Episode summary
Oren Cass & Noah Smith Debate the True Impact of Tariffs
The a16z Show
· · Hosts: Erik Torenberg · Guests: Oren Cass, Noah Smith
Summary
The discussion centered on whether tariffs can rebuild U.S. manufacturing or whether they mainly raise costs and disrupt supply chains. One side argued that free trade with China has not advanced free markets, because trade with a non-market economy can distort incentives, widen imbalances, and hollow out domestic industry. The case for tariffs was framed as a long-run strategy: raise the cost of offshoring, induce domestic capital investment, and support a broader industrial policy that also includes workforce development.
The opposing view stressed that the short-run evidence since Trump’s tariff announcements looks bad for manufacturing. The host pointed to weaker PMIs, softer orders, and falling employment and investment readings, arguing that these indicators fit the standard economic prediction that tariffs disrupt intermediate-goods sourcing and cut near-term output. The guest countered that factory construction, capital spending, and productivity are the more relevant measures, and that several years may be needed before reshoring shows up clearly in jobs data.
A major point of disagreement was the right trade strategy toward allies. One side argued for pooling scale with Europe, Japan, Korea, and others through lower barriers among allies while pressuring China separately. The other argued that economists overfocus on net trade balances and too easily treat trade deficits as proof of economic harm, when gross export growth and scale effects can matter more for manufacturing capacity.
Key takeaways
- The guest argued that tariffs can work only if they create sustained domestic investment, not if they are treated as a short-term slogan.
- The host said manufacturing PMIs, orders, and employment have weakened since Trump's tariff announcements, which he sees as evidence of disruption.
- Both sides agreed that industrial policy and workforce development matter, but they differed on whether tariffs or allied free trade should do most of the work.
- The guest argued that trade policy should separate China from allies, because pooling scale with Europe and Japan could help U.S. manufacturers compete better.
- The host said the key test is whether tariffs actually raise factory construction and manufacturing investment over the next several years.
- The guest pushed back on using trade deficits alone as the main metric, arguing that gross export growth and scale are more important for manufacturing strength.
Notable quotes
“The question is does free trade with China advance free markets or does it distort and wreck our free market”
“If you are attempt to be for free trade with a non-market economy, you are not actually advancing free markets in any significant way at all”
“I think if if the long run is uh you know, anywhere upwards of a few years, I think it will”
How the episode opens
The question is does free trade with China advance free markets or does it distort and wreck our free market? We have treated free trade as the natural extension of free market. If you are attempt to be for free trade with a non-market economy, you are not actually advancing free markets in any significant way at all.
You're actually dramatically hindering them. People focus obsessively on the trade deficits and surpluses on the imbalances on the net amount but basically the more important effect is the gross the total the total amount of exporting that we're able to do you know and so in that sense trade between us and Europe is positive sum without trade you know being balanced trade is positive sum we're really excited to to to have you on because we've been talking about some some topics over the past few months that you've been thinking a lot about that you've been writing a lot about that you're thinking is in fact um in informed you know and and and inspired encouraged some of some of what what's actually happened and so before we get into some of the the the specifics I wanted for for some of our audience who may not be familiar especially on the asynz side I wanted to just give you uh an opportunity to kind of introduce your your your platform u so to speak or introduce kind of the main topics and and ideas that you're that you're affiliated with. You know, we'll link to to to to the book and some of the articles about kind of a a newer conser conservatism, but maybe you can uh help define it in in broad strokes and we'll get to some of the specifics.
Sure. Yeah, I'll I'll try to keep it short.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tariffs
- u.s. manufacturing jobs
- industrial policy
- trade deficits
- global competition
Companies and tickers mentioned
- American Compass
- a16z
Watch the episode
Watch “Oren Cass & Noah Smith Debate the True Impact of Tariffs” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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