Specific tariffs might come and go, but the norms and relationships of international trade have shifted fundamentally. Minneapolis Fed economists Doireann Fitzgerald and Michael Waugh help look through the noise of global events to understand what has changed and what has endured. What are the new realities for American businesses and households? What are the long-term implications for economic growth and stability?
Summary
With host Jeff Horwich, Fitzgerald and Waugh explore why the U.S. economy has weathered this era of historic trade disruption without the upheaval some might have expected, including:
- The relatively limited rate of effective tariffs, given many product exceptions and trade deals.
- Limited retaliation by trade partners.
- Slow pass-through of prices to consumers.
- The tariff-resistance of the enormous, diverse U.S. economy.
- Companies braced for trade uncertainty after the prior China trade war and COVID-19.
- The simultaneous surge in AI, supporting imports and investment.
Other critical questions came up along the path, such as:
- Is the shift to higher trade barriers reversible?
- Tariffs are about goods; what should we know about trade in services?
- Are manufacturing jobs coming back?
- How freely is the rest of the world continuing to trade with each other?
- Is this experience changing how economists look at free trade?
