IN EARLY MARCH 2018, President Trump signed new tariffs on steel and aluminum, surrounded by steelworkers in their hard hats.
Shortly after, the IGM Booth panel, which we talked about in the introduction, asked its roster of experts, all senior economics professors at top economics departments, Republicans and Democrats, whether “imposing new US tariffs on steel and aluminum will improve Americans’ welfare.” Sixty-five percent “strongly” disagreed with the statement.
All the others merely “disagreed.” No one agreed. No one was even unsure.1 When asked the additional question of whether “adding new or higher import duties on products such as air conditioners, cars, and cookies (to encourage producers to make them in the US) would be a good idea,” once again all of them agreed it would not be.2 Paul Krugman, the standard-bearer of liberal economics, likes trade but so does Greg Mankiw, a Harvard professor who headed the Council of Economic Advisors under President George W. Bush and a frequent critic of Krugman’s views.In contrast, in the United States the general public opinion about trade is mixed at best, and more often than not these days, negative. On the steel and aluminum tariffs, opinions were split. In a survey conducted during the fall of 2018 where we asked a representative sample of Americans exactly the same question as in the IGM Booth panel, only 37 percent of people either disagreed or strongly disagreed with Trump’s proposal to increase tariffs. Thirty-three percent agreed.3 But, more generally, the sentiment seems to be, both on the right and on the left, that the United States is too open to goods from other countries. Fifty-four percent of our respondents agreed that using higher tariffs to encourage producers to produce in the US would be a good idea. Only 25 percent disagreed.
Economists mostly talk about the gains of trade. The idea that free trade is beneficial is one of the oldest propositions in modern economics.
As the English stockbroker and member of Parliament David Ricardo explained two centuries ago, since trade allows each country to specialize in what it does best, total income ought to go up everywhere when there is trade, and as a result the gains to winners from trade must exceed the losses to losers. The last two hundred years have given us a chance to refine this theory, but it is a rare economist who fails to be compelled by its essential logic. Indeed, it is so rooted in our culture that we sometimes forget the case for free trade is by no means self-evident.For one, the general public is certainly not convinced. They are not blind to the gains of trade, but they also see the pains. They do see the advantages of being able to buy cheap abroad, but worry that, at least for the direct victims of cheaper imports, the gains are swamped by the costs. In our survey, 42 percent of respondents thought low-skilled workers are hurt when the United States trades with China (21 percent thought they are helped), and only 30 percent thought everyone is helped by the fall in prices (27 percent said they thought everyone was hurt).4
So is the public simply ignorant, or might it have intuited something the economists have missed?