Analyzing Tariffs' Economic Effects – Penn Wharton Budget Model

The White House's plan to implement higher tariffs aims to generate revenue for the U.S. economy, but it could have adverse effects on GDP and wages. Kent Smetters, the faculty director of the Penn Wharton Budget Model, highlights the overlooked impact of tariffs on capital flows, which could make it harder for the U.S. government to manage its growing federal debt. Over time, the tariffs could reduce GDP by as much as 7.5% by 2054 and decrease wages by over 6%, significantly affecting investment and long-term economic growth.

This interview was recorded on April 11th, 2025.

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