Liberation Day Is Here

By Veronique de Rugy

Wednesday, April 02, 2025

 

Are you ready to be liberated from rising wages, massive foreign direct investments, a growing economy, and friends worldwide?

 

Doug Holtz Eakin has a limerick for you:

 

There once was a man from Mar-a-Lago

Who hated the idea of inbound cargo

So he declared himself sheriff

And jacked up tariffs

Slowing us to recessionary tempo.

 

I realize that many of you think I don’t get it and that the country was better off when manufacturing was a larger share of the economy and more people worked in manufacturing plants. Even if those salaries were lower, some of you believe that the change in the job landscape brought on by modernity — including globalization — inexcusably hurt some individuals, families, and communities.

 

My strong presumption is that such unfortunate outcomes are the product of government interventions that make it more difficult for workers to adjust to the economic changes that are inseparable from a market economy. These interventions often mute the incentive to work or raise barriers to people moving from where opportunities are declining to where opportunities are rising.

 

But whether or not I’m correct on this front, it’s undeniable that international trade isn’t remotely the only source of economic change that “destroys” particular jobs as it creates others. As we’ve grown richer, our demand for services has risen relative to our demand for goods. And our technology, of course, has also advanced. Each of these forces, not trade, is chiefly responsible for most of the losses in manufacturing employment.

 

Furthermore, while I think it is worthwhile to try to help those communities in the downward throes of economic change, it is a profound mistake to believe that the way to do it is to force a return to a world that a vast majority of Americans would dislike if this world were restored.

 

That said, here is a warning: Liberation Day and the president’s overall tariff approach are about creating more manufacturing in the U.S. at the expense of every other sector (which is more than four-fifths of the economy). But considering the reality on the ground and how much manufacturing today relies on trade to acquire low-cost inputs, expect Trump’s tariffs to also exert a significant negative impact on manufacturing.

 

Oh, and I have a question for those of you who claim that an easy and good way for Americans to avoid paying U.S. tariffs is to “buy American” and produce more things here at home: If your town managed to impose tariffs on groceries sold at your supermarket, would you think, “No problem! I can escape these higher prices simply by raising my own chickens, growing my own wheat, and manufacturing my own toilet tissue. I’ll have more employment and be richer!”?