On Squawk Box, economist Justin Wolfers calls out JD Vance for “lying to the American public” during previous CNBC appearance
Wolfers: “He's saying if we implement tariffs, you'll get lower prices. That's absurd. That's crazy. We have no examples of that occurring.”
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From the September 16, 2024, edition of CNBC's Squawk Box
ANDREW ROSS SORKIN (CO-HOST): Joining us right now is Justin Wolfers, University of Michigan professor of public policy and economics. You listened to that explanation by JD Vance. Does it make sense to you?
JUSTIN WOLFERS (UNIVERSITY OF MICHIGAN ECONOMIST): I'm an economics professor, mate. And, if that was one of my students that would be a D-, and that's because we don't fail students anymore.
Look, the problem is we — And, I want to talk about the case study, because it's a case study that matters not just for the tariff debate but also speaks to how JD Vance is conducting his campaign. There's been very careful studies by economists that showed when you implemented a tariff under Trump on washing machines, that dollar for dollar, every dollar of the tariff went through to higher prices for washing machines.
Is there criticizing a graph of mine? Fair enough. He says, let's extend the sample. Let's make sure that this effect persists and in fact it does. Two, three, four years later, you see that higher washing machine prices followed the Trump tariffs, and it's not just washing machines by the way. And a funny aside, you put a tariff on washing machines and all of a sudden those sneaky corporations decide that what they will do is also raise the price of dryers. So, it's an interesting case study also in the very different ways in which tariffs can lead to all sorts of distortions American consumers end up paying.
SORKIN: Justin, is there any argument to be made about inducing manufacturing in the United States as a function of tariffs? And are there any examples where in fact prices — perhaps maybe they don't go down, but they stay the same?
WOLFERS: There's the possibility, right? So, JD can tell a story. There's the possibility that you get production in the U.S. and then those factories grow up and become productive and join the world economy. But we have case study after case study. This has been tried all around the world, not just in the United States, India and Brazil, for instance, tried to become PC manufacturers. They spent millions, probably billions of dollars subsidizing the industries, and it turns out that if you've got a company that can only be competitive if it's getting a leg up from tariffs, the moment you take those tariffs away what you discover is you've got yourself an unproductive local company.
Look, I also want to go back, which is JD didn't just promise that he'd get something that didn't happen: manufacturing capacity in the U.S. He's lying to the American public. He's saying if we implement tariffs, you'll get lower prices. That's absurd. It's crazy. We have no examples of that occurring. Let's have a mature economic debate, one in which we tell the truth and one in which we admit and recognize there are real trade-offs to all of these issues.