Person:
Cunningham, Steven R.

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https://www.husson.edu/directory/steve_cunningham
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Dr. Phil Grant Distinguished Professorship in Management & Economics, School of Business and Management
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Cunningham
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Steven R.
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PhD Economics

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    THE ECONOMIC UNDERPINNINGS OF THE 2025 U.S. TRADE AND TARIFFS POLICY
    (2025-04-17) Cunningham, Steven R.
    This is a purely economic consideration of the apparent motivations, context, and underpinnings of the 2025 trade and tariff policy initiatives of the Trump Administration. The analysis neither supports nor challenges the validity of the initiatives, but rather attempts to make sense of them based on economic theory, data, and experience. Among the motivations offered by advocates are the needs to rebuild the U.S. manufacturing base, to rectify rising federal debt, and to achieve fairness among trading partners. I analyze each of these in turn. While there is some support for each of these, the issues also prove much more complex. There is supporting evidence that while U.S. manufacturing output has risen in recent decades, its growth is likely somewhat suppressed, and has been surpassed by some trading partners like China. But it is not clear why. U.S. manufacturing employment has declined relative to output, but this is more likely a result of automation in non-labor-intensive production, while off-shoring labor-intensive production. The tariffs could bring in significant revenue, helping to address debt and deficit issues, but at what cost, is it enough, and can it succeed long-term? If reciprocity in rates results in mutually lower tariffs, revenue generation will be limited. And is reciprocity really possible? Based on traditional theories of the effects of inelastic supply limiting the ability of producers to pass on tariffs to buyers, it is possible that, in the short term, the tariffs might not result in significant inflationary pressure. Longer term, this likely would not hold.