Q&A with Stephen Redding

Christopher Makler

Stanford University Department of Economics

Econ 50: Lecture 4

Stephen Redding

visiting Stanford from Princeton University

Research interests include international trade, economic geography, and productivity growth.
Harold T. Shapiro '64 Professor in Economics in the Economics Department and School of Public and International Affairs at Princeton University;
Director of the International Trade and Investment (ITI) Program of the National Bureau of Economic Research (NBER);
Co-Director of the Griswold Center for Economic and Policy Studies (GCEPS) at Princeton University.

What are we likely to experience in the short-term and the long-term as a result of these tariffs? How long will it take price increases to hit consumers? What can we do to prepare for the impact?

How are these tariffs similar and different relative to other historical tariffs, specifically:

The tariffs that were in place during the “gilded age” that Trump says he’s bringing back. (Weren’t those good? Wasn’t that a time when American manufacturing was doing really well?)
The Smoot-Hawley tariffs from the 1930’s (Weren’t those bad? Are there fundamental conditions that are different now that would make these less bad?)
The tariffs in the first Trump administration (Economists hated them too, they didn’t seem to completely wreck us. Were those so different than these?)

Where did the formula for the tariffs come from, and does it have any basis in economic theory? Is there any precedent for basing a tariff on trade deficit size? What does it have to do with elasticity, and do you agree with an elasticity of 4? Also, why does the formula say we should tax penguins?

What is the strongest possible argument for the tariffs? Do you agree with any of them? Are there elements of tariffs that make them a more effective tool than, say, a VAT? Are there examples in the past where high tariffs have benefitted the home country?

What is the likely effect going to be on relationships/supply chains/trade patterns between countries?

Between the US and China
Between the US and our traditional allies/trading partners like Australia
Between the US and developing countries/regions, especially those (like SE Asia) which currently export a lot of things to the US?
Between other countries excluding the US

What’s the likely effect of this going to be on the dollar, both in terms of its value and its standing as the primary global currency?

What’s going on with the stock market? If people don’t have investments, why should they care what happens to the stock market?

Where do we go from here? How should these events affect our decision-making process about big choices that lie ahead of us?