00:00I'm curious as an economist. What do you think of tariffs being used as a negotiating tactic because people pundits?
00:08Republic some Republicans who are supporting Donald Trump. They're saying everything from he's putting America first
00:13He's showing our trading partners that America isn't going to be taken advantage of this is sending a message
00:19Change is tough, but buckle in in the long haul. This will be to our benefit. What do you say to those types of arguments?
00:26Again what are you trying to do? I mean you're using a negotiating tactic. What is your end goal?
00:32Right. I mean if your end goal again is what we're doing this to increase employment
00:39Okay, why not go for a policy?
00:43Which we know is a much more efficient way
00:47to increase employment like the investment tax credit and
00:51These are other things that can be done. Why go through all this?
00:55Right. I mean, it's only gonna annoy partners. Yes, there's there's this
01:00theoretical literature and economics about what the optimal tariff
01:04Thinking back and forth about people responding. But again, you look at practice, right?
01:10Look at the evidence, you know
01:12Is there really any compelling evidence that this actually works or does it generally backfire and hurt consumers?
01:20We Trump did this his first term
01:22We have evidence about what the effects are and they're not positive in terms of overall welfare for the economy
01:30Prices went up and it was very costly for any jobs that were created. There's also another risk
01:37Effectively what you're doing
01:39When you when you set up tax tariffs and you're protecting domestic
01:45firms
01:47They might raise their prices they may say look I'm an auto company I put in tariffs I don't have to compete as
01:55Intentionally as I used to with say Japanese automakers
02:00I think I'm gonna raise my prices and their positions are gonna go up. I might not necessarily help consumers
02:07Now in this case, this is now theory. This is what happened in the 1980s
02:12When we negotiated the voluntary expert
02:15Voluntary export restrictions with jet with the Japanese
02:21Government and this was before
02:24the Japanese
02:26Companies were here producing so much. That's exactly what happened
02:29The US automakers actually raised their places because their competitors were less affected because their prices were higher
02:36So these are the kinds of unanticipated effects that can happen
02:40But in any case we really have no evidence that any sort of strategic behavior is going to work in this area
02:47And it hasn't in the past
