Source: Paul Krugman
by Paul Krugman
“The infamous Smoot-Hawley tariff of 1930 pushed the average tariff rate to about 20 percent. So far every country that has received a letter will be facing rates higher than that. Another way to look at it to ask how much we would expect these tariffs to reduce trade. The key number is the elasticity of substitution in world trade — the percent fall in imports caused by a one percent rise in import prices. The median estimate from many studies is 3.8, which implies that in the long run 25 percent tariffs will reduce trans-Pacific trade by almost 60 percent. That’s a lot. … These tariffs are going to hurt South Korea and Japan, although they’ll hurt U.S. consumers even more. So why didn’t Korean and Japanese negotiators make big enough concessions to satisfy Trump? Because there was nothing for them to concede.” (07/08/25)
https://paulkrugman.substack.com/p/the-tariff-beatings-will-continue