Trade, Tariffs and Economic Volatility
The resurgence of tariffs in 2025 has jolted global markets and signaled a sharp turn in the politics of trade. As protectionist measures accelerate and economic nationalism gains ground, businesses and policymakers are navigating a more uncertain global landscape. At the same time, interest rate decisions, inflation shocks and geopolitical tensions are adding new layers of volatility to the world economy.
This page features timely analysis from leading experts at the Fletcher School on the evolving forces shaping international trade and economic policy. Explore faculty commentary and media coverage to understand how these shifting dynamics are redefining the future of global commerce.
For interview opportunities with Fletcher faculty, please contact Katie Coleman at katie.coleman@tufts.edu.
Trade in Semiconductor Chips
By Chris Miller, Professor of International History
(August 13) You can’t understand trade without understanding chips. The largest flow of goods in all global trade is China’s import of chips. The supply chains that crisscross East Asia are largely about chips or the products they enable.
The United States has a trade surplus in chips, exporting ~$10B more in chips than it imports. But most goods with chips inside are assembled in Asia. When phones, computers and consumer electronics cross the U.S. border, the customs data categorizes them as phones and computers, not the chips inside.
This makes tariff policy tricky to implement.
The Trump administration could pursue a policy of “component tariffs”— tariffing Chinese chips not only when they cross the border as chips, but also when they enter the U.S. embedded into a phone or PC. This would create an incentive to make chips in the U.S., yet at high cost. Electronic devices can have hundreds of chips inside, making component tariffs complex to administer, with limited benefit towards national security or economic security aims.
If the administration tariffs chips but declines to tariff at the component level, the policy will only capture a small share of the chip trade and disproportionately harm U.S. firms with offshore low-value assembly. Trade in chips is much smaller than the value of chips embedded in other goods. Yet many of the chips imported into the U.S. are chips that are manufactured mostly in the U.S. and then packaged in Mexico. This would penalize U.S. firms undertaking most of their manufacturing in the U.S.
This comment was adapted from a piece originally published on Chris Miller's Newsletter.
A Transatlantic Divergence
By Jette Steen Knudsen, Professor of International Business
(August 5) Since January 2025, companies have faced a sharp shift in the U.S. regulatory landscape around diversity, equity, and inclusion (DEI). Meanwhile, DEI has become a defining feature of business conduct in Europe.
These opposing approaches create a dilemma for transatlantic companies: how can they craft a coherent and credible strategy amid such divergent regulatory regimes?
The Trump administration emphasizes "equal opportunity"—a uniform set of rules for all. In its first week, the administration halted DEI initiatives in federal agencies, withdrew federal funding for DEI efforts and issued an order requiring government contractors to certify that their practices did not violate the 1964 Civil Rights Act.
The EU instead focuses on "equal access," which requires dismantling barriers to create a level playing field. Recently, the EU adopted a directive on gender balance for large company boards and mandated that large companies disclose data on gender, ethnicity, disability, pay gaps, promotions, training access and well-being.
The challenge for companies is whether it is possible to reconcile these philosophies. Some U.S. firms—such as Target, Amazon and Walmart—have scaled back DEI efforts, while others like Costco, Patagonia and Ben & Jerry’s remain committed. European firms often pursue compliance within the EU while rebranding DEI in the U.S. under less politicized terms.
DEI remains a politically charged issue and a sticking point in EU-U.S. regulatory negotiations. In this landscape, companies must navigate conflicting legal expectations while keeping sight of their general goal: to keep and retain top talent.
A Trade World Turned Upside Down
By Joel Trachtman, Professor Emeritus
(August 4) The current U.S. government has violated three important bodies of law relating to trade.
First, while the courts have not yet definitively ruled as I write this (August 4, 2025), the mis-named “reciprocal” tariffs, and most likely those that purport to seek leverage to reduce trafficking of fentanyl and undocumented immigration do not fall within statutory delegation granted by Congress and therefore violate the U.S. Constitution’s allocation of exclusive tariff-setting power to Congress. In addition, the “deals” entered into thus far, to the extent that they purport to be binding on the U.S., are also not within the President’s authority.
Second, these unilateral acts and “deals” clearly violate the U.S.’ voluntarily accepted (with Congressional approval) obligations under the law of the World Trade Organization, as well as U.S. free trade agreements such as the U.S.-Mexico-Canada Agreement that President Trump bragged about in his first administration.
Third, they violate the “laws” of economics. There is clear consensus among professional economists that that tariffs are (subject to certain exceptions that do not appear to pertain here) self-harm. They reduce U.S. welfare as well as foreign welfare, and they operate as regressive taxes on U.S. consumers. Not only that, when applied to imports of raw materials and intermediate goods, they have the opposite effect of the President’s purported goal: they make U.S. manufacturing more costly and therefore less competitive.
The only advisable course is retreat from these foolish measures.
The President and the Fed
By Michael Klein, Professor of International Economic Affairs
(August 1) President Trump has repeatedly criticized Federal Reserve Chair Jerome Powell for not lowering interest rates and has openly considered firing him. These actions are concerning. The independence of a central bank ensures its decisions are based on economic, rather than political, considerations. In my EconoFact memo Leaning on the Fed, I present a cross-country analysis showing that more independent central banks deliver lower inflation than those that are more subject to political pressure. The independence of the Federal Reserve is bolstered by its self‑financing, the staggered 14‑year terms for its governors (though the Chair has a four-year term), and its legal separation from the executive and legislative branches. But these safeguards have not always insulated monetary policy from presidential influence. The United States has seen examples of Presidential pressure on the Fed that subsequently results in higher inflation – most notably, President Nixon pressuring Chairman Arthur Burns to keep interest rates low in advance of the 1972 election. Furthermore, pressure on the Fed to lower interest rates can be self-defeating since this raises interest rates on longer-maturity bonds. For example, mortgage rates, corporate borrowing, and auto loan rates are typically tied to the 10-year Treasury bond rate.
For an explainer piece on surging gold prices, The Washington Post cites analysis from Fletcher's EconoFact publication. (August 14)
Professor Chris Miller speaks to The New York Times about how White House trade policy is reshaping the chip industry. (August 13)
An article in The Economist on China's increasing use of economic sanctions cites research from Fletcher PhD student Viking Bohman. (August 12)
Professor Chris Miller provides analysis for The Washington Post on the controversial deal between the White House and chipmaker Nvidia. (August 12)
Professor Michael Klein speaks to U.S. News & World Report for an explainer piece on the importance of the U.S. national debt. (August 11)
Professor Monica Duffy Toft writes an article for Singapore's The Straits Times analyzing the economic competition between the U.S. and China. (August 11)
A Financial Times column by Professor Chris Miller explores China's security concerns over semiconductor trade. (August 11)
Professor Chris Miller is quoted in a piece from The Hill on Nvidia's approach to U.S.-China trade tensions. (August 11)
A Wall Street Journal article on Apple's supply chain strategy references analysis by Professor Chris Miller. (August 7)
Bloomberg quotes Professor Chris Miller in a piece on Nvidia and its role in the U.S.-China trade dispute. (August 6)
Dean of Global Business Bhaskar Chakravorti speaks to Germany's Deutsche Welle about trade tensions between the U.S. and India. (August 5)
MarketWatch reprints a piece from Fletcher's EconoFact publication, examining the relationship between trade deficits and economic growth. (August 2)
Professor Chris Miller speaks to NPR about Nvidia and its position in global semiconductor trade. (August 1)
For The Hill, alumni Kent Jones and Patrick C. Reed co-wrote a piece on legal questions surrounding unilateral U.S. tariffs. The idea for the piece originated at a Fletcher campus panel event featuring Jones and Reed. (July 31)
An MSNBC article on deteriorating U.S.-Brazil trade relations quotes Academic Dean Daniel Drezner. (July 31)
Professor Michael Klein speaks to NPR about the significance of Federal Reserve independence. (July 30)
PolitiFact quotes Professor Michael Klein when assessing claims about the value of the U.S. dollar. (July 25)