Casey Mulligan on Trump versus Reagan on Trade
By David Henderson
The Trump Administration supports a House bill known as the “US Reciprocal Trade Act.” Before it was introduced, Peter Navarro was leading the White House effort in this area, which he called the Fair And Reciprocal Trade act. To the amusement of the rest of the White House staff, Mr. Navarro got an “F” in marketing; this was one of several occasions that the President was understandably upset with Mr. Navarro.
It seems that neither the House bill nor the FART act have any chance of becoming Federal law.
This is the humorous part of a serious analysis by University of Chicago economist Casey Mulligan, who just finished a one-year stint as chief economist with President Trump’s Council of Economic Advisers. I wrote earlier about his analysis of Trump’s deregulation.
The rest of his analysis compares Trump and Reagan on trade. Trump is not clearly worse. Casey puts it more strongly, writing:
It is clear that the Reagan administration restricted trade, and did so more than the Trump Administration has. The Reagan administration harmed consumers in doing so.
That’s actually not clear to me. Based on his qualitative analysis, I would put an 80+ percent probability on Casey’s claim being correct, but I would still want to see a quantitative estimate.
Casey does, though, have a response to Bob Barro’s claim that the Trump tariff increases pretty much vitiate the the effects of the tax cut. I’ve made that point orally though not in print, so I’ll take the hit. Casey writes:
While not making comparisons with the Reagan years, Robert Barro and many others have said that the Trump Administration has been reducing economic growth with its trade policies, and enough to fully offset the pro-growth effects of tax and regulatory reform. None of these commentators have provided any quantitative analysis to show how they conclude that the offset is full. A first pass at the numbers suggests the opposite, even if the tariff increases were permanent: the corporate tax cut alone generated static taxpayer savings of about $200 billion per year, while taxpayers would be paying about $30 billion per year more for tariffs (again, a static calculation). Yes, there is uncertainty as to whether the annual tariffs will ultimately prove to be $0 billion, $60 billion, or somewhere in between, but is there any doubt as to whether it would be less than $200 billion?