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40 Cato J. 27 (2020)
Tariffs and Monetary Policy: A Toxic Mix

handle is hein.journals/catoj40 and id is 27 raw text is: TARIFFS AND MONETARY POLICY: A TOXIC MIX Michael D. Bordo and Mickey D. Levy The ratcheting up of tariffs and the Fed's discretionary conduct of monetary policy are a toxic mix for economic performance. Escalating tariffs and President Trump's erratic and unpredictable trade policy and threats are harming global economic performance, distorting monetary policy, and undermining the Fed's credibility and independence. President Trump's objectives to force China to open access to its markets for international trade, reduce capital controls, modify unfair treatment of intellectual property, and address cybersecurity issues and other U.S. national security issues are laudable goals with sizable benefits. However, the costs of escalating tariffs are mounting, and the tactic of relying exclusively on barriers to trade and protectionism is misguided and potentially dangerous. The economic costs to the United States so far have been rela- tively modest, dampening exports, industrial production, and busi- ness investment. However, the tariffs and policy uncertainties have had a significantly larger impact on China, accentuating its structural economic slowdown, and are disrupting and distorting global Cato Journal, Vol. 40, No. 1 (Winter 2020). Copyright © Cato Institute. All rights reserved. DOJ:36009/CJ.40.1.3. Michael D. Bordo is Distinguished Professor at Rutgers University and Distinguished Visiting Scholar at the Hoover Institution. Mickey D. Levy is Chief Economist for the Americas and Asia at Berenberg Capital Markets. Both are mem- bers of the Shadow Open Market Committee (SOMC). The authors thank Andrew Filardo, Owen Humpage, Bernie Munk, and George Shultz for helpful comments. An earlier version of this article was presented at the SOMC's September 27, 2019, meeting. 27

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