Our esteemed Commerce Secretary, Howard Lutnick, stated in an interview on CBS that “You have to sort of understand how things work. When tariffs come into place, foreign goods may become a little more expensive, but domestic goods do not.”
Interesting. I’m no economist, but I have taken a couple of econ courses and read a bit. And, in studying the fundamental aspects of supply and demand, I encountered supply and demand curves. Searching the deep recesses of my memory and then scribbling on my phone, I produced the following:
Crude at best, but the point is valid. The solid lines represent price vs. quantity demanded and quantity supplied. They cross at a point referred to as the "equilibrium point," that is, the point at which the quantity demanded by buyers at that price matches the quantity willing to be supplied by producers. If the quantity demanded (the "demand curve") shifts to the right, the equilibrium price rises along with the quantity supplied.
Here, we're looking at domestic goods. Because the prices of imported goods are expected to rise significantly due to tariffs (Trump's claim that these will be paid by the exporting countries notwithstanding), demand for domestic goods can be expected to rise as buyers look for substitutes (another fairly basic concept from Econ 101). That is, the demand curve will shift to the right. This inevitably leads to increased production of domestic goods (which Trump, Lutnick, et al champion) but it does not do so without also increasing the price of those goods.
Now, Lutnick graduated from Haverford College in 1983 with a degree in economics. I don't imagine such a degree is conferred without learning about this concept. From that, we can infer a couple of things: 1) Lutnick is quite willing to lie; and 2) He likes his position as Secretary of Commerce. Saying Trump is incorrect while occupying a position he appointed is not a way to keep that position.
Clearly, there are vast complexities beyond the scope of this very simple analysis, but just because something is simple does not mean that it's wrong.
