Trade Policy & Tariffs

Trade policy balances the aggregate benefits of comparative advantage against the localized costs of industrial disruption.

The Incidence of Tariffs

A tariff is a tax on imports. Empirical evidence consistently shows that the cost of U.S. tariffs is borne almost entirely by domestic consumers and businesses through higher prices, rather than by foreign exporters.

Industrial Policy

Recent years have seen a return to explicit industrial policy (e.g., the CHIPS Act) aimed at securing supply chains for critical technologies, prioritizing national security over pure economic efficiency.