US can be 'fabulous economy' with tariffs: Trump' s chief WH economist

By Daniel Flatley

 

The nominee to become President Donald Trump’s chief White House economist defended his boss’s decision to charge ahead with duties on some of the US’s biggest trading partners, telling senators Thursday the country can have a “fabulous economy” even with high tariffs. 

“The American economic story has seen periods of high tariff rates coincide with extraordinary economic success,” said Stephen Miran, Trump’s pick as chair of the Council of Economic Advisers. “There’s nothing in the historical record that would say that it’s impossible to have a fabulous economy with high tariffs.”

 

Miran, who was testifying before the Senate Banking Committee along with a slate of other nominees, also said that Trump’s tariffs against China played a role in Apple Inc. Chief Executive Officer Tim Cook’s recent decision to invest $500 billion in US-based projects.

 

“I think the president’s policies played a very large role in such an announcement,” Miran said in response to a question from Senator Jim Banks of Indiana.

 

Trump’s willingness to impose tariffs is not only creating incentives for companies such as Apple to invest in the US but is convincing other countries to “make concessions on national security and on trade as well, even preemptively before any threats have been made,” Miran said.

Inaccurate Models

Economists’ concerns about tariffs are due to a “quirk of the modeling methodology,” Miran said. There is “something wrong” with assumptions underpinning models that show trade deficits balancing out to zero over the long term. “That really hasn’t happened in recent decades,” he said.

 

Miran offered some historical backup for Trump’s attraction to the high-tariff policies of William McKinley, who was president at the turn of the last century, and some of his predecessors.

 

“The average tariff rate on dutiable imports was in excess of 40 per cent for most of the latter half of the 19th century, and the average tariff rate on all imports was in excess of 30 per cent,” Miran said. “Nevertheless, this was a period of extraordinary economic transformation.”

 

Miran’s take contrasts with that of a recent National Bureau of Economic Research paper, which showed that the high tariff levels of the late 1800s held back productivity gains.

 

Miran also on Thursday highlighted Trump’s looming reciprocal-tariff initiative, saying “the president has been very clear that he’s not going to stand for asymmetric trade relationships in which we give unfettered market access to our consumers to other countries, and they don’t reciprocate.”