economist this past February, assert that higher tariffs would do two things: first, raise manufacturing output and employment, and second, reduce U.S. trade deficits. Both individuals argued for Trump’s 2018 tariffs on the same grounds. Their hopes did not materialize. To the contrary, with these policies in place manufacturing shrank as a share of GDP, factory employment growth slowed, and trade deficits grew sharply. Here are some data:
a. U.S. manufacturing sector share of GDP: Manufacturing, having been 10.9% of U.S. GDP in 2018, was down to 10.3% in 2021 and likely 10.2% in 2023 pending a final determination by the Bureau of Economic Analysis later this year.
b. U.S. manufacturing employment: Manufacturing job growth averaged 103,000 net new jobs per year in the last five years of the Obama administration, and about half that — 54,000 per year — in the five years since 2018. Note of course a large upheaval in 2020-21 during the Covid pandemic and recovery — a big employment drop in 2020, a big jump in 2021 — so the post-2018 average has some question marks around it.
c. Trade balance: The overall U.S. goods/services trade balance was $479 billion in deficit in 2016. This deficit rose steadily throughout the Trump administration (again with a temporary downturn during the COVID pandemic) to $842 billion in 2021 and $951 billion in 2022 before dropping last year to $773 billion. The manufacturing deficit specifically rose from $0.65 trillion in 2016 to $1.1 trillion in 2022, then $1.05 trillion last year.
3. And a worst-case scenario: In sum, the proposal is to restore late Depression-era trade policy, and shift some taxation away from financialized sectors and upper-income services industries to households and goods-producing or goods-using sectors, in the probably unrealistic hope this would push investment and hiring into manufacturing. To speculate about likely economy-wide results:
Depression-like trade policies need not bring Depression-type outcomes. Modern economic historians tend to view 1930s tariffs as making the Depression somewhat deeper and longer, but root its main causes in other ill-starred ideas: central bank passivity in crisis, refusal to rescue failing banks and lack of deposit insurance, unambitious fiscal policy in the early years, international currency conflicts amplified by the gold standard. With this as a guide, a UK-post-Brexit-like result, with somewhat slower growth and somewhat higher inflation, may be the most likely “macro” outcome of a big tariff increase. Those interested in really dire forecasts, though, can turn to a very well-placed observer on the spot in 1936. Here’s then-President Roosevelt at the “Inter-American Conference on the Maintenance of Peace” in Buenos Aires, reminding us that even if policy choices are not this November’s core questions, they can still matter a lot:
“[T]he welfare and prosperity of each of our Nations depend in large part on the benefits derived from commerce among ourselves and with other Nations, for our present civilization rests on the basis of an international exchange of commodities. Every Nation of the world has felt the evil effects of recent efforts to erect trade barriers of every known kind. Every individual citizen has suffered from them. It is no accident that the Nations which have carried this process farthest are those which proclaim most loudly that they require war as an instrument of their policy. It is no accident that attempts to be self-sufficient have led to failing standards for their people and to ever-increasing loss of the democratic ideals in a mad race to pile armament on armament. It is no accident that, because of these suicidal policies and the suffering attending them, many of their people have come to believe with despair that the price of war seems less than the price of peace.
“This state of affairs we must refuse to accept with every instinct of defense, with every exhortation of enthusiastic hope, with every use of mind and skill. I cannot refrain here from reiterating my gratification that in this, as in so many other achievements, the American Republics have given a salutary example to the world. The resolution adopted at the Inter-American Conference at Montevideo endorsing the principles of liberal trade policies has shone forth like a beacon in the storm of economic madness which has been sweeping over the entire world during these later years. Truly, if the principles there embodied find still wider application in your deliberations, it will be a notable contribution to the cause of peace.”
FURTHER READING
The U.S. International Trade Commission’s record of U.S. imports, revenue, tariff rates (more precisely, “ad valorem equivalent” rates), etc. from 1890-2022.
Trade balance: Both Amb. Lighthizer and Dr. Navarro emphasize trade balance, especially in manufacturing, as a rationale for higher tariffs. Here are the relevant export/import/balance figures for 2016, 2021, and 2023, in total and for manufacturing (NAICS basis) specifically:
… and for the big picture, the Census has U.S. exports, imports, and balances from 1960 to 2023 on one convenient page.
Manufacturing and GDP: BEA’s ‘GDP by Industry’ data series (to be updated a week from Thursday with an initial estimate for full-year 2023), has U.S. output and GDP shares for manufacturing, information, real estate and finance, mining and forestry, agriculture, etc. Try the second table in the Interactive Data Tables for GDP shares.
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.
I’D BEEN TRYING TO UNDERSTAND the rationale for months: Why is MAGA America so opposed to U.S. support for the war in Ukraine?
At first, I thought I’d find the answer in foreign policy magazines and journals. I started reading about the history of American isolationism and parsing the speeches of politicians like Senators J.D. Vance and Lindsey Graham. I even thought I might write a journal article myself, analyzing and refuting these wrongheaded but reasonable-sounding arguments.
But all along something told me that I was barking up the wrong tree. The GOP base voters I encountered seemed so bitterly angry and so dug in—there had to be something beyond rational arguments about fiscal conservatism and comparative assessments of Chinese and Russian threats.
Then, a few weeks ago, I stumbled on a video that took my breath away. A reporter had gone to a Trump rally and wandered among the crowd asking people how they’d feel if Russia won the war, destroying Kyiv and wiping Ukraine off the map. One woman made clear she had no objection to the invasion or the killing of Ukrainians: “That’s fine,” she asserted truculently. “That’s fine with me.” An older man whose hat read “Vietnam Veteran” agreed: “I don’t think Putin’s the problem. I think Zelensky’s the problem. . . . Putin is trying to save his country from the likes of idiots like Zelensky and the elitists.” Another man in line outside the rally drove the point home: “This [Biden] administration’s trying to start a war with Russia. Russia’s not our enemy.”
What else was hiding under the rock, I wondered, and at first I was afraid to look. But then I spent a few days on Truth Social and other far-right sites. I did no systematic research—just an informal canvas of the MAGA mind. But I’ve come away far more scared than I was before about what might lie ahead for U.S. foreign policy.
During the inflationary surge of 2021-2022, PPI demonstrated that the inflation rate for digital goods and services was lower than the inflation rate for “physical-economy” goods and services such as food, energy, and housing. In the digital sector, price increases were moderated by faster productivity growth and higher investment rates. In particular, key digital sectors such as broadband and ecommerce did not experience the sort of capacity squeeze which drove up prices in other parts of the economy.
The Federal Trade Commission, however, takes the direct opposite position. In its antitrust complaint against Amazon, the FTC argues that Amazon is behaving in a way that drives up online prices — not just for Amazon, but for other online sellers. The FTC writes:
Amazon’s conduct causes online shoppers to face artificially higher prices even when shopping somewhere other than Amazon.
Amazon deploys a series of anticompetitive practices that suppress price competition and push prices higher across much of the internet by creating an artificial price floor and penalizing sellers that offer lower prices off Amazon.
In order to justify its claim of Amazon monopoly power, the FTC paints an odd picture of high and rising online prices relative to brick-and-mortar prices. In particular, the FTC’s complaint would imply that online inflation is higher than brick-and-mortar inflation.
What does the data show? To answer this question, we analyze private sector and government data from Adobe, the Bureau of Labor Statistics, and from the Census Bureau. Each of these have shortcomings, but together they tell a consistent story of online prices rising slower than offline prices.
We start with the Adobe Digital Price Index (ADPI), which tracks online prices for 18 different categories of goods, including books, groceries, electronics, pet products, and apparel. This index goes back to 2014, but we focused on the period since 2019, when the FTC’s argument would suggest that any potential Amazon effect on prices would be larger.
We matched inflation in 16 of the 18 ADPI categories with comparable categories in the BLS Consumer Price Index, which is mostly weighted towards brick-and-mortar sales. We found that the median online price increase was 3.1% for the four years ending December 2023. Over the same period, the median price increase across the comparable 16 BLS categories, including mainly brick-and-mortar sales, was 10.4%.
For example, in the category of appliances, the ADPI showed a price increase of 1.6% from December 2019 to December 2023, while the CPI showed a price increase of 9.3%. In the category of personal care products, the ADPI showed a price increase of 7.2%, compared to a 10.8% price increase for the CPI. And in the category of sporting goods, the ADPI showed a price increase of 4.4%, compared to a 9.9% increase for the CPI.
True, there are some categories where online prices have risen faster than the comparable BLS CPI index. For example, online apparel prices rose by 8.7% according to the ADPI, compared to 5.6% in the CPI. But overall, online prices rose slower in 10 of the 16 categories.
We now look at a different data set from the BLS, the producer price indexes for retail trade. These price indexes measure trade margins—that is, the difference between the acquisition price of a good and the sale price to consumers. If margins are expanding faster in a particular retail industry, that is a sign that prices to consumers are increasing faster than the acquisition price of good.
Through December 2022, the BLS published a margin price index for “electronic and mail order shopping.” That margin only rose by 3.2% from December 2019 to December 2022. Over the same period, the margin price index for general merchandise stories — including department stores and big box retailers such as Walmart and Target — rose by 24.2%. This sort of disparity is not consistent with the FTC’s story of online prices increasing faster.
Finally, we look at the Census Bureau’s data on e-commerce spending as a share of total retail sales. Before the pandemic, the ecommerce share was rising at just under 1% per year. It obviously jumped during the pandemic, but then levelled off to 15.4% in 2023 (figure).
Based on pre-pandemic trends, we would have projected the ecommerce share to be 14.2% in 2023 and 15.0% in 2024 (the dashed line in the figure). To put it a slightly different way, the Census Bureau data suggests that the pandemic ended up moving the shift to ecommerce by only 1 year, or 1 percentage point.
This behavior is inconsistent with the FTC’s argument that online price inflation is higher than offline inflation. Higher online inflation, as the FTC claims, would have driven up the ecommerce share higher rather than lower, because consumers would have been spending more for the benefits of buying online. (To be a bit technical here, this conclusion also requires a low cross-price elasticity of demand between online and offline markets, which the FTC has already implicitly assumed in its complaint).
Indeed, the stagnation of the ecommerce share since the pandemic is more consistent with online inflation being slower than brick-and-mortar inflation, thus holding down ecommerce spending.
Let’s be clear: The data analyzed here are not perfect. Our analysis does not rule out the possibility that online prices basically track offline prices. Consumers are not dumb, and there’s nothing holding them back from buying at their local Target or Walmart rather than Amazon if particular online prices veer higher, or shift back to online purchases if offline prices go up. But the weight of the evidence suggests that online inflation has been lower than offline inflation across this period.
Japan should keep a close eye on the European Union’s recent rollout of the Digital Markets Act (DMA). As the results of the EU regulatory experiment unfold over the next year, taking account of the lessons — and downsides — of the DMA could greatly improve Japan’s digital regulatory efforts.
First, the economic backdrop: The latest report from the Tokyo-based Japan Productivity Center, released March 4, confirms that Japan remains mired in a deep productivity slump. The country’s productivity woes extend even to the highly digitized information sector, where productivity since 2019 has fallen at a 1.7% annual rate. By contrast, productivity in the U.S. information sector has risen at an annual rate of 5.2% since 2019, while productivity in the German and French information sectors have risen at an annual rate of only 0.8% and 0.6%, respectively, since 2019.
For Japan and Prime Minister Fumio Kishida, one key policy question is how to get the country’s information sector growing again. The information sector includes telecom companies, software companies, and internet companies, as well as artificial intelligence efforts.
Japan is currently considering enacting a “Digital Antitrust Law,” inspired by the EU DMA. Like the DMA, the proposed Japanese law would create a new set of regulatory obligations for the largest tech companies, addressing potential competitive issues.
But will the proposed digital antitrust law enable faster tech growth in Japan? The first thing to note is that the United States has maintained extremely strong gains in the information sector without passing a DMA-like law. Instead, competition issues are being handled within the framework of existing antitrust law.
By contrast, the EU’s push to impose a new regulatory framework on the information sector, starting with the 2016 General Data Protection Regulation (GDPR) and continuing through to the DMA, seems to have done little to accelerate European tech growth the largest EU economies, like Germany and France, continue to show sub-1% productivity growth in the information sector. Ironically, one bright spot is the EU App Economy, supported by Google’s and Apple’s investments, which showed 53% growth in App Economy jobs since 2019.
Indeed, the DMA’s initial implementation seems to have a bevy of unpleasant side effects. For one, consumers can no longer get to Google Maps directly from Google Search, adding extra clicks and more typing, as European journalists have reported. This is extra problematic for less experienced users, who have lost their “easy-to-use” connection between searching for a store, say, and getting directions to the store.
For another, the DMA mandated changes in search that appear to favor large intermediaries who fall just below the size that would make them “gatekeepers.” A Reuters article observed that:
Lobbying groups representing airlines, hotels, and restaurants on Wednesday warned that changes proposed by Alphabet’s Google to comply with EU landmark rules may drive users to large online search services at their expense.
That is, the new regulations means that Google can’t stop large intermediaries from outbidding direct suppliers for prime online slots. So if a DMA-like law was enacted in Japan, that could hurt small and medium businesses.
Another issue is safety and security, which is a big concern in Japan. The new DMA regulations may require Google and Apple to share consumer information with other companies. While this may “level the playing field,” it may also undermine security for consumers.
The DMA’s impact on app stores also has important implications for Japan if it follows the EU’s regulatory lead. Our recent blog “Europe’s App Store Regulation Experiment” suggests that:
…..alternative app stores pose the danger of a race to the bottom, both for app stores and developers. Security is expensive. Each update or version has to be extensively tested, and the data protections maintained in operation. Developers have an incentive to spend less on security and more on flashy new features. Alternative app stores may have an incentive to be more hospitable to developers who invest less in security.
Japanese regulators have the opportunity to observe the EU’s giant experiment with the DMA. That gives Japanese regulators a chance to see what works and what doesn’t in tech regulation.
