Trump’s Tariff Plan Is a Math Disaster

Summary

Bulwark Takes: Trump’s Tariff Plan Is a Math Disaster
Release Date: April 7, 2025

Hosts:

• Tim Miller
• Stan Voyager (Senior Fellow and Economist at the American Enterprise Institute)

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Introduction

In the April 7, 2025 episode of Bulwark Takes, hosted by Tim Miller, the discussion pivots sharply from an initial advertisement segment to a critical analysis of former President Donald Trump's latest tariff plan. Joined by Stan Voyager, a senior economist, the episode delves into the flawed mathematical foundations of Trump’s tariff strategy and its broader economic repercussions.

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Overview of Trump's Tariff Plan

[00:30] Tim Miller:
Tim introduces Stan Voyager, mentioning a recent white paper Stan authored that critiques Trump’s tariff formula, describing it as "totally nonsensical" and suggesting it may have been crafted by individuals lacking fundamental macroeconomic knowledge.

[00:38] Stan Voyager:
Stan echoes Tim's concerns, emphasizing that the newly implemented tariff regime is detrimental. He notes that market reactions have been negative, with ongoing crashes since the prior Wednesday, underscoring the immediate economic impact of the tariffs.

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Economic Implications

[01:21] Stan Voyager:
Stan characterizes the tariffs as "stagflationary," meaning they simultaneously drive up prices (inflationary) and suppress economic activity. He explains that tariffs not only increase the cost of imported goods but also act as a substantial tax on businesses, disrupting supply chains and reducing overall economic productivity.

Key Quote:
"It's not just an inflationary effect, it's also a reduction in economic activity that comes at the same time."
— Stan Voyager [01:21]

[02:24] Stan Voyager:
Stan attributes the self-inflicted nature of the tariffs to Trump's long-standing obsession with using tariffs as a tool, particularly against Japan since the 1980s. He implies that this focus is outdated and economically unsound.

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Critique of Tariff Rationales

[02:36] Tim Miller:
Tim underscores the self-destructive aspect of the tariffs, labeling them as "stupid" or "moronic" due to their detrimental impact on the economy.

[02:59] Stan Voyager:
Stan dismisses the current justifications for the tariffs, describing them as convoluted and insincere. He critiques the administration's use of complex rationales like "global macro imbalances" and the "Mar-a-Lago accord," suggesting these are attempts to mask the fundamental flaws of Trump's trade deficit-focused approach.

Key Quote:
"None of that is going to happen. And secondly, it's an extremely expensive way to generate a few manufacturing jobs in the U.S."
— Stan Voyager [02:59]

He further argues that the jobs purported to be created by the tariffs are misaligned with modern manufacturing needs, which rely heavily on advanced STEM skills and intricate global supply chains.

[05:08] Stan Voyager:
Stan highlights the impracticality of replicating complex international supply chains domestically, using high-end industries like semiconductor manufacturing as examples. He points out that shifting production domestically would lead to significantly higher costs, exemplified by industries like clothing and footwear, which would become prohibitively expensive in the U.S.

Key Quote:
"Most of the people work there, have advanced STEM training. That's what a lot of my modern manufacturing looks like. And so it's just quite different."
— Stan Voyager [05:08]

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Analysis of the White Paper and Mathematical Flaws

[07:54] Stan Voyager:
Stan details the specific mathematical errors in the tariff formula. Initially, the formula appeared to set a minimum tariff of 10%, increasing if the trade deficit with a country exceeded 10%, multiplied by two. However, the White House introduced additional factors denoted by Greek letters—4 and 0.25—which mathematically nullify each other, effectively maintaining the original flawed formula. Stan points out that this manipulation was intended to obscure the error, leading to significantly lower tariffs than initially calculated.

Key Quote:
"If you plug that number into the formula, all of their tariff calculations go down by a factor of four."
— Stan Voyager [10:02]

He emphasizes that the parameter in question, derived from a paper by Alberto Cavallo, was misrepresented. The actual elasticity of import prices with respect to tariffs should have been close to one, not 0.25, leading to a substantial underestimation of the necessary tariff rates.

[11:32] Tim Miller:
Tim interprets Stan’s explanation as an attempt by some administration members to nudge Trump into recognizing the error, suggesting that the miscalculations are a result of incompetence within the tariff planning team.

[12:09] Stan Voyager:
Stan concurs, asserting that the mistake reflects a broader lack of feedback and a reckless approach within the administration’s economic policymaking processes.

Key Quote:
"It's the usual galaxy brain thinking where the intermediate step is very unclear."
— Stan Voyager [07:00]

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Consequences and Broader Impact

[13:54] Stan Voyager:
Stan remarks that the only small consolation is the public embarrassment faced by Trump’s economic policy defenders. However, he underscores that this does not mitigate the extensive economic damage caused by the tariff errors, including trillions in destroyed wealth and significant job losses globally.

Key Quote:
"The trillions of destroyed wealth and the millions of people are going to lose their jobs all over the world and businesses that are going to go under."
— Stan Voyager [13:54]

[14:04] Tim Miller:
Tim poetically concludes that despite the amusement derived from policymakers' mistakes, these errors have real and devastating consequences for individuals' financial security and the broader economy.

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Conclusion

The episode of Bulwark Takes presents a scathing critique of Trump’s tariff plan, primarily focusing on the foundational mathematical errors and the flawed economic rationale underlying the policy. Stan Voyager meticulously dissects the tariff formula, revealing significant miscalculations that undermine the intended economic benefits and instead foster a harmful stagflationary environment. The discussion highlights the broader implications of such policy errors, including undermined economic stability, job losses, and diminished global trade relations. Ultimately, the episode serves as a cautionary analysis of how misguided economic strategies, when coupled with poor implementation, can lead to substantial negative outcomes.

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Notable Quotes Summary:

1. "It's not just an inflationary effect, it's also a reduction in economic activity that comes at the same time."
   — Stan Voyager [01:21]

2. "None of that is going to happen. And secondly, it's an extremely expensive way to generate a few manufacturing jobs in the U.S."
   — Stan Voyager [02:59]

3. "Most of the people work there, have advanced STEM training. That's what a lot of my modern manufacturing looks like. And so it's just quite different."
   — Stan Voyager [05:08]

4. "If you plug that number into the formula, all of their tariff calculations go down by a factor of four."
   — Stan Voyager [10:02]

5. "It's the usual galaxy brain thinking where the intermediate step is very unclear."
   — Stan Voyager [07:00]

6. "The trillions of destroyed wealth and the millions of people are going to lose their jobs all over the world and businesses that are going to go under."
   — Stan Voyager [13:54]

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Follow Stan Voyager:
Stan Voyager is a Senior Fellow and Economist at the American Enterprise Institute. For more insights, follow him on his preferred social media platforms.

Subscribe to Bulwark Takes:
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Transcript

[Tim Miller]

We interrupt this program to bring you an important Wayfair message. Wayfair's got style tips for Every home. This is Nicole Byer helping you make those rooms flyer. Today's style tip when it comes to making a statement, treat bold patterns like neutrals.

[Stan Voyager]

Go wild like an untamed animal.

[Tim Miller]

Print area rug under a rustic farmhouse table. From wayfair.com Ooh, fierce. This has been your Wayfarer style tip to keep those interiors superior.

[Stan Voyager]

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[Tim Miller]

Hey guys, it's Tim Miller from the Bulwark. I'm here with my Internet friend, senior fellow and economist at the American Enterprise Institute. It's Stan Voyager. How you doing, Stan?

[Stan Voyager]

Hey, Tim, how's it going?

[Tim Miller]

You did a white paper that ruffled some feathers. That's not a phrase that you usually Hear in Washington, D.C. but you know, sometimes the white paper just has that much power. And essentially the short of it we'll get to explain it here in a second, is that the tariff formula that they put together was actually totally nonsensical and maybe written by people who didn't even take Macroeconomics 101. So we'll explain the details of that to folks in a second. But before we do, as we're taping this, the markets are crashing again just at the biggest possible picture, even if they had the math right. What do you make of the tariff regime that these guys are putting into place from an economic perspective?

[Stan Voyager]

Well, I think the tariff regime that they've put in place is very bad. Reassuringly, people with money at stake in the stock markets appear to agree with me on that as we have been in an ongoing crash since Wednesday. The way I think about the tariffs they've imposed, certainly there's a norm as most recent round, is that they are stagflationary, not really so much inflationary, which is really what a lot of people are focused on, obviously because of the experience we've had in the past few years. But stagflationary in the sense that on the one hand they push up prices just mechanically because you add tariffs to products you import. But at the same time it's also a massive tax increase. It's super disruptive to supply chains. And so there's a dampening effect as well. And so you have both of those things going on at the same time. It's not just an inflationary effect, it's also a reduction in economic activity that comes at the same time.

[Tim Miller]

Well, that seems pretty bad. A slowing economy and a totally self.

[Stan Voyager]

Inflicted, you know, there's really no, it's because Trump has been obsessed with tariffs and I guess with the Japanese since the 1980s. That's really, I think, the main rationale and that's how I think you should think about it.

[Tim Miller]

Yeah, the totally self inflicted nature of this, I'll use the word stupid or moronic nature of this. Like it is, I mean, is there just kind of taking off the political hat and getting into an economic hat? Like is there any argument for what they're doing? Is there anything that is sensible about the plan here?

[Stan Voyager]

No. Well, so what you've seen is you've had a bunch of guys, certainly during the four years that Trump is out of office, you've had people come up with increasingly more convoluted rationalizations for the tariffs. Some of that is long standing goals that people had themselves. Other stuff is just we want to make it sound a little more respectable to have all this stuff about global macro imbalances and a Mar a Lago accord and an exchange rate that to me just feels like backfilling of Trump's tariff. Because the guys who hold those viewpoints, they just, they don't want to sound so stupid to just say we think trade deficits are bad because we think we're losing money when we import stuff. You have some rationales that are a little closer to traditional justifications to protectionism, like we want to protect America's manufacturing industry. That's traditional sort of labor movement view on why you would want to have tariffs. And you hear that from some people in the administration. You'll hear that from Peter Navarro, who not coincidentally ran for Congress as a Democrat repeatedly. That's sort of where those views were harbored in the 80s. You hear that from J.D. vance. First of all, none of that is going to happen. And secondly, it's an extremely expensive way to generate a few manufacturing jobs in the U.S. those manufacturing jobs also don't look like, I think what they fantasize about, I think what they fantasize about is strong guys with hammers in a steel mill. And that's not the kind of jobs that jobs that most manufacturing is like today, but also certainly not the kind of jobs that are going to come back in massive numbers. And so I think that justification, which is probably the most conventional one, is also very misguided.

[Tim Miller]

So it'll bring jobs back for people in one of our archetypes, like skinny managers or nerdy out of shape people like that with STEM degrees overseeing people that have expertise and you know, kind of the Economics of it. Right. Like what kind of jobs would, would be coming?

[Stan Voyager]

Well, it would be those kinds of things to the extent that will be successful. But I think even that is giving them too much credit because a lot of those industries rely on complicated international supply chains that, that are going to be very difficult to replicate. If you look at asml, which is a sort of high end lithography companies and they make machines that made semiconductors. They have suppliers all over the world. Most of the people work there, have advanced STEM training. That's what a lot of my modern manufacturing looks like. And so it's just quite different. Then there are other industries where if we had a domestic industry, it would just be way smaller. Right now a lot of our clothes are produced in Southeast Asia. Shoes are produced in Southeast Asia. I mean we could produce those in the US but they'd be like 50 times as expensive. So we just end up having way fewer shoes, which is not, which is not great. Right. So there's also just this big negative effect on our, on our economic.

[Tim Miller]

So you're telling me the forgotten man doesn't often have advanced STEM degrees? That's something, that's something to think about. I just want to. Just because, just because you mentioned it, I want to sit on the Mar A Lago accord for one second and then I'm going to get to your paper because there is this kind of galaxy brain justification that is happening that's like Trump is some master manipulator. And their theory of the case, as I understand it, is basically that they want to crash the economy kind of because they want to get interest rates down so we can pay off our debt and finance our debt, maybe even. What is your sense for what that rationale is?

[Stan Voyager]

I think the way they would argue it is that they want an international accord to lower the value of the dollar so that our exporters are more competitive.

[Tim Miller]

Got it.

[Stan Voyager]

And so I don't know how we.

[Tim Miller]

Get that we have to hurt the economy to hurt the dollar first.

[Stan Voyager]

It's the usual galaxy brain thinking where the intermediate step is very unclear. It's crashed the economy. And then the final step is also clear, which is where we have an international accord signed at Mar A Lago that makes our exports more competitive. But the intermediate stats are not totally obvious.

[Tim Miller]

Got it.

[Stan Voyager]

Okay.

[Tim Miller]

So your white paper, which was pretty funny, which I do, I do just have to admit that I made a snarky comment about those inaccurate on social media. So I just, I want to give a mea culpa right now. To, To. To you and Kevin off the top. But the, the gist of the paper is essentially that if these guys are going to base their dumb tariffs on our trade deficit, like, they should have based it off of a totally different set of numbers than they based it off of. That's my layman's way to summarize that. Why don't you give people the details?

[Stan Voyager]

Yeah, I think that's fair. So they, on Wednesday, they announced this set of tariffs, and it was not immediately clear how to calculate them. They had them from every country. And so, you know, people started trying to figure out. Except Russia. Yeah, that's right. Except North Korea. I think there may be one or two more. They said that they couldn't put tariffs on Russia because we're negotiating, whereas Russia and Ukraine are negotiating. But of course, they did put tariffs on Ukraine anyway, so people started trying to figure out what they do here. And pretty quickly people started saying, look, what they did is they set a minimum of 10% on everyone. But if the trade deficit divided by imports that we get from a certain country is greater than 10%, so if the trade deficit is greater than 10% of total trade flows with that country, then the percentage is higher, and it's that number multiplied by two. If that's higher than 10%, then we get that number anyway. That's what people came up with. Then the White House said, no, that's not true. We have a more complicated formula. So the Office of the US Trade Representative put out this report where it was the formula that people had been saying all along with two additional Greek letters in it that were multiplied. And they said one of these Greek letters is 4, the other one is 0.25. So if you multiply them out, you get one. So it's still the same formula, but they just added two more Greek letters to make it look more impressive. Now, they claimed that they got this value, this 0.25. They claim that they got it from a paper. This paper is by Alberto Cavallo and a couple of other people. You may have seen the Cavallo reference on the Internet. He was my office mate for a couple of years of graduate school. And in that paper, there is no such number. The estimate of the parameter that they're using in the formula in the paper is almost one, so it's four times bigger. So if you plug that number into the formula, all of their tariff calculations go down by a factor of four. And so at that point, only very few countries would actually end up with a tariff over 10%, and no country would end up with more than 14 cents.

[Tim Miller]

So what is that number that would have brought it down? What is that based upon?

[Stan Voyager]

It's the elasticity of import prices with respect to the tariff. So if you say the tariff goes up by one, how much do import prices go up? It's the pass through elasticity, basically. And so that number is in the, is in the denominator. And so if you make it bigger, then your estimated tariffs go down. If you make it four times bigger, they go down by a lot. And so we provide that, you know, we do the calculus obviously. You know, like that's a two second calculation.

[Tim Miller]

It's like a third grade calculation. I'm working on this as a kid right now. Yeah, no offense, I don't want to undermine, you know, you know, your ability as a senior economist, but.

[Stan Voyager]

Yeah, yeah, that's right now. Yeah, exactly. And so then you get. Rates are way lower. The highest one is just below 14%. And very few countries are even below that 10% minimum, which is a completely arbitrary minimum. Of course. Now I think the White House by now realizes that they made a mistake. They have offered really no substantive defense. One of the other authors of the paper had an op ed in New York Times this morning confirming our argument. And Peter Navarro was on CNBC just now. He also had no substantive pushback. And so I think they just messed up. Now, there are two ways to respond to that. One is, no, they applied the formula incorrectly, which is what a lot of more Trump friendly guys are saying, because they're trying to get Trump to say, well, my staffers, they messed up.

[Tim Miller]

Right. This is how I misinterpreted it originally. It was that, I thought that that was kind of like the point of this. Right. Which is there was some people who are trying to nudge Trump in the right direction. And so there, that is now happening. They're using your paper to be like, hey, Mr. President, maybe this actually should have been a little lower here. You should fire the dummy that got the math wrong.

[Stan Voyager]

That's right. Yeah. The way I, the way Kevin and I write about it is more, you know, this whole approach is nonsensical, but if we're going to take it seriously, you know, the numbers are wrong.

[Tim Miller]

Yeah. And so what is the, and the other defense is just, you guys are, you guys are cucks, neoconservative cucks, and don't know what you're talking about. And.

[Stan Voyager]

Yeah, correct. A lack of loyalty, which, you know, on a more serious note, I do think these are the kinds of mistakes that you end up making as an administration. If there's no culture of feedback, you know, there's no, there's no process. I think that, you know, that that's how these things happen.

[Tim Miller]

Well, it's, I mean, it's, it's the penguin island thing. Right. I mean, like, it's hard to give a rationale for why they would have messed up the simple math, like, be, you know, beyond. It was just a lack of seriousness in the process. And they don't. Like you said, there's no feedback from the administration. It's just a recklessness. And you see it in the signal chain in foreign policy. Right. It's like, well, why weren't there any actual military experts on that? Signal chains. But aside the fact that it shouldn't have been on this public app, you're looking at the conversation happening and there's no actual subject matter experts involved. Right. And I assume it's a similar thing here.

[Stan Voyager]

You see then, the people they sent to El Salvador, I'm sure they would have rather be in a situation where they're defending people with criminal records or in El Salvador than what they actually did. I think you see them every front.

[Tim Miller]

Yeah, it's a great point, Stan. All right, any other funny economic anecdotes that you've seen out of the White House? We have to laugh at the. As all of our 401ks crash, we've got to find a little amusement in the process.

[Stan Voyager]

Yeah. For me, the only silver lining is you have a. You have a set of guys who have long, you know, understood that there's demand for people willing to defend Trump's economic policy ideas, who I think have had a rough week or in cast, you know, those kinds of people. And so, you know, seeing them have to publicly embarrass themselves is, I guess, a silver lining in this situation. But it's.

[Tim Miller]

Yeah.

[Stan Voyager]

Not, not. Doesn't quite make up for the, for the trillions of destroyed wealth and the millions of people are going to lose their jobs all over the world and businesses that are going to go under shot.

[Tim Miller]

And Freud of the bad people being wrong will not actually pay for the retirement home or the college fund. But it's not nothing.

[Stan Voyager]

It's nothing.

[Tim Miller]

Stan Voger, thank you so much, man. I appreciate you. Everybody should follow him on your social media account of choice. He's at aei. Everybody else subscribe to the feed. I'll be back later today. As always. See you then. Peace.