Understanding Inequality, Part III: Tariffs

A Trumpian diversion

Last week I promised that this week’s entry in my series of inequality primers would focus on the surge of giant fortunes since 2000. I’m going to break that promise and delay that entry, for two reasons. First, I’m still doing the research: high-end wealth inequality is not an issue I’ve worked on personally, so I need to do a lot of reading and talk to some specialists before weighing in.

But second, I have something more topical to discuss. This past week the CUNY Stone Center on Socio-Economic Inequality, my academic base, held its annual workshop on Inequality by the Numbers. Mainly this involved research presentations by young scholars, but as an over-the-hill-guy academic statesman I was asked to give a relatively non-technical talk about stuff currently on my mind.

So I talked about how recent tariff changes might affect inequality. I had a few newish things to say, and people seemed interested. And this was also the week we got the CBO’s estimates of the income distribution effects of the One Big Beautiful Bill Act (embarrassingly, that really is its official name.) So it seemed worth writing up and elaborating on the points I made.

Spoilers: In principle tariffs can either increase or reduce income inequality. Under current circumstances, I’ll argue, they probably won’t have much effect either way on the distribution of market incomes (wages, profits etc). Tariffs are, however, regressive taxes, and they increase inequality through that channel.

Beyond the paywall I will cover the following:

1. Tariffs and inequality: What economic models say

2. Can tariffs reverse the effects of globalization on inequality?

3. Can tariffs reverse the “China shock”?

4. Tariffs as regressive tax policy