As the news buzzes with discussions of President Trump’s tariffs, economists and policymakers continue weighing the potential impacts of these policies. In a new opinion article published in the New York Times, Professor Justin Wolfers argues that “this round of tariffs may be 50 times as painful as the ones Donald Trump instituted in his first term.”
While rising prices are the most immediate concern, Wolfers shines light on hidden costs that we might not think about at first glance. Consumers will be forced to make decisions they otherwise wouldn’t, leading to significant trade-offs that may not be immediately visible. These “painful” substitutions, as Wolfers calls them, will continue to shape our buying decisions and ripple through every aspect of daily life.
Instead of buying a more expensive product or paying the higher prices for goods, consumers might find themselves having to adjust their lifestyles and change their buying decisions. “These are across-the-board tariffs, so they will distort virtually every purchase you make. In each case you’ll have to stop your baked-in calculations, recalibrate and find a way to make do — perhaps substituting frozen vegetables for fresh vegetables, a less effective medication for a higher-priced import, or corn syrup for sugar. And in each case, you’re worse off,” Wolfers writes.
Wolfers points to the spike in washing machine prices following Trump’s tariffs in 2018 as one example of how tariffs affected consumer decision making and their unseen costs.For many families, even if their washing machine wasn’t working properly, the higher prices caused by tariffs made replacing it a tough choice. Many chose not to, opting instead to save the cash. However, as Wolfers points out, the real cost extended far beyond the price tag. While using a faulty washer, “[t]he time you spend to rearrange the stuff in your washer is a cost. The time you spend wringing out sopping wet T-shirts is a cost. Tariffs are costly not just because they raise prices but because they force you to make different decisions that will extract a different kind of cost from you over time,” he writes.
These new tariffs imposed by the Trump administration represent a shift in U.S. trade policy. As Wolfers notes, before 2016, the average tariff rate was around 1.5 percent. Trump’s latest round of tariffs has pushed this rate to about 15 times the 2016 level, and 225 times more painful.
Wolfers warns that, compared to the ones Trump imposed during his first term, the impact of tariffs this time around could be much larger. “[T]he reality of his first term is that there was a lot more tariff talk than action. They were barely more than a bump in the road. This time, they’re a mountain. And so the impact will be more like a crash than last time’s comfortable jolt.”
>> Read the full opinion article in the New York Times here
