Adam Posen has been since 2013 president of the Peterson Institute for International Economics, which the PIIE proudly refers to as the world's leading non-partisan global economics think tank. One more reason why I wanted to hear words straight from the respected economist’s mouth, on why he is — as so many other economists are - so vehemently opposed to Trump’s tariff policies. After all, even outside the Trump inner team who laud and promote tariff’s constantly, there are economists who see reasons why the current debate is warranted. Adam spells this out.
Adam is unequivocal - and widely supported by the majority of mainstream economists - that Trump’s anti-tariff policy is the wrong way to go, defies conventional economic wisdom, and is highly likely to cause a recession within the next year and a half.
So dive in and hear what Adam has to say. Agree what he has to say or not, you will get a clear concisive argument that spells out why Trump tariffs are hurting the U.S. economy badly, and hear about simple solutions that go beyond partisan recommendations and could help the U.S. economy navigate the road ahead.
Bonus point. Adam and I discussed his recent article in Foreign Affairs which I found to be simple and understandable, and which we had a great time discussng: “Trade Wars Are Easy to Lose: Beijing Has Escalation Dominance in the U.S.- China Tariff Fight.” I asked and he answered plenty of questions about why China not the U.S. has the advantage in the trade war being waged. Check it out. And let me know - and Adam - what you think.
Chance of recession is not negligible 00:01:56:10
My colleague Karen Dynan puts a 40 plus percent chance on a recession in the U.S. over the next year. My own forecast, it's a 65% chance of negative growth over the next year and a half. They're not like for like, but they're roughly in the same place. And if you get U.S. contraction, there are large parts of the world economy that will also go into contraction. That's said it's mostly going to be the poorest countries of the world. The ones already weak, the ones already short of capital are the ones already behind who will be most harmed. And the situation China will suffer somewhat from the trade war with the U.S., but not as much as the U.S. will and Europe, Japan, U.K., Australia. And if Trump stops stepping on them, Mexico have some shot at doing okay in this environment.
Rules based System? 00:09:11.510
I think, by saying rules-based system which she <Georgieva> should. She's saying the trump approach and the Trump goals are not right.
China does create distortions 00:03:43:10
…there are a variety of ways in which China is distorting the world. Trading system subsidies on a huge scale to certain industries, barriers to entry that are very high intellectual property, theft, undervaluation in the past, not so much now of the currency through manipulative measures. all of which matter, and all of which, if the Biden or Trump Administrations, or even the Obama Administration previously had dealt with in a more constructive way, using our allies together in a system would have been good, and maybe would have preempted some of these problems.
The US is the instigator 00:04:54:20
The US is clearly prompting the trade war. Right now the U.S. is clearly being even less rules based, more unilateral, and the US. is frankly having is a much bigger source of uncertainty for the world.
Three things wrong with Trump 00:06:15:07
Essentially, there are three things wrong with the Trump Administration's policy program.
· The 1st is scale They're taking on all countries at once with no real justification, very arbitrary, and at a huge levels of tariffs 10 to 20 times <larger> that what they previously were in the Us. And frankly, 10 or 20 times what they are, even in the countries we complain about like India. Not so much. But most countries we're talking about.
· Second is because it is much more done through executive orders and through capricious means. Which means it is very difficult to negotiate in any credible way. Whether you're China or the EU or Japan or Mexico, and Congress has abdicated its oversight legally, they have plenty of authority to check this. And in fact, they're supposed to have some of these tariffs and emergency powers reviewed at certain intervals expire at certain intervals, and they're not enforcing that at all. And so this is an autocrat move now you can say XI’s an autocrat so fine, but it matters more when the US, does it? It matters more when a country that has been an advocate of rule of law, and which was seen as a safe haven and an example ceases to be that, rather than when the Communist party of China continues to be the Communist party of China.
· But the 3rd thing which I really want to emphasize is what I warned about in October, before President Trump won the election, which was that his program is based on 2 things. It's it's based on <a> weaponizing uncertainty and <b> believing that these trade matters are much more important than macro outcomes or are necessary to macro outcomes, and both of those are wrong. So the weaponizing uncertainty just creates this miasma of worry. And it's not just in trade. I mean, this is what DOGE has done. If they had wanted to shut down the Department of Education, USAID, that was expected. I might think it's a bad idea, but if they just simply put in legislation and zeroed out those specific entities in the next budget, the economic impact would have been very small, but if they do it by creating uncertainty for all Government employees and all government contractors, and do it in an incredibly arbitrary, untransparent, unpredictable way. It has much bigger effects. So the same is true in trade.
What internationalism demands 00:09:40:17
Leaving China aside, and you know everybody else. What happens is trade does several things. It allows them to specialize in ways they otherwise couldn't. They're not dependent. If you're not China or the US. You don't have everything within your country. You don't have every piece of technology. You don't have every resource. You really need to get stuff from abroad. and in order to survive and to get stuff from abroad,
· the best way to do it? Is you become specialized in something or some things, or you develop businesses that are competitive in certain areas, whether that's flower growing or cocoa or assembly of shoes, or much more higher up the value chain, whatever it is.
· The second thing is it's a disciplining device in countries which generally lower income is associated with more corruption, more capricious governments, less transparency. If they're subject to international trade, then there's a bit of discipline on them, both legally and more importantly, competitive to flee, to behave, because otherwise the Europeans, the Americans, whoever will not deal with them, they're not meeting certain standards. They can't be depended upon. So it acts as a check on the behavior of companies and even more so on behavior of of capricious or nasty governments.
Adam S. Posen has been president of the Peterson Institute for International Economics since January 2013. Over his career, he has contributed to research and public policy regarding monetary and fiscal policies in the G-20, the challenges of European integration since the adoption of the euro, China-US economic relations, and developing new approaches to financial recovery and stability. He was one of the first economists to seriously address the political foundations of central bank independence and to analyze Japan's Great Recession as a failure of macroeconomic policy. While at the Federal Reserve Bank of New York during 1994–97, he coauthored Inflation Targeting: Lessons from the International Experience with Ben Bernanke, Thomas Laubach, and Frederic Mishkin.
During Dr. Posen's presidency, the Peterson Institute has won global recognition as the leading independent think tank in international economics, including repeated top rankings from the Prospect Think Tank Awards and the Global Go To Think Tank Index. Under his leadership, PIIE has expanded to include 42 world-renowned resident and nonresident fellows and increased its endowment by 50 percent. Since 2013, PIIE has developed high-level recognition and research partnerships in the People's Republic of China, while deepening longstanding ties with policymakers in other East Asian, European, and North American capitals. The Institute also has broken new ground in providing accessible economic analysis to the general public.
In September 2009, Posen was appointed by the UK Chancellor of the Exchequer to serve a three-year term as an external voting member of the Bank of England's rate-setting Monetary Policy Committee (MPC). During this critical period for the world economy, Posen advocated an activist policy response to the financial crisis, led the MPC into quantitative easing, and accurately forecast global inflation developments. The Atlantic named him in its line-up of global "Superstar Central Bankers" in 2012. He also consulted for the UK Cabinet Office for the successful London G-20 summit of 2009 during the global financial crisis.
He was made an honorary Commander of the Most Excellent Order of the British Empire by Her Majesty Queen Elizabeth II in 2014 for his services to British economic policy. He received the Order of the Rising Sun from the government of Japan in 2021 for his distinguished achievements in advancing US-Japanese economic relations and Japanese economic policy in the global context.
Posen has been the recipient of major grants and research fellowships from the American Academy in Berlin, the Brookings Institution, the Bank of England, the European Commission, the Ford Foundation, the Sloan Foundation, and the US National Science Foundation. In November 2018, he gave the inaugural Adam Smith Distinguished Lecture at the University of Glasgow. In January 2019, he was named a CEPR Distinguished Fellow. He served seven terms as a member of the Panel of Economic Advisers to the U.S. Congressional Budget Office from 2005 to 2019. Posen received his BA and PhD from Harvard University.
Posen has been widely cited and published commentary in leading news and policy publications, including the Financial Times, Foreign Affairs, New York Times, Wall Street Journal, Washington Post, Nihon Keizai Shimbun, Asahi Shimbun, Handelsblatt, Die Welt, Harvard Business Review, and The International Economy. He appears frequently on Bloomberg television and radio, among other media programming.
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