🧵Happy 25th Anniversary of granting permanent normal trade relations to China, for those few who still celebrate!

Today I'm counting down 10 classic examples of the failed consensus that led us off the cliff (h/t @AmerCompass Wrong All Along project). #10... This [U.S.-China WTO] Agreement will also strengthen our ability to assure fair trade and to defend our agriculture and manufacturing base from import surges and unfair pricing.”
— Lael Brainard, Under Secretary of the Treasury, Clinton admin. (2000)

1/ Fascinating drama playing out over the past 24 hours as the very good GAIN AI Act from @SenatorBanks comes under fire from @nvidia, which seems happy to shred its credibility for the sake of getting more AI chips into China. 🧵 2/ The Banks bill takes the sensible and modest approach of requiring US chipmakers to offer AI chips to American customers before selling them to China. So it's just blocking sales where more chips for the CCP directly means fewer for American firms.
theregister.com/2025/09/04/us_…

1/10 I say this out of respect, not disrespect, for Sohrab, whose analysis is always careful and thoughtful: This makes no sense at all. If the best effort at constructing a case from within an assumption of U.S. hegemony leaves logical holes this gaping, that era is truly over.

https://twitter.com/SohrabAhmari/status/1934238118867034134

2/ First, Israel is conducting a campaign against a country that has orchestrated unending terrorism against it for decades and called for its destruction. It is not America's place to grant permission for such a campaign, to take responsibility for it, or to stand in its way.

1/ In an especially fun bout of market fundamentalism yesterday, @MattHennessey @WSJopinion argued that markets "are governed by the laws of economics the way the physical world is governed by the laws of gravity." I love this for two reasons...
wsj.com/opinion/jd-van… 2/ First, because it's disastrously inapt. Economics is nothing like physics. Its principles are not generated from repeatable experiments, nor do they hold consistently across space and time. Believing otherwise is a quite literal example of blind faith and fundamentalism.

1/ Today's Understanding America, You're So Vain, You Probably Think This Post Is About You, takes a look at the bizarre social media reaction to this @FrankLuntz tweet and what it says about the blinkered innumeracy and elitism of reindustrialization's skeptics. 2/ The Rorschach test here is one separating people who can think rationally and empathetically about the wide range of opportunities their fellow citizens might pursue, and those who lack that basic capacity. @scottlincicome apparently falls in bucket 2.

Tough crowd, sore subject I guess. Deleting tweet and archiving it here. Only point I was trying to make is that I think comparative advantage mostly determines composition of trade, other factors drive level. I was curious how people would describe it. You didn't disappoint... I particularly appreciated Alex's enthusiastic ALL CAPS confidence that comparative advantage explains the slave trade.

https://x.com/aarmlovi/status/1908685568210264355

1/ If you don't like what Trump did on reciprocity, that's fine. But if you're claiming it's indecipherable, you're not trying very hard.

In February, in Understanding America, I explained exactly how this might look and why: 2/ "Some analysts have taken the threat of 'reciprocal tariffs' to mean literally holding a mirror up to the tariff regimes of other countries... there’s no reason to believe that’s what the administration is pursuing." understandingamerica.co/p/the-one-word…

1/ Some thoughts on how to understand the tariff kerfuffle, at the aptly named Understanding America.

To start with, you have to distinguish between four different uses for tariffs: 🧵 2/ Uses of tariffs:

#1: Funding. Tariffs can generate revenue.

#2: Decoupling. Tariffs can shift supply chains.

#3: Rebalancing. Tariffs can promote domestic production.

#4: Negotiating. Tariffs can provide powerful leverage.

1/ The latest Understanding America, "Here’s How the Return of American Industry Will Actually Look," focuses on one of the most inexplicable realities of the U.S. economy:
Manufacturing productivity has been falling for more than a decade. 🧵 2/ The decline in manufacturing productivity is critical for how we understand the economic challenges we have faced and the economic opportunities in front of us.

The narrative goes that automation has been reducing employment and we just need better mechanisms for coping...

1/ The main reason we're winning the tariff debate is we're right.

But if I'm being honest, it helps a lot that the other side is just not good at what they do.

I genuinely wish there were a better anti-tariff case making the rounds than this one. 🧵

https://x.com/DominicJPino/status/1839463767060431166

2/ The most important thing to recognize is the basic failure of reading comprehension. Is it rude to say they don't even understand the debate they're engaged in? Maybe. But I think it's nicer than concluding that they're lying.

Very insightful @greg_ip @wsj look today at the economic battle within the GOP between old "pro-business libertarian wing" and "a growing contingent of conservatives skeptical of big business, ambivalent about tax cuts and vocally supportive of tariffs."

Three observations: 1. Ideas matter! @AmerCompass, a team of seven with a budget below $2M, can serve as a "counterweight" to the entire legacy establishment because we make actual arguments that happen to be right. 100x spent on ad hominems and brute ideological enforcement still loses ground.

1/ My long-but-worthwhile-read @nytimes is about the American political class's self-righteous detachment from the economic and social conditions of its nation.

This is the root cause of present instability and poses the most serious long-term threat to the Republic. 🧵 2/ My story starts with my own experience as domestic policy director on Mitt Romney's 2012 presidential campaign. Questions began trickling in from New Hampshire -- what's our plan on opioids? I am ashamed to say I did not know what they were. But I was no outlier...

1/ Some important announcements at @AmerCompass, as we celebrate the absurd success our scrappy team has had reshaping the nation’s major policy debates and charting the course for conservative economics. You ain’t seen nothing yet… 🧵





2/ I’m moving into the role of chief economist. Much more research and writing ahead. Of note, a weekly must-read on economics, politics, and public policy: Understanding America. It launched today. Read and subscribe here: americancompass.org/welcome-to-und…

1/ The long-predicted fiscal crisis is here, now. Interest payments exceeding defense spending. Deficits above $2 trillion, suppressing growth and hollowing out our economy.

As we show @AmerCompass, there's only one answer here. Call it the 19-20 solution... 🧵 2/ What is the 19-20 solution? It's pretty easy to understand. The only way to bring our budget back to balance is to get taxes and spending back to between 19 and 20% of GDP. Read between the lines, you discover there's actually incredibly broad agreement on this:

1/ The latest @AmerCompass podcast covers immigration.
@MarkSKrikorian cuts through the inane spin and arcane legalese to offer the clearest explanation I've heard of how the Biden admin created the border crisis and what it will take to fix it.
Here's what I learned:🧵 2/ The key starting point is to change your mental picture of "illegal immigration." The term "border crisis" conjures people sneaking across unguarded expanses of wilderness. That seems like it could be hard to stop! But mostly that's not what is happening.

1/ Political realignment is sending "socially liberal, fiscally conservative" cocktail party Republicans into the Democratic Party and the more racially diverse working-class Democratic base into the GOP. This means a radical shift for the politics of "big government"... 🧵 2/ New @AmerCompass polling shows the GOP consultant class's anti-government ethos no longer has any purchase with the GOP base (if it ever did). Republicans believe government can solve problems and generally want to see it doing more, even at the federal level. For instance:

To understand the underlying fraud of the "border security" bill, the thing to recognize is that it's the product of compromise between one side that wants to secure the border and one that does _not_ want to secure the border. Everything else follows from that. The open-border side is trying to present themselves as an inevitable feature of the landscape. If one side is irrevocably committed to absurd policy, this is just "the toughest immigration bill there will ever be." May as well take the deal. But... But!

https://x.com/davidfrum/status/1754362000803536936?s=20

1/ To understand @JoeBiden's disastrously low standing on the economy, we tried an experiment @AmerCompass:

Survey American attitudes on a Top 10 set of Biden economic policies, 5 of which are broadly supported, 5 of which are polarizing.

The results are fascinating. 🧵 2/ Successful politicians “pick fights” on contested issues where the bulk of voters are on their side. Biden has done the opposite, doubling down on a set of high-contrast issues that divide Democrats and the upper class from everyone else. americancompass.org/how-the-biden-…

1/ Kicking off the New Year with a must-read: Free Trade's Origin Myth @LawLiberty
What if I told you economists' sacred theory of "comparative advantage" was regarded as a totally inadequate basis for trade policy for 100+ years after it was first published? 🧵 2/ Comparative advantage, first described in the early 1800s, rose phoenix-like from the ashes of World War II, as American economists sought to claim for themselves a leading role in rebuilding a peaceful, US-led world order. lawliberty.org/forum/free-tra…

1/ Out today -- a new @AmerCompass collection on tax policy: A Walk on the Supply Side. My essay, The Curse of Voodoo Economics, argues that conservative conflation of two rationales for tax-cutting has driven economic policy off the rails. Let me explain...🧵 2/ A common explanation for the Republican Party’s tax-cutting obsession is that it follows naturally from conservative principles. Conservatives favor smaller government and have greater faith in markets, ergo tax cuts will always be central to the GOP agenda.

1/16 The @WSJ has given me the space to make the thorough case for tariffs, so allow me to briefly outline the argment here. In a sentence, it comes down to a straightforward argument: Making things matters. 🧵 2/ Economists in Washington like @MichaelRStrain and @AdamPosen love to ridicule tariffs, for instance the global 10% tariff proposed by @realDonaldTrump. "Lunacy" and "horrifying" says Posen. "A disaster for the U.S. economy" says Strain.