Forum Unpacks Economic Impact of Tariffs
Paul College faculty came together on April 7 for an open forum to discuss the hot-button issue of tariffs.
Led by Economics Professor Michael Goldberg and Finance Lecturer Rick Kilbride, the forum was an opportunity for students and Paul community members to ask questions about the ongoing tariff increase implemented by President Donald Trump’s administration.
While Goldberg noted much uncertainty surrounding the tariff increases, market reaction and economic history are concerning. He said that raising U.S. tariff rates from about 2% to potentially 25% is higher than the Smoot-Hawley tariffs of 1930, which many economists blame for worsening the Great Depression.
"The markets are saying this is not a good policy," Goldberg said.
Goldberg stressed that tariffs primarily function as taxes on businesses rather than protecting American workers as claimed.
"75% of what we import is imported intermediate goods and investment goods—robots, machine tools, steel, aluminum. The stuff our businesses are using to produce what they produce," Goldberg explained. "So who's being taxed when we raise tariffs? It's businesses. We're just raising the cost of production in this country."
Citing the example of steel and aluminum tariffs, Goldberg said tariffs protect a small number of jobs in those industries while potentially costing many more jobs in the much larger downstream industries that use those materials.
Kilbride opened the forum by presenting real-time market data showing significant downturns across global markets, with the S&P 500 down approximately 12% from its mid-February high. He said that volatility measures had reached levels comparable to the “dot-com bust” and COVID-19 crisis.
Kilbride suggested the tariffs might be symptomatic of a more significant economic realignment, particularly in the U.S.-China relationship.
"I think we've got big stock market and economic problems that are signaling political and geopolitical problems," he said. "I think that this is a big cycle change."
He described the current economic order between the U.S. and China as "balanced but unstable," with Chinese goods flowing to America. At the same time, China finances American consumption through investments in U.S. treasury securities, real estate, and companies.
"It's unstable, particularly if you don't trust your counterparty," Kilbride noted, suggesting that tariffs could be triggering a breakdown in this arrangement with "enormous implications for the capital markets globally."
Multiple students asked about how to address unfair Chinese trade practices, and Goldberg suggested a multilateral approach rather than unilateral tariffs.
"If we really wanted to go after China, what would we do? We'd get together with our allies, work together, not raise tariffs, not threaten them with economic Armageddon, and focus everyone's attention on the unfair trade practices of China," he said.
Instead, he warned that the current approach is "encouraging the EU, Canada, Mexico, to all ally with China to fight against the U.S."
The discussion concluded with an emphasis on continued monitoring of the evolving situation and a call for patience.
Click here to see the forum's PowerPoint
Goldberg also discussed the recent tariffs in a WMUR Channel 9 news segment.
