Key Takeaways:
– President Trump’s economic adviser, Kevin Hassett, disputes economists’ general belief that tariffs lead to increased prices.
– Prior to the president signing more tariffs, Hassett insists these could have positive effects on American citizens.
– While acknowledging possible price fluctuations, Hassett insists they would not be directly caused by the tariffs.
Trump’s Economic Adviser Disagrees with Other Economists
In a surprising turn of events, Kevin Hassett, economic adviser to President Donald Trump, contradicts the long-held opinions of most economists. He says that their belief that tariffs increase prices is incorrect. This statement comes ahead of Trump’s intention to append his signature to more tariff orders.
Hassett’s Stance on Tariffs
Speaking on MSNBC, Hassett rebutted this common argument raised by economists against tariffs. He argues that the disparity in the taxes being paid by US and foreign companies highlights an issue that could be addressed by tariffs. The $370 billion paid by US companies to foreign governments far exceeds the $57 billion foreign companies pay to the US. He suggests an adjustment of this imbalance could be beneficial for American citizens.
Will Tariffs Cause Price Increase?
When asked to guarantee against any upcoming price hikes due to these tariffs without referencing the previous administration, Hassett gave an evasive response. He mentioned that prices can both rise and decline, which is simply how the world works. After being interrupted and questioned again about forecasting these trends as an economist, he admitted to the possibility of a price increase. Nevertheless, he firmly stated that Trump’s tariffs would not be the cause.
Furthermore, Hassett claims that a multitude of factors could influence fluctuating prices and that this would puzzle economists examining the causes. He also expresses his confidence that strong proof of a tariff-induced price effect won’t exist.
Trump’s Views on Tariffs
Even though Hassett maintains this bold view, President Trump acknowledged that these tariffs may possibly cause a spike in prices for American consumers. He referred to it as ‘a little pain’ that people understood, suggesting that Americans are prepared to endure the short-term hit for a presumed long-term gain.
Understanding the Economic Modeling
In an attempt to justify his stance, Hassett further explains the economic modeling. In his perspective, the current economic model that supports sending $370 billion abroad instead of retaining it locally doesn’t make sense. He feels this stance only benefits foreign governments at the expense of American citizens.
Besides, he also questions the justification for continuing the trend of paying more to foreign governments due to an economic model that disregards real-world dynamics. For a layman, he tries to simplify the complex economic modeling and elasticity of supply versus demand as far as possible.
To make his argument even clearer, Hassett provides an example. He imagines a scenario where we estimate $370 billion being paid to foreign governments by US companies in the last year. Meanwhile, foreign firms only paid the US government $57 billion in taxes. This disparity fuels his belief that we can adjust and improve this situation. Consequently, such actions he insists would benefit American citizens.
Final Thoughts
While Hassett’s views seem at odds with the popular opinion of economists, it’s crucial to take into consideration that the world of economy and global trade isn’t always black and white. The real-world impact of his arguments, validated or rebutted, will be revealed over time amidst various other market influences. However, these differing viewpoints stimulate a necessary debate on the strategy and direction of economic policies.