Dozens of economists, including Nobel laureates James Heckman (2000) and Vernon Smith (2002), have signed a letter criticizing US President Donald Trump's tariff policy, describing it as "misguided" and asserting that it has "no basis in economic reality."
Titled "The Anti-Tariff Declaration," the letter raises several concerns, including the potential for tariffs to cause a "self-inflicted recession." As of April 22, over 1,400 individuals have signed the letter in opposition to harmful tariff policies.
In an exclusive interview with GDToday, James Heckman, Professor of Economics at the University of Chicago and Distinguished Professor-at-Large at the Chinese University of Hong Kong, noted that Trump's tariffs threaten the credibility of the US dollar and the global trading system built around it.
The flawed logic behind Trump's tariffs
Heckman traces the origins of Trump's tariff policies to a paper published in January 2016 by three economists, led by the first author from the Massachusetts Institute of Technology.
The paper, titled "The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade," and a series of related studies, introduced the idea that trade with China has led to significant job losses.
Heckman highlighted that many towns in the Midwest, particularly in Illinois, Ohio, Indiana, and Michigan, have suffered economically as a result.
The paper claimed that the influx of Chinese goods led to a drop in manufacturing employment, resulting in a net negative effect on US unemployment due to trade with China.
Both Republicans and Democrats have embraced the ideas presented in this paper, which have contributed to the political narrative that portrays China as a bad actor that steals ideas and jobs from the US. This has led to calls for higher tariffs to protect American workers from China.
"Even though Trump was strongly anti-China and in favor of tariffs, Joe Biden did not change those tariffs when he took office; he maintained them," Heckman acknowledged.
However, the Nobel laureate believes these papers are "really misleading" due to their "flawed logic," as they are limited in scope and do not consider trade in services.
Heckman emphasized that Chinese goods imported from places like Guangzhou have significantly reduced the cost of living for many workers, especially those in unskilled positions.
"The clothes they wear and the prices becoming much cheaper are all a result of trade with China and other countries," he noted.
A trade war to distract from domestic issues
Heckman argues that real problems are being overlooked and obscured by trade wars.
He pointed out Trump's misguided interpretation of the US economy and criticized his advisers for adhering to outdated economic policies that fail to address the current global trade landscape.
"How much is going to be driven by internet commerce? How much will be affected by technology, robots, AI, and so forth? All of these innovations exist and could be very productive, but they just don't understand," he stated.
Quoting the Italian political theorist Niccolò Machiavelli, Heckman believes Trump understands that the best way to divert attention from domestic problems is to initiate a conflict.
"A trade war is a kind of war, so we are going to war now," he lamented.
Regarding the global economic landscape, the Nobel laureate condemned Trump's actions, stating that he has shaken up the world economy, created significant uncertainty, and disrupted capital markets.
"He has threatened the credibility of the American dollar and the entire global trading system built on it."
Reporter: Zhang Ruijun
Video: Qin Shaolong
Script: Zhang Ruijun
Poster: Qin Shaolong
Editor: Yuan Zixiang, James, Shen He
