In this episode, Alex and Tyler tackle the resurgence of tariffs in American policy, a development neither saw coming after decades of trade liberalization. They unpack the economics of who really pays when tariffs jump from 2.4% to 18% in a matter of weeks, exploring everything from tax incidence and exchange rate adjustments to the question of why we treat tariffs so differently from currency depreciation. Along the way, they debate Tyler's new "soft" arguments against tariffs (including contagion effects and rising correlations), examine whether Lerner symmetry still holds in a world of T-bills and exorbitant privilege, and consider the Trumpian case for investment over trade. From soybeans and pharmaceuticals to AI data centers in outer space, they trace how tariff policy affects everything from American landowners to Canadian defense spending.
Tyler arrives ready to confuse and Alex ready to clarify, but by the end they agree on one thing: we've muddled ourselves into something quite bad.
Link to transcript: https://www.mercatus.org/marginal-revolution-podcast/return-tariffs
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Timestamps
- The return of tariffs - The threat of contagion - Who really pays for tariffs - Exchange rates muddle the picture - Are tariffs making bad things more correlated? - Does Lerner Symmetry hold? - Differences between dollar depreciation and tariffs - Retaliation - Tariffs as a Georgist tax on land rents - How the US economy will adjust - The bottom line
