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Simon J. Evenett | 25 Nov 2024

Unfortunately, some trade policymaking operates in a silo sealed off from macroeconomic logic. While some analysts have recently highlighted the constraints that macro relationships play should the U.S. raise import tariffs, I go further. Until American firms, governments and households bring their spending closer into line with their incomes, U.S. tariff increases may depress imports but not to the degree witnessed during the Smoot Hawley era. The same constraints ensure a zero-sum dynamic between foreign retaliation and total goods shipments to the United States---the more U.S. exports get hit by in response, the more U.S. imports must fall.

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