Author Matthew Lynn writes for the WP:
Inflation would surge. Supply chains would crash. And the economy would be plunged into a deep recession while the stock market tanked. When President Donald Trump imposed huge tariffs on imports in April, the mainstream economic establishment and the big forecasters on Wall Street were virtually united on one point: The tariffs would trigger stagflation, at best, and a deep slump, at worst. It sounded like life would resemble a post-apocalypse Netflix series, with survivors dodging zombies and fighting one another for the last few items at the mall….
The one thing a liberal economy does very well is adapt to change. Most businesses have simply taken the tariffs in their stride and moved on. History tells us that free markets can cope with wars, plagues and revolutions. It was always slightly absurd to argue that 20 percent levies on Vietnamese-made Halloween masks would be the end of the world.
Finally, it is starting to look as if the United States actually was getting a raw deal on trade. The U.S. now imposes an average tariff of 18.6 percent, the highest since 1933, according to Yale’s Budget Lab. And yet prices are rising by only about 3 percent. It turns out the foreign exporters were making enough money from American consumers that they can absorb most of the new tariffs, either in lower profits or through efficiency savings. They are not being paid by American consumers the way that was predicted. The extra $30 billion a month in revenue the tariffs are already generating is not exactly “free money” (after all, the most enduring lesson of this dismal science is that there is no such thing as a lunch you don’t have to pay for). But it’s as close to it as anything we have seen for a long time…
Investors bailed out of U.S. stocks and switched into European equities after they were told that the profits of American companies would crash; take a look at the French market this week to see how that is working out for them. Businesses postponed investment or laid off staff to prepare for a slump that didn’t happen. Instead, tariffs are working at least reasonably well. They are bringing in an expected $400 billion a year of extra tax revenue, with little negative impact, and over time may make it easier for U.S. manufacturers to compete, and perhaps even create skilled blue-collar jobs.
ChatGPT says: The piece makes three central claims and builds a larger meta-argument about credibility in economics.
1. Core argument:
Lynn argues that economists and Wall Street forecasters predicted catastrophe when Trump’s new round of tariffs hit — recession, inflation, market collapse — but those forecasts have not come true six months later. Growth and employment are solid, inflation is contained, and tax revenue is up. Therefore, the profession needs to confront its forecasting failure.
2. Explanations offered:
Political bias: Lynn asserts that economists suffered from “Trump derangement syndrome,” letting political dislike skew analysis. He draws an analogy to Brexit predictions that also proved too pessimistic.
Misunderstanding markets: He claims economists underestimated market adaptability — businesses adjust, supply chains reroute, and global producers absorb price shocks.
Misreading trade dynamics: He suggests foreign exporters, not U.S. consumers, are bearing most of the tariff costs, as prices have not spiked proportionately.
3. Broader implications:
Lynn likens economists to political pollsters — once trusted experts who have lost public confidence because of repeated predictive errors and perceived bias. His prescription is humility and neutrality: economics should return to evidence-based, apolitical analysis or risk irrelevance.
4. Analytical notes:
The piece is polemical, not empirical. It selectively uses early-period data to argue that tariffs “worked,” though six months is too short to measure long-term structural effects (e.g., lagged inflation, supply-chain shifts, global retaliation).
The “Trump derangement” framing is ideological shorthand rather than analysis — it simplifies legitimate methodological issues (e.g., model assumptions about pass-through rates and trade elasticities).
The adaptation point has merit: firms often reconfigure supply networks faster than macro models assume. But that doesn’t invalidate the discipline — it highlights model calibration limits, not political bias.
The claim that exporters absorbed tariffs contradicts most empirical studies of the 2018–2019 tariff round, which found roughly half the burden fell on U.S. importers/consumers. The column treats current data as conclusive without considering delayed effects or compensating fiscal stimulus.
5. Bottom line: This is a populist critique of the economics profession masquerading as a performance review. Lynn’s main thrust — that economists need more intellectual humility and less partisanship — is fair. His supporting logic, however, cherry-picks short-term indicators and attributes complex forecasting errors to political psychology rather than to the inherent uncertainty of modeling behavioral systems under shock conditions.
