Fast-changing tariff policy overtakes Dallas Fed event

One of the speakers at an event on North American trade at the Federal Reserve Bank of Dallas on Thursday summed up the current state of changing tariffs this way: "My presentation is outdated."

Economist Marcus Noland went on to tell the audience that data he planned to cover was upended in the previous 24 hours with President Donald Trump's fast-shifting policy.

The event, also covering immigration, was the initial portion of a two-part conference series hosted by the Dallas Fed and the Peterson Institute for International Economics, a nonpartisan think tank. The second installment of the conference is scheduled for this fall in Washington, D.C.

"The implications of these tariffs could have enormous shocks to the economy, even if the president pulls back on most of it," Noland told the audience, citing the retaliatory tariffs of 84% from China on the United States. "This is not good."

The potential economic effect of tariffs, once known, could push down U.S. gross domestic product growth, Noland said, tipping the economy into stagflation — a combination of high inflation, low economic growth and high unemployment. If this is coupled with deportations, an action seen by economists in the room as having a negative impact on the U.S. economy, he said it's possible to slow the nation's growth to the point of a recession.

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Without knowing where tariffs are headed and the quick pivots already taking place, Nolan said it can be difficult to forecast what that means for the U.S. economy, but the events thus far have already damaged the nation's credibility as the United States backs out of prior global trade agreements.

Trump's rapidly evolving tariff regime took another twist on Wednesday when he said he'd enact a 90-day pause on reciprocal tariffs. Trump told reporters if he's unable to get the deals he wants with U.S. trading partners, the tariffs would revert to their higher rates once the pause expires.

The pause did not apply to China, with Trump hiking duties on the country's goods to 125%, effective immediately, according to multiple media reports. That spurred China's own tariff hikes of 84%, which Nolan mentioned in his presentation.

The attempt to reverse globalization in the United States is unlike any economic policy change ever seen in anyone's lifetime in the room, said Matthew Slaughter, dean of the Tuck School of Business at Dartmouth, in his keynote presentation at Thursday's event.

Slaughter also reflected the challenge of analyzing such fast-changing policy by asking rhetorically why these events are happening. He said Trump's tariffs reflect a broader sentiment by U.S. citizens with some individuals seeing it as a threat rather than a growth opportunity.

To tackle that perspective, Slaughter outlined a so-called ladders of opportunity plan to better prepare human capital to adapt to the "dynamic forces globalization and technical change.

"Globalization is true for Americans whether we open up to the rest of the world or do it behind tariff walls," Slaughter said, adding the ladders offer Americans a shot at what is a worldwide economy — for better or worse.

The three rungs of the ladder are tied around educational principals, starting with investing in early education programs from birth to kindergarten and making those programs available to all children. The next rung includes extending education beyond high school to a two-year offering at a community college, he said, with research showing a 30% boost in lifetime earnings for workers with that level of education compared to individuals with just a high-school degree.

The last rung of this ladder of opportunity involves lifetime training tied to $10,000 investments for every decade of employment in conjunction with the business community to help retool or update employees on new technology within their respective business, he said.

In all, the investment in education could total $250 billion, Slaughter said, but it's only a small fraction of the economic fallout in the past 10 days.

"America is failing to build human capital and what we need are these ladders that would raise the odds of building an engaging economy," he said. "We need to build more bridges, not walls."