What's the point of blanket tariffs?

Summary

Marketplace Morning Report: "What's the Point of Blanket Tariffs?"

Release Date: July 25, 2025
Host: Sabri Benishour
Guests: Gene Grossman, Professor of International Economics at Princeton University

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Introduction

In this episode of Marketplace Morning Report, host Sabri Benishour delves into the contentious topic of President Trump's recent proposal for blanket tariffs. Ahead of an impending self-imposed deadline on August 1st, these tariffs could range between 15% and 50% on a broad spectrum of countries. The episode explores the rationale behind such tariffs, their intended goals, and the potential economic ramifications both domestically and globally.

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Current Economic Context: Decline in U.S. Oil Rigs

Timestamp: [01:04] - [03:29]

Before addressing tariffs, the episode touches on the declining number of active oil rigs in the U.S., a situation reminiscent of the pandemic-era lows. As of the previous week, there were approximately 420 active rigs, which has been steadily decreasing over recent months. This decline is attributed to lower oil prices, driven by an ample global supply.

Notable Insights:

• Mark Finley (Rice University): “[...] you’ll see the rig count begin to change in response to [oil price movements]” ([02:05]).
• ABHI Rajendran (Energy Intelligence): Highlights that OPEC’s steady increase in production has kept oil prices in the mid-60s, influencing industry investment decisions negatively.

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President Trump's Blanket Tariff Proposal

Timestamp: [04:48] - [08:30]

Sabri introduces the main focus of the episode: President Trump's announcement of baseline reciprocal tariffs ranging from 15% to 50% on numerous countries. These tariffs are set to take effect on August 1st unless countries negotiate for lower rates.

Key Points:

• The tariffs apply broadly, affecting countries that the President characterizes as "not big countries" with limited business interactions with the U.S.
• The proposal has sparked debates about its effectiveness and underlying objectives.

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Expert Analysis: The Purpose and Contradictions of Blanket Tariffs

Timestamp: [05:36] - [07:58]

Sabri engages Gene Grossman to unpack the complexities and inconsistencies surrounding the tariff proposal.

Gene Grossman’s Insights:

1. Unclear Objectives:

   • “You know, it's not clear exactly what the purposes are and many of them are in contradiction with each other.” ([05:36])
   • The stated goals range from addressing trade imbalances to repatriating manufacturing and increasing U.S. exports.

2. Trade Deficit Concerns:

   • “If it's about trade imbalances, it's very questionable whether it's going to work.” ([05:36])
   • Grossman questions the effectiveness of blanket tariffs in genuinely reducing trade deficits, as they do not target specific imbalances.

3. Contradictory Goals:

   • “In order to reduce the trade deficit, we have to import less, of course, but at the same time we're raising the price of imported intermediate goods...” ([06:10])
   • Raising tariffs increases the cost of imported inputs, potentially making domestic manufacturing more expensive and less competitive.

4. Revenue Generation vs. Trade Deficit Reduction:

   • “If we reduce imports, then we're not going to raise revenue.” ([06:17])
   • The dual objectives of reducing the trade deficit and generating revenue through tariffs may be inherently conflicting.

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Economic Impact: Job Creation and Manufacturing

Timestamp: [07:40] - [08:23]

Grossman further elaborates on the broader economic implications of the tariff strategy.

Key Insights:

1. Manufacturing vs. Automation:

   • “Focusing on bringing manufacturing production back will not create jobs because that production is so automated.” ([07:40])
   • The modern manufacturing landscape relies heavily on automation, which limits the potential for significant job creation despite increased domestic production.

2. Diversion from Strategic Economies:

   • “It's a whole range of policies... throwing sand in the wheels of putting us in the lead for the next set of activities for the 21st century.” ([07:58])
   • Grossman warns that the focus on manufacturing could divert resources and attention from burgeoning sectors like advanced technologies and services, where the U.S. holds competitive advantages.

3. Global Leadership Concerns:

   • The tariffs may inadvertently allow other global players, notably China and Europe, to overtake the U.S. in strategic industries, potentially weakening America's long-term economic leadership.

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Conclusion

The episode concludes with a critical assessment of the blanket tariff approach. While the intention behind addressing trade imbalances and bolstering domestic manufacturing is clear, experts like Gene Grossman highlight significant flaws and potential unintended consequences. The broad application of high tariffs may not effectively target specific economic issues and could hinder the U.S.'s ability to compete in future technological and service-oriented industries.

Final Thoughts:

• The blanket tariff strategy presents a complex array of benefits and drawbacks. Policymakers must carefully weigh these factors to avoid undermining long-term economic growth and global competitiveness.

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Additional Segments

While the primary focus is on tariffs, the episode also briefly covers:

• Oil Rig Declines: Analysis of the decreasing number of active oil rigs and its relation to global oil supply and prices.
• Advertisements: Promos for Wix and Dell products were included but are not part of the main content.

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This comprehensive overview provides listeners with a nuanced understanding of the proposed blanket tariffs, expert opinions on their efficacy, and the broader economic implications for the United States.

Transcript

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[Sabri Benishour]

Drill Baby Drill is looking more like Chill Baby Chill. From Marketplace, I'm Sabri Benishour in for David Brancaccio. How many active oil rigs would you guess there are in the U.S. well, we are going to find out later today when oil services and technology company Baker Hughes releases its US Rig count. But as of last week there were around 420 active rigs, which is low like pandemic era level low. And the number of rigs has been falling fast the past few months. Now, during the pandemic, the reason was obvious. The whole shutdown thing was dragging down demand for rigs. But what would be doing that now? Marketplaces Elizabeth Trovall has that the towering.

[Dan Pickering]

Steel rigs used to drill oil and gas wells cost producers tens of millions of dollars. And Dan Pickering with Pickering Energy Partners says right now in the US we.

[Mark Finley]

Have about 40 fewer rigs drilling today than we did a quarter ago and a year ago. The reason why oil prices today are.

[ABHI Rajendran]

In the kind of mid-60s and a few months ago and a year ago.

[Dan Pickering]

They were higher and prices are what drive industry investment, says Rice University's Mark Finley.

[Mark Finley]

And typically what happens is you'll see a move in the oil prices and then a few weeks later you'll see the rig count begin to change in response to that. And then a few weeks after that you'll begin to see production change in response.

[Dan Pickering]

As far as why prices today are lower, that has a lot to do with ample global oil supply, says ABHI Rajendran with Energy Intelligence You've had, you.

[Mark Finley]

Know, kind of a steady monthly increase in production from opec. So you know, as demand has risen, even with some of the economic and other uncertainties, you know, you've pretty much had OPEC plus supply.

[ABHI Rajendran]

That demand.

[Dan Pickering]

He predicts US Oil production, which is at a record high, will Decline slightly in 2026. I'm Elizabeth Trovall for Marketplace.

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[Sabri Benishour]

This week President Trump said the baseline rate for so called reciprocal tariffs on countries around the world could now lend somewhere between 15 and 50%. That is higher than what he had previously floated. This is ahead of a self imposed August 1st deadline for these tariffs to kick in and they could change as countries try to negotiate for lower rates. But this idea of high blanket tariffs raises the question of of their purpose. For more, we are joined by Gene Grossman, professor of International Economics at Princeton University. Good morning.

[ABHI Rajendran]

Good morning.

[Sabri Benishour]

The President has said he wants blanket tariffs on a large group of countries. Just kind of across the board. Some countries are getting higher tariffs. If one stated goal of tariffs is to address trade imbalances, which vary by country, what is the purpose of across the board tariffs?

[ABHI Rajendran]

You know, it's not clear exactly what the purposes are and many of them are in contradiction with each other. Sometimes it's about trade imbalances, sometimes it's about bringing manufacturing back home. Sometimes it's about opening up our trade partners to more US exports. If it's about trade imbalances, it's very Questionable whether it's going to work.

[Sabri Benishour]

Yeah. Could you talk a little more about the ways in which the goals, the various stated goals of these tariffs are contradictory? Sure.

[ABHI Rajendran]

I mean, in order to reduce the trade deficit, we have to import less, of course, but at the same time we're raising the price of imported intermediate goods, of imported inputs, which will make reshoring of production more expensive and more difficult. Another stated goal is to raise revenue so that we can reduce income taxes as we've done. But if we reduce imports, then we're not going to raise revenue. So it can't be that we're going to reducing the trade deficit and creating a lot of tariff revenue.

[Sabri Benishour]

The President has said that these countries that are getting the across the board tariffs, they're quote, not big countries, they don't do that much business. If that's the case, will 15% tariffs create production or jobs in the U.S.

[ABHI Rajendran]

Well, I think that that's not small. I mean that's historically a huge tariff. It's going to have effects on how much we import and I think imports will drop. But in the longer run, I mean, it's intended as a shift to manufacturing to create more output in manufacturing. I think it will have some of that effect. And where is that going to come from? I think it's going to come away from the, you know, the services, the advanced technology intensive services that the US should be leading the world in. And I think we will see us ceding some of that leadership to China and to Europe, maybe with consequent effects for long run growth.

[Sabri Benishour]

So you're saying that focusing on bringing manufacturing production back will not create jobs because that production is so automated, but it's also distracting the US Economy from areas where we should be focused on strategically competing with, for example, China.

[ABHI Rajendran]

Yeah, I think that's right. I mean, it's a whole range of policies. It's not only the tariffs but the cutback on funding for research I think is, is important. The limitations on movement of people, migration is also important. All of it is throwing sand in the wheels of putting us in the lead for the next set of activities for the 21st century, which are not largely going to be manufacturing activities.

[Sabri Benishour]

Gene Grossman, professor of International Economics at Princeton University. Thank you very much.

[ABHI Rajendran]

You're very welcome.

[Sabri Benishour]

In New York, I'm Sabri Benishour with the Marketplace morning Report from 8pm American Public Media.

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