And do workers have pension portfolios?
I just watched an interview that Michael Shellenberger did with Batya Ungar-Sargon. (It’s on Shellenberger’s gated Substack.) They’re discussing Trump’s tariffs and Ungar-Sargon argues that Trump is waging class warfare on the rich on behalf of the working class. Her evidence gets her halfway there. Trump’s tariff announcements certainly have destroyed much of the wealth owned by the rich.
But they will hurt the working class in two ways: (1) as consumers and (2) as owners of stocks.
Take the second point first. Trump’s announced tariffs have destroyed wealth for virtually everyone who holds a wide portfolio of stocks. That’s not just the rich. Many American workers own stocks in their 401(k) and 403(b) retirement plans. So Trump’s announcements have hurt them too.
I don’t know any worker who doesn’t buy goods. Most workers spent a large part of their after-tax income on goods. That brings me to point (2). If the tariff rates are implemented at anything close to the levels that Trump is threatening, prices on almost all imports will rise and that will cause prices on many domestically produced goods to rise.
Why do many economists focus on the stock market? Because stock prices adjust for new information and they do so quickly. The price of a stock reflects investors’ expectations of the flow of income from owning that stock. So stock prices are a good early indicator of wealth destruction. Prices of consumer goods move more slowly. But they will move.
I’ve seen people say that stock prices are based on short-term earnings. Not true. Imagine that Eli Lilly announced today that it would end all R&D and plow that money into earnings. Earnings would be higher and I’m very confident that Eli Lilly’s stock would fall.
Another note:
About 15 years ago I gave a talk to a local Rotary Club group. In it I made my case for free trade. If you don’t know Rotary, let me explain that the median age of the members was close to my age at the time, about 59. Also, my hair had already turned grey. In Q&A, someone said that he could see how free trade benefited corporations but how did it benefit the kind of people in the room. I had already explained how it benefited consumers, but I thought I would try a new tack. I said, “I see a lot of people in the room with the same hair color as mine. Don’t you have retirement assets? And isn’t a large fraction of your retirement assets in stocks? The audience laughed and the guy laughed. I think people have this absurd view that there is no connection between corporations and them.
