Are Trump's Tariffs Trying to Solve a Problem That Doesn't Exist?

New York Times

12-05-2025

Jason Furman, an economist who was an adviser to President Barack Obama, believes that trade is an unmitigated good — a rarely heard opinion on the right or the left these days. In this episode of 'The Opinions,' David Leonhardt, the director of the Times editorial board, pushes Furman on the downsides of trade and asks him to explain its benefits — for both Americans and the rest of the world.
Below is a transcript of an episode of 'The Opinions.' We recommend listening to it in its original form for the full effect. You can do so using the player above or on the NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.
The transcript has been lightly edited for length and clarity.
David Leonhardt: I am David Leonhardt, the director of the New York Times editorial board. I've been reporting on trade in recent months to figure out how my colleagues and I should editorialize about President Trump's tariffs.
It's quite clear to us that Trump's tariffs are a bad idea. It's less clear what an ideal trade policy would look like. For a long time, economists have argued that trade is good and that the country should want more and more of it. The evidence isn't so clear. As trade has increased in recent decades, economic inequality has soared, and a lot of once-thriving communities have really struggled. Trump and Vice President JD Vance claim that their tariffs will turn those communities around.
Audio clip of JD Vance: 'For 40 years, we've had an economy that rewards people who ship American jobs overseas and raises taxes on American workers, and we're flipping that on its head. We're going to cut taxes for American workers and for American companies that build here. We're going to make it harder to ship American jobs overseas.'
My guest today, Jason Furman, thinks that this is a terrible idea. He is an economist who's a contributing writer for Times Opinion. And he spends a lot of time thinking about how to explain complicated economic ideas to noneconomists. He's long been advising Democratic politicians, including Barack Obama.
Jason is no Pollyanna, but he's pretty positive about trade — certainly more so than many American voters are. So I wanted him to come on 'The Opinions' today to make a case that trade is good and explain how it really has benefited our country. And when I invited him, I was honest with him. I said, 'I'm going to ask skeptical questions.' And I pushed him to give a more persuasive case in favor of trade than many of his fellow economists have managed to do.
Jason, thank you for joining us.
Jason Furman: Thanks for having me.
Leonhardt: So let's start by helping people understand how we got here. How would you define the modern era of trade? Roughly when did it begin, and what has it actually changed?
Furman: So let's go back a while. Trade kept increasing up through World War I as transportation costs fell, then it fell dramatically, fell even more when there was a set of tariffs called Smoot-Hawley in the United States in 1930, and then from basically the end of World War II through 2017, tariffs kept going down and down and down.
They went down through global trade agreements. They went down through individual free trade agreements. The cost of trade went down. And as all of that happened, trade went up and up and up. It reached a peak around 2008, and it's basically plateaued since then.
Leonhardt: I told you before that I think a lot of economists have done a bad job making the case for trade. I think their arguments are often technocratic, and they talk about trade deficits and economic models. And so I'd like you to be more tangible. Can you help people understand why you think this era of high trade of recent decades has improved the lives of Americans?
Furman: It is just unimaginable that we could live anything resembling the lives we live without massive, massive amounts of trade. For example, you wake up and you pick up your toothbrush. It was made in Vietnam. You put some toothpaste on it. The ingredients came from Germany. You get a shirt. The cotton was grown in the United States, spun in Mexico, dyed in Indonesia and sewn in Bangladesh. You pick up your phone. It was designed in the United States. The chips came from Taiwan, the display from Korea, the gyroscope from Switzerland. You get your morning coffee that came from Ethiopia and eat it with a banana that came from Guatemala, and I'll skip the rest of the day, just culminating when you go to sleep in your Ikea bed with a German memory-foam mattress and sheets made in Egypt.
Everything I just described is much more important to low- and moderate-income households than high-income households. High-income households are spending a bunch of money on travel, restaurants, getting massages and the like. It's lower-income households that are disproportionately dependent on everything that I was talking about.
The final thing I'd say is, imagine an alternative world where all of those different things, from your toothbrush to your memory foam mattress, were made in the United States. Those would be much worse jobs than the jobs we have. They would pay much worse, and those products would just be much, much more expensive for all of us. So trade frees us up to have better jobs. It is part of our living standard, and it is especially important to the most hard-pressed Americans.
Leonhardt: When I think about that, theoretically or logically, it makes some sense to me, but this is the big stumbling block I keep running into: By most measures, life for lower-income and middle-income people in this country has improved much more slowly in recent decades than it did in the past or certainly than it has for upper-income people.
When I look at the overall trends over the last few decades, things haven't really been that good for lower-income and working-class Americans. That doesn't mean trade is the reason, but I'm curious: Do you reject the story I just told, and do you actually think life is much better for most Americans than the one I just suggested? Or do you fundamentally accept that story but think trade is the exception that has really helped ordinary Americans and without high trade, things would be even worse for lower-income and working-class Americans? Or maybe there's a third story.
Furman: First of all, I think we're always very quick to blame trade for things. If you look at mass layoffs, for example — back when we used to collect the data; we don't anymore — about 2 or 3 percent of them were due to trade and outsourcing. Every year there's 20 million American workers that lose their jobs, and just a tiny fraction of them are due to trade.
So I do think we create this greater importance, and I think some of that is just a deep seated philosophical nativism we have, that we want to blame things on other countries and foreigners rather than taking responsibility for our own choices.
In thinking about the broad trends, I think trade is a secondary or tertiary thing. It's more of a positive than a negative. In terms of evaluating those trends, if I roughly group the United States into blocks of a quarter-century, the best quarter-century was 1950 to 1975 — very rapid income growth, not much inequality. The second best was 2000 to 2025, where we had the second-most-rapid income growth and ambiguous inequality. And the worst, by far, was 1975 to 2000, which happens to be the period before the rise of China and most of the period before NAFTA as well. That's when you saw a real explosion of inequality and a real stagnation of wages at the bottom.
Leonhardt: So maybe to try to wrap up this part of the conversation: I think I hear you saying, 'Look, whatever big economic problems we have in this country, for people of lower incomes and middle incomes, too, trade isn't causing them. In fact, trade, on the net for most Americans, really has been positive, and we shouldn't blame trade for other problems that we have.'
Furman: Yes, I think things are getting better economically. Incomes rising, different measures of inequality — that's unclear. They're not getting better as fast as they were in the past, but we are making progress. And yes, trade is helping with that progress, not hurting it.
Leonhardt: OK, so we've been talking about the benefits. Let's talk a little bit about the costs. Academic research has shown that trade with China alone appears to have cost more than two million jobs in the 2000s. When economists talk about that, they say, 'Look, trade is always going to have winners and losers.' How do you think about the real costs of trade? And how could we have done a better job in helping people who have borne the brunt of the costs of trade?
Furman: So that two million number came from a very influential paper. It was terrific, but it was the beginning of a long literature. They only studied the gross job changes, and let's put them in perspective: Over that period, 2 million out of 250 million people were laid off or discharged from their jobs. So you're talking about less than 1 percent of the job loss was due to trade. They didn't study the ways in which expanded trade with China increased our exports, and they certainly didn't incorporate the price effects and the consumer side. So take all of that together — I think it's completely plausible that the net effect of trade on manufacturing jobs was roughly neutral over the last 25 years.
Leonhardt: Let me stop you there. So, neutral because even if it cost two million jobs, it added manufacturing jobs. How?
Furman: Two ways, one is it's very hard to have a successful manufacturing industry if you don't have good machinery to make stuff with, you don't have raw materials. And all of those increased as a result of trade. And second, exports. I think it is perfectly plausible that we lost manufacturing jobs. I think it's also perfectly plausible that it was net neutral. And just a gut check on the whole thing: The manufacturing job share has been declining, basically continuously, since the 1950s, and you don't notice any break at all around NAFTA or around China's entry to the W.T.O. I mean, manufacturing job loss is a very old story, and if anything, it's stabilized a little bit in recent years.
Leonhardt: We've been talking about the United States. Let me ask a little bit about the rest of the world. It seems to me that for much of the rest of the world, trade has been enormously positive in recent decades, that we've basically seemed to have the most rapid decline in poverty and recorded history since 1990.
A huge portion of that is people in places like China and India and Latin America being able to have jobs that come from trade. They now work in factories, and they export things to the United States and Europe and other countries. And that has played a really important role in the decline of global poverty. Even for people who are more alarmed about the effects of trade within the United States, it's important to recognize the huge benefits it has had globally. Is that a fair story, do you think?
Furman: I think that's an incredibly fair story, and when things turn out differently than you expect, you should update. In 1999 there was a real reaction against globalization. It was the 'Battle in Seattle' at the W.T.O. ministerial. Partly, that was people concerned about what it would do to the United States, but a lot of it was this argument that trade is exploitation, that it's going to hurt poor countries, that it's going to enrich global corporations at the expense of the global poor.
And that was just completely wrong — completely, completely wrong. When we write the economic history of the world, the quarter-century from 2000 to 2025 might be the best period in the history of the global economy. So you really want to update your views in that respect.
Leonhardt: I like the idea that we should update our views in the face of new evidence. And so here's one that I think is less convenient for centrists, which is that a lot of advocates of trade either suggested or promised that it would spread freedom and democracy in other countries. I mean, part of the bipartisan consensus that we heard from Bill Clinton, for whom you worked, and both George Bushes was a world that trades more will be a freer, more democratic world.
That prediction just seems to have been wrong, and it seems, to me, important that centrists update their views and acknowledge that whatever are the economic benefits of trade, it really doesn't seem to have had the political benefits that many of its advocates predicted. Do you think I'm being unfair there?
Furman: I think you're right there. Let's distinguish between two things. One is: Does trade promote international peace? There's an enormous amount of research in international relations, and it has pretty consistently found that when countries trade more, they're less likely to go to war. It's not foolproof, but it does help, and I think war with China is less likely today because of all the trade we have with them.
Then your question was about democratization and the like: Absolutely, that was the theory with China. You were encouraging the reformers, plus you were putting cellphones and the internet into hands of people in China, which would expose them to freedom and ideas from around the world. It hasn't worked out, and I think it was worth a try and it was worth a shot, and I'd do it again for only that reason. But it is the case that the relationship between trade and democratization is more ambiguous.
Leonhardt: Let me ask you one more backward-looking question before we look to the future. One frustration that I have sometimes is that I think that there are some trade advocates who say, 'Well, maybe we should have done some things differently back in the past but now we have the world that we have and we can't put the genie back in the bottle,' to use the cliché, and that's true. But I do wish that from advocates of trade I sometimes heard some more humility and reflection.
I think the ways in which it didn't increase democracy around the world and the devastation that it caused in some communities in the United States appear to have contributed to frustration and anger and political polarization. Do you think there are things we could have done differently in the 1990s and early 2000s to have reduced some of the downsides from trade and increased some of the upsides?
Furman: I agree with you that if your view is, it is okay to trade as long as you do all these other things, and then you don't do the other things, you should be against that trade liberalization. My view is that if you do the trade part without doing the other parts, you're a lot better off. You're even better off if you do the other parts. And just to put, again, some numbers on that: if you take Autor, Dorn and Hanson's work, they found that using one of the leading estimates of the price declines due to what's happened with China, 6 percent of the United States population lived in areas that got hurt from that trade and 94 percent lived in areas that benefited from that trade.
In some sense, if you look at the history of the global economy or the U.S. economy over the last centuries, it's because we're constantly confronted with new things that benefit 95 percent of people and harm 5 percent of people. That could be a new invention, a new way of organizing work, a new system of education, a new way of reducing discrimination against one group or trade. And if you turn down every opportunity to make 95 percent better and 5 percent worse or even, by the way, every opportunity to make two-thirds better and one-third worse, you're going to end up collectively just much, much poorer.
In terms of what I would do: I don't think I'd do anything specific related to trade. As I said, most job loss is not related to trade. So doing more things to prepare people educationally for jobs, to better connect them to jobs through things like apprenticeship programs, to help them find jobs and retrain — there's evidence that some of that really does work — to wage insurance for older workers. So if you lose your job and only find a new one at lower pay, you get some of that compensated. I would do all of that, but I wouldn't have any of that linked to the reason that you lost your job. You don't really care if you lost your job due to trade, technology or just idiocy on the part of your boss.
Leonhardt: Trump does not share your analysis of the benefits of trade in recent decades, and so he has pursued a very different policy from what you would advise. Now that we are here, what do you expect over the next year or so? And I mean that in two different ways: How much do you think Trump will reverse himself and withdraw his tariffs? And either way, how much effect do you think his tariffs are going to have on the U.S. economy?
Furman: In the short run, the tariffs will mean higher inflation and higher unemployment. The exact magnitudes of both of those is quite uncertain. I'm betting a bit more on inflation than unemployment. But we'll see. Over the longer run — we were talking about the long sweep of globalization — it seems almost certain that we're going to end this term with much higher tariffs than the United States has had at any other point since the 1940s.
So what will that mean? It will mean the U.S. import share is lower, for the obvious reason: Tariffs, you buy less imports. It also will mean that the U.S. export share is lower because resources are devoted and shifted from making stuff you used to export to stuff that you used to import, because the exchange rate will change and because of the retaliation from other countries. So we'll be a bit less globalized coming out of all of this. And then the big question in all of that is: Does this outlast Trump's term and become a new normal, or is it just a three-year aberration?
Leonhardt: OK, let's end here by asking you: What should be the Democratic Party's position on tariffs? You played a central role in helping craft Democratic agendas in the past, including for Obama. So let's imagine — we'll call it Project 2029 — you're helping devise the agenda for the next Democratic president and she or he says to you, 'What should be my trade policy?' I already know you're going to say, 'Promise to repeal the Trump tariffs on Day 1.' What else is on the agenda?
Furman: I would really distinguish between China and the rest of the world. For the rest of the world, the greater the integration, the better. I think that's true economically. I think that's true politically. And if we just went back to where we were on Jan. 20, 2021, that was pretty good. That would be fine with me. If we could do better than that with trade agreements with different countries around the world, that would be even better.
With China, I actually think the Biden administration got the rhetoric right, which was: small yard, high fence. We're going to focus on things related to our national security and that are central to our national security, and we're going to be really strict about them, like microchips and the like. And then things outside that umbrella, like toys and furniture, we're going to not be strict on those and make sure that we're continuing to get the benefits economically.
And then there's a whole gray zone in between, like electric vehicles, solar panels and the like, where I'm not totally sure how I would weigh the national security and economic side. Finally, I think Democrats or anyone should not continue to distract people by pretending that our problems were made overseas and instead should focus on all the ways in which we have made problems here in the United States and need to fix them.
That is what autocrats, dictators, and even democratic demagogues around the world do — they always blame their problems on foreigners, and that is always a distraction from solving those problems. That's a way of keeping the status quo. I hope Democrats don't fall into that trap.
Leonhardt: Jason, thank you for coming on. You've given me a lot to think about, and I suspect you've also done so for many of our listeners.
Furman: Thank you.