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Job losses
But what about the impact of tariffs on job creation? Surprisingly, an increase in import taxes has been found to result in slightly more unemployment across countries.
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An example provided by Irwin at Dartmouth College points to one plausible explanation — and it has to do with the steeper cost of imported goods.

“A number of studies have shown, on net, we lost jobs from the (2018) steel tariffs rather than gained jobs because there are more people employed in the downstream user industries than in the steel industry itself,” he said.
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A study by the Federal Reserve Board found that a rise in input costs resulting from US tariff hikes in 2018-19 led to job losses in American manufacturing. The damage from those higher expenses was compounded by retaliatory taxes on US exports, more than offsetting a small boost to manufacturing employment from US tariffs — at least so far, the 2024 paper said.

Retaliation by other countries is indeed another danger of pulling the tariff lever. Higher tariffs on American exports would typically raise their prices for foreign consumers, hitting demand for the goods in many cases.

When Trump announced new tariffs this year, America’s major trading partners were quick to strike back with their own levies, although the US then agreed a temporary truce with China and the European Union.

Costs of free trade
While economists generally agree that free trade has benefited the global economy in recent decades, they acknowledge that it comes with certain costs.

One is the loss of jobs in communities that are particularly exposed to new competition from foreign manufacturers.

That is similar to the impact of technological progress on workers. “Manufacturing jobs as a share of the labor force have come down everywhere. It isn’t a US-specific story,” said Gimber at JPMorgan Asset Management, pointing to automation.

He drew a parallel between helping workers affected by higher imports and what is known as a just transition — the idea that the drastic changes needed to move toward a greener economy should be fair to everyone and minimize harm to workers and communities.

In both cases, providing workers in impacted industries with new skills or retraining them could be key, Gimber said.

Another potential cost of free trade is dependency on far-flung manufacturers. That took on new relevance during the pandemic, which snarled global supply chains, contributing to shortages of products such as face masks and respirators in the US and elsewhere.

However, economists do not typically see tariffs as a good way to build up domestic manufacturing, Fatas at INSEAD said, noting that subsidies for specific industries are viewed as a better tool “because they work more directly.”

But perhaps the strongest argument in favor of free trade is its importance to maintaining peace between nations.

As Gimber’s colleague David Kelly noted in March, closer trade relations give countries more to lose in any conflict.

Santa Fe, New Mexico
AP — At least three people were missing in a mountain village in southern New Mexico that is a popular summer retreat after monsoon rains triggered flash flooding Tuesday that was so intense an entire house was swept downstream.
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Emergency crews carried out at least 85 swift water rescues in the Ruidoso area, including of people who were trapped in their homes and cars, said Danielle Silva of the New Mexico Department of Homeland Security and Emergency Management.

No deaths were immediately reported, but Silva said the extent of the destruction wouldn’t be known until the water recedes.
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“We knew that we were going to have floods … and this one hit us harder than what we were expecting,” Ruidoso Mayor Lynn D. Crawford said during a radio address Tuesday night.

Crawford said that some people were taken to the hospital, although the exact number was not immediately clear. He encouraged residents to call an emergency line if their loved ones or neighbors were missing.
The floods came just days after flash floods in Texas killed over 100 people and left more than 160 people missing.

In New Mexico, officials urged residents to seek higher ground Tuesday afternoon as the waters of the Rio Ruidoso rose nearly 19 feet in a matter of minutes amid heavy rainfall. The National Weather Service issued flood warnings in the area, which was stripped of vegetation by recent wildfires.

A weather service flood gauge and companion video camera showed churning waters of the Rio Ruidoso surge over the river’s banks into surrounding forest. Streets and bridges were closed in response.

Kaitlyn Carpenter, an artist in Ruidoso, was riding her motorcycle through town Tuesday afternoon when the storm started to pick up, and she sought shelter at the riverside Downshift Brewing Company with about 50 other people. She started to film debris rushing down the Rio Ruidoso when she spotted a house float by with a familiar turquoise door. It belonged to the family of one of her best friends.

Her friend’s family was not in the house and is safe, she said.

“I’ve been in that house and have memories in that house, so seeing it come down the river was just pretty heartbreaking,” Carpenter said. “I just couldn’t believe it.”

There were also reports of dead horses near the town’s horse racing track, the mayor said.

Two National Guard rescue teams and several local teams already were in the area when the flooding began, Silva said, and more Guard teams were expected.

The area has been especially vulnerable to flooding since the summer of 2024, when the South Fork and Salt fires raced across tinder-dry forest and destroyed an estimated 1,400 homes and structures. Residents were forced to flee a wall of flames, only to grapple with intense flooding later that summer.

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