In this episode, Alex and Tyler tackle the resurgence of tariffs in American policy, a development neither saw coming after decades of trade liberalization. They unpack the economics of who really pays when tariffs jump from 2.4% to 18% in a matter of weeks, exploring everything from tax incidence and exchange rate adjustments to the question of why we treat tariffs so differently from currency depreciation. Along the way, they debate Tyler's new "soft" arguments against tariffs (including contagion effects and rising correlations), examine whether Lerner symmetry still holds in a world of T-bills and exorbitant privilege, and consider the Trumpian case for investment over trade. From soybeans and pharmaceuticals to AI data centers in outer space, they trace how tariff policy affects everything from American landowners to Canadian defense spending.

Tyler arrives ready to confuse and Alex ready to clarify, but by the end they agree on one thing: we've muddled ourselves into something quite bad.

Link to transcript: https://www.mercatus.org/marginal-revolution-podcast/return-tariffs

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https://marginalrevolution.com/
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Timestamps

00:00:00 - The return of tariffs
00:02:44 - The threat of contagion
00:04:14 - Who really pays for tariffs
00:16:39 - Exchange rates muddle the picture
00:20:40 - Are tariffs making bad things more correlated?
00:22:53 - Does Lerner Symmetry hold?
00:29:56 - Differences between dollar depreciation and tariffs
00:33:13 - Retaliation
00:34:28 - Tariffs as a Georgist tax on land rents
00:38:10 - How the US economy will adjust
00:49:42 - The bottom line