Restricting Food Imports Will Raise Prices, President Trump

Does it really need to be said?

I didn’t think the policy ideas to combat high living costs could get much worse than Kamala Harris’s recent embrace of price controls. Then yesterday former President Trump was asked in Flint, Michigan, “How are you going to bring down the cost of food and groceries?” His answer was astounding.

Sure, much of the reporting has ignored that Trump began by talking about getting energy prices down and how this would lower the cost of everything else. To the extent a future Trump administration could unblock more energy projects by, say reforming the regulatory environment or releasing land, this positive supply-shock would indeed bring down production costs across the economy and thus lower many prices, including on food.

Trump then went off on a tangent on interest rates, suggesting they were likely to come down in the future. He may be right, and many Americans would surely welcome lower mortgage rates and interest rates on car loans. However, such outcomes are primarily driven by broader macroeconomic conditions—particularly inflation and growth trends—which also influence the Federal Reserve's monetary policy decisions. While a president can indirectly impact these conditions, monetary policy decisions remain largely independent of direct presidential influence—at least for now: Trump, of course, has mused about wanting to give the President more of a direct role in determining monetary policy.

All this, however, was mere build up to the bizarre part of the answer. Trump talked about U.S. farmers being decimated and how he wanted to help them. I presumed he would address the need to remove burdensome regulation to reduce their costs and, thus, consumer prices. Yet the former President instead said:

They [farmers] are being absolutely decimated. And, you know, one of the reasons is we allow a lot of farm product into our country. We’re going to have to be a little bit like other countries. We’re not going to allow so much.

Excuse me? Does Trump really think that restricting the supply of foreign produce into the United States will lower food and grocery prices? The opposite is obviously true.

If the food supply restriction he has in mind was a large tariff on imported farm products, it would raise the price of those imports by making them more expensive to bring into the country. Domestic producers, facing less competition, would produce somewhat more but would have less pressure to stay efficient and, in the longer term, less incentive to innovate. As a result, both imported and domestic farm products would become more expensive. Grocery prices would go up, not down - and that’s what we already see with existing food protectionism in the U.S.

If the supply restriction came from quotas, which would limit the quantity of imported farm products, the impact would be similar. Quotas directly reduce the supply of foreign goods, leading to a shortage compared to demand at the old price. With fewer imported products available, domestic producers could raise their prices due to reduced competition. Quotas might also create artificial scarcity at certain times, driving up prices even further as consumers compete for the limited supply. Again, grocery prices would be higher, not lower.

Jason Furman once told Cato that Democrats tended to go wrong on economics by “getting the sign wrong,” whereas Republicans’ errors were usually in “getting the magnitude wrong.” By that, he meant progressives were prone to think the laws of economics were faulty, whereas Republicans would just exaggerate the impact of policies in the right direction. Think: “mandating carbon mitigation will lower energy bills *and* help the environment” vs. “tax cuts pay for themselves because they boost labor supply.”

Trump’s intervention reminds us that progressives today have no monopoly on getting basic economics wrong. And, indeed, that having a BSc in Economics is no guarantee one won’t make such errors.