## Straight Talk

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**Canonical URL:** [Straight Talk](https://www.imf.org/-/media/files/publications/fandd/article/2026/06/straight-talk-greer.pdf)

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### Overview
- Author: Jamieson Greer, US trade representative.
- Central argument: Trade theory and economic modeling must be updated to reflect the return of tariffs, industrial policy, and the real costs of globalization; policies should prioritize balance, reciprocity, fairness, and resilience.

### Mistaken assumptions in prevailing models
- Common model assumptions that the author criticizes:
  - Full employment and seamless worker transitions between industries and geographies.
  - Focus primarily on long-run efficiency gains defined as sourcing products at the lowest possible cost.
  - Treating theoretical efficiency gains as unalloyed social goods while assuming away transition costs and distributional impacts.
- Empirical shortcomings noted:
  - Models often do not capture supply-chain linkages, tariff-jumping, rules-of-origin effects, or sector-level network and scale effects.
  - Statistical gaps: insufficient collection of supply-chain dynamics and other statistics needed for accurate empirical analysis.

### Costs of globalization and real-world impacts (findings and statistics)
- Labor-market and community impacts:
  - More than 70,000 plants shut down in the United States.
  - Millions of high-quality manufacturing jobs lost.
  - Declines in working-class wages, weakened industrial base, slowed innovation, and declined real productivity in manufacturing.
- Quantified economy-wide effects:
  - Goods trade deficit exploded to $1.2 trillion annually, contributing to an unsustainable current account deficit.
- Health and mortality:
  - Areas with average exposure to Mexican import competition under NAFTA experienced a sustained 0.68 percent increase in annual age-adjusted mortality (study by Amy Finkelstein and coauthors).
  - The authors found that this mortality impact more than erased the welfare gains identified in a leading economic analysis of NAFTA, making the agreement a deadly net loss for the people it was supposed to help.
- Measurement distortions:
  - Accounting for distorted computer industry figures, US real manufacturing output fell 6 percent between 2007 and 2016.
- Redistribution and mobility:
  - Geographic mobility declined in trade-exposed places; cross-sector reallocation of former manufacturing workers was minimal; returning jobs were lower-skill and went to different people.

### Evidence that tariffs and industrial policy can reorder production
- Historical and recent examples cited:
  - Ronald Reagan’s restrictions on Japanese autos in the early 1980s incentivized an onshoring boom that produced over 100,000 new American auto jobs at more than 300 new production facilities by the 1990s.
  - President Trump’s 2018 safeguard tariffs on washing machines triggered investment, including large new facilities by Samsung and LG in South Carolina and Tennessee.
  - Mercedes-Benz is investing $4 billion in its Alabama plant, explicitly citing tariffs as the cause.
  - McKinsey research shows recent tariffs have caused a large-scale reordering of supply chains around the world.
- Recent trade-balance movement:
  - The US trade deficit with China was down 32 percent, year over year, in 2025.
  - The overall trade deficit in goods has decreased, year over year, every month since President Trump began implementing his reciprocal tariff policy in April 2025.

### Critique of IMF approaches and models
- IMF recommendations and model limitations discussed:
  - The IMF has characterized imbalances as “concentrated and persistent” and attributes them in part to surplus-country policies.
  - IMF’s recommended remedies include large-scale tax increases (including a 10 percent federal sales tax) and austerity measures, which the author labels untenable.
  - The IMF’s Global Integrated Monetary and Fiscal (GIMF) model shows tariffs would have a negligible effect on narrowing current account imbalances; the IMF notes the model does not account for “tariff jumping through the cross-border reallocation of production.”
  - The author argues that excluding tariff-jumping in models ignores the primary mechanism through which tariffs induce reshoring and change trade patterns.

### Policy recommendations and calls for new tools
- Modeling and empirical needs:
  - Develop models that capture:
    - Distributional consequences of trade.
    - Labor market frictions.
    - Network and scale effects in manufacturing.
    - Effects of regulatory arbitrage on workers and producers.
    - Impacts of detailed rules of origin on global production networks.
    - Public health outcomes related to trade shocks (citing new NAFTA research).
- Policy stance:
  - Tariffs and reciprocal trade agreements can be used to encourage inbound productive investment, increase incentives for domestic production, and open markets for US exports.
  - Durable rebalancing requires actions by both surplus and deficit economies; without pressure surplus economies have little reason to act.
  - Tariffs that directly target the primary sources of the deficit are presented as simpler and more flexible solutions than complicated alternatives (e.g., certificate schemes, market-access charges on financial inflows).
- Intellectual imperative:
  - Economists must update theory and empirical methods to reflect current global economic structures and policy instruments—“catch up with the world as it is, rather than how we may wish it to be.”

*Jamieson Greer, “Straight Talk,” F&D, June 2026.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2026/06/straight-talk-greer.pdf_