AILSA CHANG, HOST:
Love President Trump's tariffs or hate them, you got to give him one thing.
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PRESIDENT DONALD TRUMP: Great consistency, actually, 'cause I've been talking about it for 40 years. But - 'cause I saw what was happening 40 years ago. If you look at my old speeches when I was young and very handsome...
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TRUMP: My old speeches - and people would say - I'd be on a television show. I'd be talking about how we were being ripped off by these countries.
CHANG: It is true. For decades, long before he was ever president, Donald Trump has been arguing that trade deficits are bad. And there he was yesterday at the White House, announcing a new set of steep, across-the-board tariffs that he says will help get rid of those trade deficits. But should we be eliminating trade deficits at all? Well, the economist Jason Furman says no. He's a professor at Harvard University and was a top economic adviser to former President Obama. Jason Furman joins us now. Welcome.
JASON FURMAN: Thanks for having me.
CHANG: OK, first, what is a trade deficit? Just define it for us.
FURMAN: A trade deficit is when you pay more money to another country in exchange for the stuff you're buying from them than they pay you in exchange for the things that they buy from you.
CHANG: OK. And then from an economist's point of view, then, is it bad for the U.S. to have a trade deficit?
FURMAN: The one thing that is definitely not bad is trade deficits with any individual country. Even if overall we didn't have a trade deficit, there would still be some countries where we really love their products and we need them and so we have a trade deficit with them and some other countries where it's the opposite. So right now, Brazil buys a lot of energy stuff from the United States, so we have a surplus with them. France makes a lot of food and chemicals that we need here in the United States, and so we run a trade deficit. Overall, if the trade deficit is really, really large for a really long period of time, it can be unsustainable. Don't think that's where the United States has been.
CHANG: OK. And just to bring the tariff piece into all of this, it is true that the U.S. has had lower tariffs on imports than most of the countries that it trades with. And to President Trump, that's just unfair. But has the U.S. gotten anything in exchange for those lower tariff rates?
FURMAN: Yeah. Tariffs are a tax on yourself, so it's not obvious that you want them to be higher. What are the countries with high tariff rates? They're places like North Korea, Venezuela. I don't think we want to emulate them. I think we'd like to be more like the rich, dynamic countries, like, say, the United States, which has benefited from its openness to trade.
Moreover, other rich countries actually have quite similar tariffs to the United States. Most of them have 1- or 2% on us, we have 1- or 2% on them. It is true the Chinas and Indias of the world have higher tariffs, but their tariffs are, like, 6% on the United States while ours were 1% on them. So we'd only need to raise tariffs by a few percentage points if we even wanted to match them, not that I think that should be our goal.
CHANG: OK. Well, if I may push back just a little bit, I mean, trade deficits are not always great in all aspects, right? Like, the U.S. has lost huge numbers of manufacturing jobs. And we're talking about well-paying jobs for people without a lot of education. Trump says the tariffs will help bring back those kinds of jobs. Why isn't it worth it to give it a try, even if tariffs might mean slightly higher prices and lower profits?
FURMAN: First of all, the United States is producing more than it's ever produced in manufacturing, it's just doing it with less people. And that's because of the enormous increase in productivity growth. But let's say you wanted to use trade policy to bring manufacturing jobs back. You wouldn't do what the president just did, which is to put tariffs on all the bananas, mangoes, avocados and coffee coming into the United States. Those just aren't things that we're really ever going to make at enormous scale. Moreover, the types of things that they do in Vietnam - you know, making clothing, making shoes - that's not the jobs that we should be aspiring to have in the United States. We don't want to give up jobs making airplanes in order to have more jobs making shoes.
Finally, these tariffs themselves, I think, will likely end up hurting manufacturing, not helping it because they blow up global supply chains, raise the cost of inputs to American businesses, and our businesses are now having to deal with tariffs in lots and lots of other countries in retaliation for what we've done.
CHANG: So with tariffs increased at the scale that President Trump wants to increase them, what do you see is going to be the outcome?
FURMAN: Almost every economic forecaster has lowered their forecast of growth quite a lot. Most are not predicting a recession, but you never know. Almost every economic forecaster has raised their forecast for inflation, and American families should expect to see higher prices, basically starting almost right away. Over the longer run, if something like this lasts, I expect us to have basically worse-paying jobs as we have more people working to make shoes and T-shirts for Americans and fewer people making airplanes and tech products for export.
CHANG: Jason Furman with Harvard University. Thank you very much for joining us today.
FURMAN: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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