President Trump and his supporters have clashed with mainstream economists for years about the merits of tariffs. Now, the world will get to see who is right, as the president’s sweeping levies on automobiles and auto parts play out in a real-time experiment on the global economy.
In Mr. Trump’s telling, tariffs have a straightforward effect: They encourage companies to move factories to the United States, creating more American jobs and prosperity.
But for many economists, the effect of tariffs is anything but simple. The tariffs are likely to encourage domestic car production over the long run, they say. But they will also cause substantial collateral damage that could backfire on the president’s goals for jobs, manufacturing and the economy at large.
That’s because tariffs will raise the price of cars for consumers, discouraging car purchases and slowing the economy, economists say. Tariffs could also scramble supply chains and raise costs for carmakers that depend on imported parts, reducing U.S. car production in the short term.
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