Trade policy should boost GDP, not reward specific industries

May 29, 2018

The threat of new tariffs on auto imports hit share prices of some foreign carmakers last Thursday, but broader equity markets shrugged off the possibility of a renewed trade war. Indeed, there were only modest changes in stock prices of U.S. carmakers that presumably would benefit most from auto tariffs. Market participants appear to have quickly realized that the notion of auto imports as a threat to U.S. national security is a stretch. The Commerce Department will take several months to work through an investigation, but this threat appears to be more of a bargaining tactic than a policy tool.