Howard Lutnick Makes No Sense

By Rich Lowry

Saturday, April 12, 2025

 

Howard Lutnick hasn’t been insulted in public yet by Elon Musk, but who can say he doesn’t deserve it?

 

The level of incoherence in the Commerce secretary’s case for Trump’s tariffs has been off the charts.

 

The latest word is that Scott Bessent is now taking the lead on trade, with Lutnick getting the role of “bad cop.”

 

This pairing makes sense if the thought process is, “We’ll have someone who knows what he’s talking about (but might have to try to explain policies he doesn’t wholly endorse), and balance him out with someone who doesn’t make any sense and then we’ve covered all our bases nicely.”

 

It’s not just that Lutnick was out there saying after liberation day, “I don’t think there’s any chance that President Trump’s going to back off his tariffs” (it’s not his fault he didn’t have any idea what Trump was going to do); his substantive case for the tariffs has been scattershot and unmoored from reality or any rational economic theory.

 

Your reaction to what a government official says in public might be, “Well, that’s reassuring,” or, “He can’t possibly believe that,” or, “Oh, no — that’s crazy.”

 

With Lutnick, the most appropriate reaction very often is, “Huh?”

 

On Meet the Press a couple of weeks ago, asked about price increases in response to the tariffs, Lutnick responded with an eye-wateringly nonsensical answer.

 

He said that balancing the budget would bring down interest rates, creating a boon for consumers: “You’re going to have mortgages come smashing down, the cost of your home will come smashing down.”

 

Lutnick didn’t say how the budget was going to get balanced, a mathematical impossibility given the president’s mix of priorities (the status quo on entitlements, lower taxes, and a bigger defense budget).

 

He suggested, though, that the trade war would play a role. “And you know who’s going to pay for that?” he further explained of the supposedly forthcoming deficit reduction. “Tariffs and outside countries who just leech off of us, lean on us, earn money off of us, they’ve got to start to pay.”

 

The obvious problem with this notion is that if tariffs work in convincing consumers to buy American, or in getting business to move supply chains to the U.S., then there are fewer imports to tax and the revenue-raising potential of tariffs is vitiated.

 

And the cost of tariffs is, at least in part, borne by U.S. consumers via price increases or simply doing without.

 

Lutnick made a nod to this, although in the context of advancing another preposterous assertion: “Yes, some products that are made foreign might be more expensive, but American products will get cheaper, and that’s the point.”

 

Really? One point of tariffs is to make what are relatively cheap foreign goods more expensive. That creates an incentive for consumers to buy American-made goods that are cheaper than the tariffed foreign good, although more expensive than the original non-tariffed foreign good. This is not a savings.

 

Another point is to get products that are being manufactured abroad (because it’s cheaper to do it there) back into the United States, where — given the more costly labor market and regulatory environment — they will be more expensive to make. This is not a savings, either.

 

Wherever you look, there are no savings.

 

Then, pressed on the price of groceries and when they will come “way down” as Trump promised, Lutnick averred that when the administration opens up the European market to U.S. agriculture and “our farmers can sell more and more overseas, you’re going to see the price of food in America come down.”

 

“It’s a volume thing,” he explained.

 

What? It’d be better if we could sell more agricultural products abroad, but that’s not going to reduce prices here in the U.S.

 

Besides, a trade war with China will reduce our access to the Chinese agricultural market, which hurt farmers the first time around — so Lutnick’s premise is flawed in that respect, too.

 

And according to the Agriculture Department, the U.S. imports 59 percent of the fresh fruit and 35 percent of the vegetables consumed by Americans.

 

And, finally, prying open the EU market will be easier said than done. For decades the treatment of agriculture has been a highly contentious topic in Europe. There is a reason that the EU ‘s zero-tariff offer covers only industrial goods.

 

Lutnick ended his discussion of the tariffs on the program with a flat-out assurance that there would be no recession — only more winning and higher economic growth. Of course, since the unveiling of the tariffs he was touting, the markets have tanked and analysts are predicting a greater likelihood of a recession.

 

On Face the Nation last weekend, he uncorked the argument that the trade deficit means that we are selling our country off to foreigners.

 

“In 1980,” Lutnick explained, “we were a net investor, meaning we owned more of the rest of the world than they owned of us.”

 

“And now — and now they own $18 trillion of us net,” he continued. “So that means the rest of the world — every year, when we run a $1.2 trillion deficit, the rest of the world buys $1.2 trillion of America.

 

“And it goes up and up and up, and eventually we’re not going to own America, and we are going to be owned by the rest of the world.”

 

Uh, the trade deficit doesn’t accumulate over time. If it did, America presumably would have been a wholly owned subsidiary of foreign countries already, since we’ve had a trade deficit since the 1970s.

 

To simplify, what happens is that we buy foreign goods with dollars, and then those dollars are invested in the United States. Usually, being a destination for investment is considered a good thing — and, indeed, in the very next breath, Lutnick touted investments in America.

 

“The United States of America is going to protect the people who invest in America,” he declared. “Trillions and trillions of dollars, you heard the president speak about it, are coming to invest in America. This is the economy of the world.”

 

It apparently didn’t occur to him that he was contradicting himself within the space of a couple of sentences. No wonder business leaders are flummoxed by the man.

 

There have been lots of complaints from within the administration about Lutnick’s abrasive personality. But sharp elbows aren’t unusual in high politics. The more consequential matter is that one of the foremost defenders of the policy shaking the American economy is confused and confusing.