AI On Tariffs

Just out of curiosity, and apropos of nothing, we asked Grok (the AI chatbot created by Elon Musk) the following question: If a president of a superpower wanted to destroy his own country, what steps would he take? Here’s what Grok had to say:

If a president of a superpower aimed to deliberately undermine their own nation, they could theoretically take steps to weaken its economic, social, military, and political foundations. Here’s a hypothetical breakdown of such actions, assuming they have enough influence and control to push them through:

1. Economic Sabotage: They could tank the economy by imposing reckless fiscal policies—massive, unsustainable debt through unchecked spending or tax cuts without funding, devaluing the currency by pressuring the central bank to print money excessively, or dismantling key industries through deregulation or punitive tariffs that disrupt trade. Encouraging corruption and cronyism could further drain resources.
2. Undermining National Security: Militarily, they might weaken defenses by slashing budgets, pulling out of strategic alliances, or leaking sensitive intelligence to adversaries. Ordering troops into unwinnable, morale-crushing conflicts—or abandoning critical outposts—could erode military strength and global standing.
3. Social Division: They could stoke internal conflict by amplifying divisive rhetoric, targeting specific groups with policies that breed resentment, or letting infrastructure and public services crumble to fuel discontent. Misinformation campaigns, either directly or through proxies, could deepen mistrust in institutions.
4. Political Erosion: To cripple governance, they might attack the rule of law—pardoning loyalists who break it, stacking courts with unqualified ideologues, or pushing legislation that centralizes power in their hands. Undermining elections through voter suppression or outright fraud could destabilize democracy further.
5. International Isolation: They could alienate allies by breaking treaties, insulting partners, or cozying up to hostile regimes, leaving the country diplomatically vulnerable. Withdrawing from global organizations or climate agreements might also diminish soft power and economic leverage.
6. Neglecting Crises: In the face of natural disasters, pandemics, or cyberattacks, they could deliberately botch responses—ignoring experts, withholding aid, or spreading confusion—letting chaos compound.

Grok continues: “In practice, any president trying this would face massive resistance: checks and balances, public backlash, legal barriers, and pushback from their own administration or military. It’d take more than intent—sophisticated manipulation and loyal enablers would be key. Historically, no leader has pulled this off fully, but you can see echoes in cases like Venezuela under Maduro, where mismanagement and authoritarianism led to collapse—though even there, self-destruction wasn’t the explicit goal. Intentional ruin would be a slow burn, not a switch flipped overnight.”

by Open Culture |  Read more:

***

There is some evidence that the White House used AI to come up with a quick and dirty (and incorrect) formula to correlate tariff rates with trade deficits. I have no problem with using AI, I think they just didn’t go far enough. The White House should have asked the AI a question like this:

Suppose the US imposed tariffs on other countries in an effort to reduce bilateral trade deficits to zero using the formula for the tariff of (exports-imports)/imports. What do you estimate would be the consequences of such a policy?

Answer (O1 Pro):

A tariff schedule keyed to bilateral deficits—imposing a rate equal to (US exports − US imports) / US imports—would be extremely disruptive and unlikely to achieve its goal. Key points:

1. Immediate Impact on Prices and Supply Chains

• If the US imports more than it exports from a given country, (exports − imports) is negative, making the tariff percentage negative unless the formula is modified (e.g., by absolute value). In practice, one would presumably set a positive tariff aimed at closing the bilateral gap.

• Such high tariffs would sharply raise import prices for both consumers and firms reliant on foreign inputs. It would encourage attempts to switch suppliers but at the cost of disrupting supply chains and increasing production expenses.

Retaliation and Trade War Dynamics

• Targeted countries would almost certainly retaliate with their own tariffs. Retaliation would damage US export sectors—especially agriculture and high-value manufacturing—and risk a broader trade war.

• Countries with a US trade surplus would apply punitive measures that shift US business to alternative suppliers, undermining the very exports the policy is meant to foster.

Misalignment with Macroeconomic Fundamentals

• Bilateral imbalances reflect global production patterns, comparative advantage, and macro factors like savings–investment imbalances and currency flows. A country that persistently imports more overall does so because it’s running a capital account surplus. Tariffs don’t fundamentally alter that global saving–investment arithmetic.

• If the US still runs an overall current account deficit, restricting imports from some countries will simply shift deficits to others. Global supply chains will rearrange, but the total US deficit will be largely unchanged.

Violation of Trade Agreements

• Such a policy almost certainly violates WTO rules, since it imposes discriminatory tariffs based on bilateral imbalances. The resulting litigation and sanctions would add more uncertainty.

Net Effect: Reduced Efficiency, Higher Costs

• Economically, the net effect is negative. Costs rise for US consumers and US manufacturers reliant on imported inputs. Retaliatory measures reduce export opportunities. Overall trade volume shrinks. Growth slows, and no fundamental improvement in the US external balance occurs.

In summary, a bilateral “deficit-equalizing” tariff policy would create severe distortions, invite retaliation, and do little to fix the structural causes of US trade deficits. Empirical evidence and standard trade theory both suggest it would reduce economic efficiency and likely harm US producers and consumers alike.

by Alex Tabarrok, Marginal Revolution |  Read more:

[ed. Any Questions? See also: America Underestimates the Difficulty of Bringing Manufacturing Back (Molson Hart/X); and, All the arguments for Trump's tariffs are wrong and bad (Noahpion).]