President Donald Trump's decision to impose 25% tariffs on imports from South Korea and Japan is drawing sharp criticism from economists who say the rationale behind the move is fundamentally flawed.
What Happened: On Monday, Economist Peter Schiff called out Trump’s public letters to both East Asian nations, saying that they showed “a complete lack of understanding of trade,” in a post on X.
Schiff notes that the tariffs charged by Japan on U.S. goods average under 2%, and are even lower in South Korea, at under 1%. “Our trade deficits result from South Korea and Japan making more goods that Americans want to buy than the goods we make that they want to buy,” he says.
He also warns that the tariffs are unlikely to achieve their intended effect, which he blames on the falling U.S. dollar in recent months.
“Trump’s 25% tariffs will have a minimal effect on our trade deficits with either nation. In fact, as the dollar falls, our trade deficits will likely rise in dollar terms, as we pay more to import less,” he said.
This sentiment was echoed by University of Michigan economist Justin Wolfers, who pointed out that South Korea already has a free trade agreement with the U.S.
“The U.S. is imposing a 25% tariff on Korea because of trade deficits that it claims are ‘engendered by Korea’s Tariff and Non-Tariff, Policies and Trade Barriers,'” Wolfers says. “But Korea has a free trade agreement with the U.S. It charges zero tariffs on nearly everything.”
Why It Matters: Over a month ago, Schiff had said the same, that only a major decline in the U.S. dollar, one that makes imports prohibitively expensive for American consumers, can help reduce the trade deficit.
A minor decline like the present, on the other hand, would only serve to “make the trade deficit larger by increasing the cost of imports. The consequence is both inflation and interest rates will rise,” he said.
Japan's Prime Minister Shigeru Ishiba has since voiced his dissatisfaction with Trump’s decision to impose 25% tariffs on goods imported from the country, calling it “truly regrettable.”
Image by Rokas Tenys via Shutterstock
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