Silver Linings Beigebook
Four Potential Upsides from the Liberation Day Tariffs
So the Liberation Day tariffs have not been received well and have some glaring downsides.
They’ve roiled markets as traders update their expectations of future cash flows downwards, particularly hurting those in or near retirement.
Businesses are flying blind on how to reroute their supply chains and where to invest in new manufacturing plants due to uncertainty about U.S. economic and trade policy.
If the tariffs successfully “re-shore manufacturing”1 to the US, they’ll probably make Americans poorer in the process.
In regards to international relations, this administration’s trade policy and general buffoonery are pushing allies and neutral countries away from the US.
As a REAL AMERICAN PATRIOT, I am despondent that China will get flying cars while the US pulls an economic and strategic Plaxico Burress. So there’s a lot to be down about.
Since 2016 I’ve felt like Candide; disenchanted and focused on making the best of my own affairs. Despite that, I still have a nugget of Pangloss’ teachings in me. Sometimes it’s hard, but I try to always look on the bright side of life. So I thought of some possible positives from Trump’s trade war.
It’s vital to remember these potential upsides will come at a horrible human cost as people will lose work and struggle to afford basic necessities if the tariffs are kept in place. But silver linings are found on sable clouds. Without further ado, here’s the list roughly in order of my confidence in them.
Trump’s Approval
Most American’s own stock and the market is crashing. Everyone buys things and tariffs raise prices. Some manufacturers have already laid people off in anticipation of reduced demand. He is hurting people’s pocketbooks. I’m willing to bet his approval rating drops. I’ll be watching the polling averages closely in the next couple of weeks (hell, I already check them daily).
His approval rating falling isn’t a good in and of itself. As he becomes less popular, he becomes more politically constrained. If he loses enough of the Republican base, Republican Congressmen and Senators will be more willing to push back against him. I suspect the dynamics will be similar to this article I wrote about DOGE vs Congressional Republicans. Of course there is risk that a politically weak Trump may be tempted to more authoritarian actions. But I think it more likely a weakened approval rating constrains his ability to act.
More Interesting Economics Papers
A year or two from now is going to be a good time to be an econ PhD or pursuing one. Particularly in international trade, development, and macroeconomics. I expect to see a lot of papers utilizing regression discontinuity design with a cut-off around April 2nd, 2025. Perhaps politicians will start listening to economists again; at least on the basics.
Public Opinion on Tariffs
Public opinion appears to be strongly opposed to tariffs and self-identified Democrats are overwhelmingly negative on them. This should attenuate anti-trade Democrats’ influence in intra-party debates about trade if Democrats win in 2026 and 2028. Perhaps Republicans reembrace free trade.
Restarting Interest in Multi-lateral Trade Deals
In the same way that WWII led to the United Nations (or WWI led to the League of Nations, but now I’m hurting my case), a global trade war could lead to renewed interest in multi-lateral trade deals once the asinine thing is done. The Doha round has been dead for years, but maybe a new round can get kicked off and actually go somewhere. This one is a long-shot, but a boy can dream.
There you go. Do you feel better? I’d be surprised if you did, but alas, cold comfort is all I have to offer.
I’m skeptical of the American industrial decline narrative. The US is second (behind China) in value added in manufacturing and is about the same size as Germany, Japan, India, and South Korea combined. Those are spots 3-6. Manufacturing employment has declined, as has manufacturing as a share of GDP, but output is steady. I’m not saying the situation couldn’t be better, only that the industrial decline narrative is overblown.
