Ryan Bourne
In a New York Times essay just before Christmas, American Compass’s Oren Cass once again blasted economists for refusing to cheerlead Donald Trump’s tariffs.
It’s the same tune he’s been humming for years: the trade deficit is a calamity (it isn’t), globalization alone sparked “deaths of despair” (not the case), trade with China is unremittingly awful for US workers (nope), and the case for free trade rests solely on simplistic comparative advantage “theory” and dodgy modeling (not, say, real-world evidence). The only new argument is Cass’s claim that we free traders at Cato, confronted by free trade’s disastrous economic effects, have suddenly pivoted to justifying free trade on grounds of individual liberty—an additional benefit we’ve actually discussed for decades.
Look through the fog, however, and Cass’s whole argument really hinges on this melodramatic retelling of recent US history since China joined the WTO. He paints a landscape of vanishing factory jobs, tumbling industrial output, and shattered communities, for which economists are apparently culpable given their unwavering advocacy of free trade dogma.
In fact, Cass thinks economists should take a leaf from the book of Seinfeld’s George Costanza. In the episode “The Opposite,” Jerry advises George that because his instincts have always been wrong, resulting in his loser life, making the opposite decisions might help reverse his fortunes. He tries it and it works! Cass therefore asks: given globalization has so miserably failed, why aren’t economists similarly flipping the script and cheerleading for tariffs and industrial policy?
Plenty of economists have already picked apart Cass’s logic on economics, trade theory, and the empirical evidence, so I won’t repeat those points here. Instead, I’ll just note two high-level problems with Cass’s argument that perhaps explain why most economists aren’t penning their mea culpas.
First, it’s laughable to assume that if a policy happens alongside some bad outcomes, the opposite policy—in this case, slapping up indiscriminate trade barriers—will yield good ones. Even Cass knows this deep down. When detailing why protectionism is justified, for example, he will almost always point to China and high-tech manufacturing—justifications for protectionism that could potentially serve some national security or “resilience” objective.
Yet just a small minority of all US trade—imports and exports, goods and services—is with China, and the vast majority of it (and globalization more broadly) involves things other than high-tech goods. We should call it the modern protectionist’s “motte-and-bailey”: what starts with a seemingly serious concern about, say, America’s levels of semiconductor production, is used in service of advocating universal tariffs that end up making Americans pay more for bananas and avocados. Perhaps economists recognize the ridiculous logical leap.
Second, and more damningly, most economists don’t see the US economy as the train wreck that Cass describes it as. Yes, we have problems that some are too Panglossian about. Yes, not enough politicians care about long-run growth. But a good economist will not simply assess the seen; he will also assess the unseen, including the ever-important question, “compared to what?” And that’s where Cass’s thesis most obviously dissolves.
Historically, Cass has praised Germany or Japan as examples of countries that, despite the secular trend of a shrinking relative manufacturing sector everywhere, have nevertheless maintained a high level of total output dedicated to industry. Indeed, their manufacturing value added tots up to a higher share of GDP—19 percent—than America’s 11 percent. Germany has also posted a goods trade surplus for years—another Cass benchmark for economic success.
Yet if that is the formula for general prosperity, it’s well hidden. From 2000 to 2023, US per capita GDP grew by nearly 36 percent, while Germany’s rose just 26 percent and Japan’s 18 percent. Given the US was richer to begin with, Americans are now 17 percent richer than Germans and a whopping 61 percent richer than the Japanese.
Nor has a larger manufacturing base and trade surplus spared the poorest men in Germany—the left-behind that modern protectionists say would benefit most from tariffs and more manufacturing. One recent paper, in fact, explains “men at the bottom quintile of the German male earnings distribution had lower average earnings in 2019 than in 2001.”
While there are obviously many other economic, policy, and cultural differences between these countries, these outcomes hardly scream that there could be dramatic gains made from manufacturing-centric protectionism. And that’s being generous: it’s not clear even in theory how incentivizing the reshoring of low-skilled manufacturing jobs like textiles through broad-based goods’ tariffs could raise aggregate productivity (and thus wages).
What about the supposed non-economic benefits of having a larger industrial base? Well, these other countries’ heftier manufacturing sectors haven’t appeared to make them more “resilient” to recent shocks like the pandemic or war in Ukraine. Since 2019, US per capita GDP has grown by 7 percent, while Germany completely flatlined and Japan managed just 2.6 percent. All this, I suppose, helps explain why Cass spurns GDP in favor of more eccentric (and flawed) metrics to measure the well-being of Americans.
My main point is: Cass doesn’t provide a real-world example of a modern country that’s supposedly spurned free trade, embraced more manufacturing-centric policy, and outperformed the US, even on those alternative measures. Instead, we get served cherry-picked anecdotes and speculative motivated reasoning, arguments thrown at the wall to imply tariffs and industrial policy offer salvation from the nation’s problems—real and imagined.
Exhibit A for this kind of reverse-engineered policy advocacy: in 2019, Cass argued that industrial policy would be beneficial because manufacturing was prone to faster productivity growth because of the propensity to automate, so diverting more resources towards manufacturing would boost aggregate growth rates. Now, he cites weak manufacturing productivity since 2010 as proof (somehow) that free trade is failing, and as the justification for the same big government fix. No matter the trend, the prescription is always the same: restrict trade and let the government micromanage the economy’s industrial composition. Never mind, of course, that US tariffs were generally lower during the prior period—which included the much-derided “China Shock”— than they were during the latter.
This is but one example of why debating the neo-protectionists is maddening. The rationales for higher tariffs and industrial planning constantly shift, narrow case studies are wildly extrapolated, and they rarely offer up a “model country” as evidence their policy suite would provide broad prosperity. Meanwhile, they brush off any standard, cross-country economic comparisons in favor of simplistic timeline narratives, while explicitly ignoring thorny trade-offs (like how manufacturing employment and manufacturing productivity in the US have been inversely related in recent decades).
Despite Cass’s claims to the contrary, there have been real and substantive critiques of trade economics within the profession. New models and theories have developed, and researchers regularly document the gaps in knowledge that remain. Academics’ role in recent political narratives could arguably be critiqued from the opposite direction too: as UCSD international economist Kyle Hadley has said, clever empirical strategies led to an excessive focus on manufacturing job loss from imports, with (at least initially) far less emphasis on exports, services, and other product and corporate innovations encouraged by the absence of trade barriers.
Yet Cass acknowledges none of this. Instead, the foundation underpinning his narrative remains the idea that America’s economy is a hot “mess” because of trade policy, thus justifying yet another American experiment with broad-based protectionism. The obvious fair and simple question to ask: a mess relative to what? If even Cass can’t answer that clearly, he shouldn’t be surprised economists aren’t switching sides.