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Excellent piece by Krugman on Tariffs [1]
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Date: 2025-04-14
Once again, Krugman breaks it down Barney Style. He makes three key points about bringing manufacturing back:
1. Trump’s tariffs will hurt, not help, manufacturing 2. If you want to promote manufacturing, you should use industrial policy, not tariffs 3. Good jobs don’t have to be in manufacturing, and manufacturing jobs aren’t necessarily good
The Industrial Policy piece is spot on.
If you want to promote manufacturing, promote manufacturing My guess is that few people engaged in current debates over trade policy and manufacturing know that many of the same issues were addressed in the 1960s and 1970s by economists trying to devise economic strategies for what we now call emerging markets. But if they were, they’d know about a clear lesson that emerged from that discussion (see, for example, Max Corden’s Trade Policy and Economic Welfare.) Namely, if you want to promote an economic activity you should promote it as directly as possible. So if you think manufacturing is important, you should pursue industrial policies, especially subsidies, that specifically boost manufacturing. Tariffs are at best an indirect way to help, with harmful side effects including higher consumer prices and damage to industries that use imported inputs. Tariffs may look less expensive than industrial policy, but that’s only because many of their costs are off budget. Or to put it another way, if you think promoting manufacturing with subsidies is too expensive, you should definitely be against tariffs, which are actually even more expensive. And you know who did try to boost manufacturing with targeted subsides, and had a lot of success? The Biden administration:
[...] Look, I know that many Democrats are pissed at Biden for not stepping aside sooner. But that shouldn’t mean disavowing the good his administration’s policies did. When Bernie Sanders declares that Democrats abandoned the working class, he’s trashing his allies and playing into Trump’s hands: The Biden administration was the most pro-worker government we’ve had since the New Deal, and while Obama was more cautious, he rescued the auto industry, greatly expanded health coverage, and significantly raised taxes on the rich. Why do you think Wall Street hated him? Should tariffs ever be part of an industrial strategy? The only justifications are political. As it happens, U.S. law makes it much easier to impose tariffs than to provide subsidies: Tariffs can be raised through executive action, while subsidies require legislation. This means that there are some circumstances, such as responding to sudden import surges, when tariffs may be the only available recourse.
There are some other gems.
“McDonald’s workers in Denmark are paid more than Honda workers in Alabama.” That claim has been showing up in my inbox, so I checked it out. And it’s true. McDonald’s workers in Denmark are paid more than $20 an hour, in addition to receiving substantial benefits. Indeed.com says that “production associates” at Honda’s Alabama plants are paid an average of $14 an hour. What this comparison tells us is that institutions that empower workers are more important in determining workers’ pay than what sector they work in. Two-thirds of Danish workers are represented by unions, while auto workers in Alabama aren’t unionized. Empowering service sector workers can make their jobs good; disempowering manufacturing workers can make their jobs bad.
It's an excellent read.
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[1] Url:
https://www.dailykos.com/stories/2025/4/14/2316440/-Excellent-piece-by-Krugman-on-Tariffs?pm_campaign=front_page&pm_source=trending&pm_medium=web
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