The Tariff Receipts Are In
Every credentialed economist predicted the tariffs would destroy the economy. The economy is bigger than it has been in a decade. Someone owes someone an explanation.
The economic-policy commentariat spent eight years explaining that tariffs would destroy the United States economy. The argument came in many flavors. They would raise consumer prices catastrophically. They would invite retaliation. They would shrink trade in absolute terms. They would slow GDP. They would drive inflation. Each of these predictions was made with confidence, by named economists, in widely-read publications, with credentials prominently displayed.
Each of these predictions has now had time to be tested. The tests are not flattering.
What was predicted vs. what happened
Consumer prices did not catastrophically rise. They moved on tariff-affected categories by single-digit percentages, well within the range of normal year-over-year variation in those categories, and the macro inflation index continued its disinflationary trend through the period. Retaliation occurred, but the retaliation was less severe than predicted because the trading partners depended more on access to American consumers than American consumers depended on those particular trading partners. Trade in absolute terms did contract on certain bilateral lanes — that was the point — but it was reabsorbed by other lanes, with the United States and its allies trading more with each other and less with the adversary economies that had become the original concern.
GDP did not slow. It accelerated. Manufacturing employment, which had been declining for a generation, posted its first sustained gains since the early 1990s. Household real wages at the lower end of the distribution rose for the first time in a decade. None of this is a coincidence. None of this is the result of factors economists did not understand. It is the predictable consequence of a policy that the economic commentariat insisted, against textbook evidence, was impossible.
The intellectual reckoning
The reckoning will come slowly and grudgingly. The same publications that ran 2018-vintage essays explaining that tariffs were unconditionally bad now run 2026-vintage essays explaining that the current outcome was the result of factors the previous administration had set in motion. The framing has shifted from "this can't work" to "this worked, but for reasons unrelated to the policy." That framing will not survive the next decade, but it will get us through the next year, which is what the framing is for.
The honest version is shorter. The free-trade consensus of 1995 was a particular argument that applied to a particular world. When that world stopped existing — when one of the two largest trading partners turned out to be a strategic adversary rather than a converging democracy — the argument needed updating. The economists did not update. The voters did. The policy followed the voters, the receipts followed the policy, and now the economists are figuring out a graceful retreat.