Trump credits ‘mister tariff’ for the country’s strength. Economists beg to differ

Washington: US President Donald Trump, a lover of tariffs, has become even more enthusiastic about their benefits in recent weeks. In an economic speech in Detroit on Tuesday, Trump mentioned tariffs more than two dozen times, saying the levies had generated trillions of dollars of investment for the country.

That followed a series of social media posts in which he credited them for the country’s strong economy, its declining trade deficit and its booming stock market.

“The USA markets just hit another ALL TIME HIGH — ALL OF THEM!!!” the president wrote on social media last week. “THANK YOU YOU MISTER TARIFF!!!”

But there is little evidence in the data to support the idea that tariffs are conveying broad economic benefits. US growth has been strong in recent months, but economists say that has been driven primarily by the boom in artificial intelligence. The construction of vast data centers is boosting investment, while soaring AI stocks are making Americans who invested in the stock market richer, encouraging more spending on goods and services.

New tax deductions that were signed into law last year are also encouraging investment. But manufacturing — the sector that tariffs are designed to help — appears to be struggling. Surveys show that manufacturing contracted for a 10th straight month in December, and spending on new factories has slumped since the Biden administration.

The United States has steadily shed factory jobs in recent months. Any gains in the country’s anemic job market last year were almost entirely from the health care sector. Smaller manufacturers in particular seem to be reeling from a higher cost of inputs, such as metal and machinery, that have been hit by tariffs.

Several economists said the United States was growing not because tariffs, but in spite of them.

Gita Gopinath, a Harvard University economist and former first deputy managing director of the International Monetary Fund, said the AI boom had “basically offset the drag from tariffs.”

“Consumption growth is being supported by the wealth gains from the stock market, and therefore the question for 2026 is whether that story continues,” she said.

Mark Zandi, the chief economist at Moody’s Analytics, said U.S. growth was “all AI,” adding that technology and health care was “driving the train.”

“It has nothing to do with trade,” he said.

Some supporters of tariffs have argued that the policies will ultimately benefit the manufacturing sector, but that uncertainty about whether the import taxes were here to stay had undermined their effectiveness so far.

Jeff Ferry, the chief economist emeritus at the Coalition for a Prosperous America, a trade lobbying group that supports tariffs, noted that many of the president’s tariffs had been in effect for only about six months.

“The aim of the tariffs is to rebuild U.S. production,” he said. “That takes time.”

Trump and his supporters have taken the opposite view, arguing that the strong economy is evidence the president’s economic plan is working perfectly. The president has been able to usher in the highest tariffs in a century with minimal inflation and a booming economy, they say.

Although the stock market immediately plunged after Trump announced his biggest tariffs in April, it has recovered to new highs. In recent months the trade deficit has shrunk dramatically, in October hitting the lowest level since 2009. The drop in imports buoyed U.S. gross domestic product in the third quarter and has pushed up estimates for fourth-quarter GDP. Trump highlighted both the strong economic growth numbers and the falling trade deficit in his speech Tuesday.

But some of the recent improvement in economic output and the trade deficit could be the result of volatility created by dramatic changes in policy.

U.S. companies stoked a surge in imports early last year as they raced to build up inventories ahead of expected tariffs. That pushed economic output into negative territory in the first quarter. The reason: Gross domestic product measures only goods produced domestically, so imports are subtracted from that measure to avoid double-counting.

Once tariffs took effect, imports dropped off sharply, the trade deficit fell and GDP rose. But if the wild swings are averaged out of the course of the year, last year looks more normal.

The question for many economists is where those metrics go from here, and whether companies will continue to import less.

Brad Setser, an economist at the Council on Foreign Relations, said economists needed more data to separate the impact of the earlier surge in imports from a more permanent adjustment to trade. So far, recent trends appeared to reflect “crazy noise” in trade trends, rather than a positive change for the economy, he said.

Teasing out the effects of tariffs will be complicated by other trends in the coming year. Lower interest rates will likely help accelerate the U.S. economy, as will individual tax cuts and provisions that allow companies to write off their investments.

If the economy and the stock market remain strong, that could cement the use of tariffs as a policy tool in the years to come, regardless of whether tariffs actually help manufacturers. Many voters will probably base their attitudes toward tariffs on how the economy is doing overall, without looking more granularly at which policies are really causing those effects.

That seems to be the case for Trump, who said Tuesday that the “historic use of tariffs” was one of the biggest reasons for the country’s “unbelievable success.”