The Tariff Downturn

Global downturn? “Weakened economic prospects will be felt around the world, with almost no exception,” said Organization for Economic Cooperation and Development Chief Economist Alvaro Pereira, announcing that the organization has slashed global growth forecasts for the second time this year, mostly due to tariffs. “Lower growth and less trade will hit incomes and slow job growth.”

“The OECD now forecasts global economic growth to slow to 2.9% this year from 3.3% in 2024,” notes Bloomberg. “It expects the rate of expansion in the US will tumble further, to 1.6% from 2.8%—an outlook that is significantly lower than its projection in March.”

Top trade representatives from the 38 member countries in the OECD—including officials from both the U.S. and China—will be meeting in Paris this week. Figuring out how to navigate a future with far more trade barriers than before is basically the top agenda item. “Agreements to ease trade tensions and lower tariffs and other trade barriers will be instrumental to revive growth and investment and avoid rising prices,” said the OECD in a statement. “This is by far the most important policy priority.”

“The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,” said OECD Secretary-General Mathias Cormann. “Today’s policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.”

The “reciprocal” tariffs—calculated based on trade deficits, which is an odd way to do it—that President Donald Trump announced on “Liberation Day” (April 2) were greeted with stock market turbulence and widespread outcry; soon after, the implementation of the tariffs was delayed by 90 days to allow countries time to come to the bargaining table. But that 90-day deadline is up next month, on July 9, and it’s not clear who has reached or will reach a deal. Meanwhile, the U.S. and China have been engaged in an escalating tit-for-tat ramp-up of tariff levels, finally brokering a deal on May 12 that has proved fragile, as Trump accused Xi Jinping of violating the trade deal just weeks after, with Xi now claiming that Trump has also violated his end of the bargain.

It’s almost like their roles as trading partners had made that relationship functional. Now it’s unclear what exactly we’re getting out of the new trade regime; some amount of increased revenue, sure, but possible global economic downturn, with effects most concentrated in the U.S., Canada, Mexico, and China—the places most harmed by Trump’s tariff policies.

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Drill, baby, drill: The Trump administration has decided to remove certain federal protections for millions of acres in the Alaskan wilderness, far north of Anchorage, in order to allow for more oil drilling. Of course, some of these lands only became protected from oil and gas drilling last year, when the Biden administration decided to ban the practice on 13 million of the total 23 million-acre area (known as the National Petroleum Reserve-Alaska). “Alaska’s majestic and rugged lands and waters are among the most remarkable and healthy landscapes in the world, sustaining a vibrant subsistence economy for Alaska Native communities,” said Biden at the time. None of this is false, but Biden conveniently neglected to mention that the state cannot continue to fund itself if it stops generating revenue from the oil and gas industry. (Not to mention the Permanent Fund, which pays out some dough to residents each year.)

“Created in the early 1900s, the reserves were originally envisioned as a fuel supply for the Navy in times of emergency,” notes The New York Times. “But in 1976, Congress authorized full commercial development of the federal land and ordered the government to balance oil drilling with conservation and wildlife protection.” Secretary of the Interior Doug Burgum said, in announcing the change, that the Biden administration had prioritized “obstruction over production” and that the protections were “undermining our ability to harness domestic resources at a time when American energy independence has never been more critical.”

Later in the piece, the Times cites disapproval from Rosemary Ahtuangaruak, the former mayor of Nuiqsut, a town of 500. But it’s not clear to me why every single low-population town should deserve veto power; what Burgum is saying remains true, and nobody ever claimed oil drilling came without tradeoffs.

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Scenes from New York: The New York Police Department is helping federal investigators at various agencies gather information to round up immigrants who are, in some cases, here illegally or overstaying their visas. “The city’s sanctuary laws forbid the department from divulging information in immigration cases, which are civil matters,” reports The New York Times, “but the police often cooperate with federal authorities on criminal cases, usually in joint investigations into crimes like sex trafficking, drug and gun dealing, and terrorism.”

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QUICK HITS

• You simply must appreciate this absurd headline from The New York Times: “Harvard Argues Cutting Off Its Government Funding Is Wasteful.” I mean, yes, in a sense: Research that’s stopped and thrown out, because labs no longer receive funding from the federal government, is an example of waste. But it’s not like it’s impossible for them to find alternative funding sources.
• Nevada’s governor just signed a bill that will remove a restriction preventing people from becoming foster parents due to long-ago marijuana convictions.
• “The federal personnel agency has launched an online system for processing retirement applications, ending a paper-based method that had remained largely unchanged for decades,” reports Bloomberg. “President Donald Trump cited the project as one of DOGE’s top accomplishments as Musk wrapped his stint as a special government employee at the White House last week. The Office of Personnel Management‘s new retirement portal went live on Monday. Most federal employees starting the retirement process will be required to use it right away, with paper forms being phased out for others by July 15, according to a memo from acting OPM Director Charles Ezell.” (Crazy nugget from that article: “That old system relied on federal workers at a former limestone mine in Pennsylvania.” Seriously?!)
• Klarna for groceries
• The mask is lifting:

The Washington Examiner (the conservative news outlet) reports that Stephen Miller screamed: “What do you mean you’re going after criminals? Why aren’t you at Home Depot? Why aren’t you at 7-Eleven?” Kinda blows up the narrative that they care about public safety. pic.twitter.com/sJW8q58xVV

— David J. Bier (@David_J_Bier) June 2, 2025

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Source: https://reason.com/2025/06/03/the-tariff-downturn/