It hit me last week that almost no one in the administration truly believes in tariffs. Not, at any rate, as a serious policy. The only real enthusiast for them is President Donald Trump, and he plainly does not understand how they work. Everyone else goes along with him for reasons of cowardice or careerism, but we can see from his officials’ revealed preferences that they know it is nonsense.
Exhibit A: Tariffs on movies. Last week, the president issued one of his rambling declarations on Truth Social: “Our movie making business has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’ California, with its weak and incompetent Governor, has been particularly hard hit! Therefore, in order to solve this long time, never ending problem, I will be imposing a 100 percent Tariff on any and all movies that are made outside of the United States.”
Let’s leave aside how, say, a decision to shoot parts of Barbie in the United Kingdom counts as a national security threat. Congress’s feebleness in asserting its control over trade policy no longer surprises me. Nor, sadly, does the public’s lack of concern about executive overreach.
No, let’s instead ask a more basic question. How does one impose tariffs on films? Tariffs, as any economist will tell you, fall on goods, not services. They are levied once, at the point where they cross a border.
Movies are distributed digitally, streamed online, and edited across borders. Is the plan to penalize the foreign bits of them? If so, how is that assessed? The average Hollywood film today is shot in five countries, with postproduction scattered globally.
More immediately, how do you collect them? Is everyone going to be required to install spyware that monitors the amount of foreign content they stream and calculate their tax bill accordingly?
I have put these questions to supporters of the administration, and it is clear, not just that there are no answers, but there are not supposed to be answers. This isn’t really about tariffs at all. It’s about the administration’s dislike of California Democrats, above all, Gavin Newsom.
Tariffs are Trump’s omnipolicy, his answer to everything from the deficit to Vladimir Putin’s inconvenient refusal to take the win in Ukraine. He sees them as a potent tool for every situation, like Dr Who’s sonic screwdriver. They are somehow supposed to reshore jobs, generate revenue, and prize open foreign markets — three goals that are logically incompatible with one another.
The people at Commerce and USTR know this and offer contradictory apologias for whatever argument their boss is using on any given day. It is clear, however, that they are well aware that the laws of economics were not magically suspended on April 2. Hence, their readiness to compensate victims of the tariff policy and their talk of tolerating pain, with the false implication that the economic costs are transient.
Which brings us to Exhibit B: Gaza. I hope with every fiber of my being that Trump’s peace plan succeeds. What is happening in that wretched strip of land is unbearable, and every day that the conflict continues turns another chunk of the global population, not only against Israel, but against the entire Western order.
Look closely, though, at the terms that are being proposed, and you’ll see one striking clause: “A special economic zone will be established with preferred tariff and access rates to be negotiated with participating countries.”
Got that? Preferred tariff rates. So one of the carrots for Gazans is that they can join the global marketplace without barriers.
TRUMP’S AMBITIOUS GAZA PEACE PLAN IS FRAUGHT WITH COMPLEXITY
Now this is a very juicy carrot indeed. Gaza has until now been structured in such a way as to be a terrorist habitat, cut off from international trade and made dependent on higher per capita handouts than any other territory on the planet. A bourgeois, property-owning Gaza would be a lot less indulgent of young men launching rockets and attracting retaliation. Its businessmen would want to remain on cordial terms with their customers — most of whom, given the geography and the economics, would be in Israel.
When it comes to Gaza, the State Department takes it for granted that low tariffs make a country better off. Almost every federal official understands why this is. But they all tiptoe around the fact because no one is prepared to talk the president through how trade balances work, or explain why shielding sectors from competition harms rather than helps them, or describe how pushing up prices damages the whole economy. Funny old world.
