Podcast Summary: 3 Takeaways with Lynn Thoman

Episode #265: America’s Edge: More Barriers or More Innovation?
Date: September 2, 2025
Guest: Mike Froman – President, Council on Foreign Relations; former U.S. Trade Representative

Episode Overview

In this episode, Lynn Thoman interviews Mike Froman, former U.S. Trade Representative and current President of the Council on Foreign Relations, about the impact of tariffs and trade barriers on American competitiveness. The conversation explores whether tariffs help or hurt the U.S. economy, the lessons of past protectionist strategies, and what path might best ensure America’s economic edge—more barriers or more innovation. Froman shares data, global case studies, and reflections on the future of U.S. trade policy, including the critical role of innovation and the coming challenge of AI.

Key Discussion Points & Insights

1. The Hidden Cost of Tariffs for Families

• Tariffs impact consumers, companies, and exporters.
  • Tariffs raise the price of imported goods, which can be partly absorbed by exporters (through discounts), importing companies (through lower earnings), but ultimately are “passed on to the consumers.” (03:04)
• Everyday Americans feel tariffs in the form of higher prices.
  • Mike Froman:

    "Nobody walks out of a Walmart and says, thank goodness for the World Trade Organization and for globalization, even though that has meant that they've been able to spend a smaller and smaller percentage of their income on basic clothing and shoes and back-to-school items." (03:37)

• Rising tariffs contribute to inflation, but there is usually a lag before consumers notice the effects. (03:54)

2. Do Tariffs Actually Save American Jobs?

• Historical Data from Steel Tariffs:
  • Example: “In 2018... tariffs on steel” resulted in “1,000 more workers in the steel sector and 75,000 fewer workers in the industries that use steel as a significant input.” (04:30)
  • Quote:

    "For every steel job that was saved, cost something like $600,000 to the US economy." (04:50)

• Tariffs tend to shift jobs between sectors rather than create net new jobs, especially in an already “full employment” economy. (05:25)
• Manufacturing employs only about 10-11% of U.S. workers, so broad tariffs don’t address larger labor market needs. (06:04)
• Automation and robotics mean future manufacturing growth may not translate into more jobs. (06:28)

3. Lessons from Import Substitution:

• Case Study: India and Brazil
  • High tariffs intended to strengthen domestic industries led to “inefficient, less productive manufacturing sectors,” becoming a burden rather than a benefit. (07:22)
• In the U.S., “the costs of [this] approach, the tariffs, they're likely to be felt quite immediately... [while] the benefits... if [they] come... are likely to be felt four, six, eight years from now and affect quite a limited group of workers.” (08:01)
• Political challenge: “Everybody feels the pain now, for the benefit that might or might not come to a few people.” (08:22)

4. The Value of Globalization for America

• Globalization lifted over a billion people out of poverty worldwide. (09:03)
• Americans benefit as consumers (more choice, lower costs) and as part of a more productive and resilient economy.
• The U.S. is leading in innovation, agricultural exports, and the digital economy.
  • Quote:

    "We are the place where virtually all of the innovation of the digital economy is taking place. Any entrepreneur around the world who has an idea wants to build their company in the United States." (10:03)

• Manufacturing output in the U.S. is at a historic high, but with fewer, more productive workers. (10:19)

5. What’s at Risk with More Barriers?

• Tariffs are “inherently inflationary.” They raise standards of living costs and decrease competitive pressure, thus harming productivity. (11:15)
• America’s open markets, deep capital pools, rule of law, and leading universities are critical strengths that barriers could erode. (12:09)
• The U.S. economy’s edge is in openness and its attractiveness to global talent and investment. (12:21)

6. Industrial Policy and the Risk of Crony Capitalism

• Convergence of Economics and National Security:
  • There’s a case for targeted government intervention in critical sectors, such as chips and critical minerals. (13:23)
  • Quote:

    "We became overly dependent on China in a lot of critical areas, including products that go into our military equipment. So there is a case for the government to say, okay, stop." (13:47)

• The challenge is setting clear principles and guardrails to avoid "crony capitalism" and ensure interventions are strategically justified, not driven by political favoritism. (14:15)
• The need for “limiting principles or guardrails” so that policy is “not just the squeakiest wheel or who had the closest relationship with the president.” (14:29)

7. Where Will America's Edge Come From?

• Innovation Over Barriers
  • Froman is “optimistic about our capacity to out-innovate others.” (14:53)
  • Private-sector R&D is critical, but government has a role in areas lacking private incentives.
  • Quote:

    "I am hopeful... [we] ensure that we're putting enough research and development dollars into it to continue to develop the next generation of scientists and technologists who can continue to lead that innovation." (15:33)

8. Smarter Strategy than Blanket Tariffs

• Tariffs are justified to address unfair trade, but blanket tariffs harm U.S. productivity and cost consumers. (15:58)
• The smarter approach: build “coalitions of the willing”—plurilateral agreements with countries aligned on key rules, standards, and policies.
  • Quote:

    "We can get 10 or 20 or 50 or 70 countries together around a common set of issues and continue to have some predictability that comes with rules and standards..." (16:36)

Notable Quotes & Memorable Moments

• On Tariffs and Consumer Prices:
  "Nobody walks out of a Walmart and says, thank goodness for the World Trade Organization and for globalization..." – Mike Froman (03:37)

• On Steel Tariffs' Real Impact:
  "For every steel job that was saved, cost something like $600,000 to the US economy." – Mike Froman (04:50)

• On Globalization’s Achievements:
  "Peak globalization lifted over a billion people out of poverty. ... That is a very significant development." – Mike Froman (09:03)

• On America’s Economic Edge:
  "We are the place where virtually all of the innovation of the digital economy is taking place." – Mike Froman (10:03)

Important Timestamps

• [01:57] – How tariffs impact consumers and companies
• [04:20] – Real impact of tariffs on U.S. jobs
• [07:08] – High tariffs in Brazil and India: consequences
• [08:46] – Postwar free trade & benefits for the U.S.
• [11:00] – Risks of raising new trade barriers
• [12:47] – Government picking winners & risks of crony capitalism
• [14:50] – America's edge: barriers vs. innovation
• [15:54] – A smarter alternative to tariffs
• [17:10] – 3 Takeaways

Three Takeaways (17:16)

1. Global Trading System is Over:
   • "The global trading system as we know it is dead. ... We're not going to be able to go back, even if it was desirable to the way things were before."
2. Tariff Diplomacy Has Unknown Consequences:
   • "The unknown question, what impact will our aggressive approach on tariffs have on broader relations and U.S. leadership in the world?"
3. AI Will Overshadow Past Economic Disruptions:
   • "All of that, I believe, is going to be dwarfed by the impact of artificial intelligence when we look back."
   • Past U.S. policy failed to support workers coping with technological and global shocks; with AI, the need for robust policy is even more urgent. (18:30)

Final Thoughts

Mike Froman takes a nuanced view, warning that tariffs often impose widespread, immediate costs for speculative, narrow gains. He stresses that America’s strength is rooted in openness, innovation, and partnership—not barriers. The biggest future challenge will be ensuring policy cushions Americans from unprecedented disruption as AI transforms the economy—far outpacing past tremors from trade and globalization.