CPA Economist Jeff Ferry Testifies on Tariffs to Joint Economic Committee

Brendan Duke, Senior Director for Economic Policy at CAP, was the only one who said that tariffs were okay if used strategically. No one liked the idea of a revenue tariff.

Rep. Gwen Moore (D-WI-4) asked Ferry about the CPA modeling of the 10% tariff, saying that tariffs would only work if industrial policies like the CHIPS Act were used alongside them.  

Ferry said he disagreed with that assessment.  She asked how the CPA tariff model came up with its estimated $6 trillion in revenue and he explained, giving her some basic math of 20% times $3 trillion in imports adding up to $600 billion annually, or $6 trillion over 10 years.  The argument against this form of revenue was that it would not be used to lower a roughly $2.5 trillion fiscal deficit, but instead would be used to “fund corporate tax cuts and tax breaks for billionaires,” the Democrats on the panel repeated.

Rep. David Schwiekert (R-AZ-1) brought up a new Congressional Budget Office report on tariffs, where they said it will increase the debt. The report came out on Wednesday.

“They assume a more severe decline in imports, probably,” Ferry replied.  “The CPA model assumes the economy grows and CBO’s maybe does not,” he guessed. “Also, these models rarely include currency fluctuations because currency is a monetary variable and not a real variable so we take into account what will happen with the dollar in our model. Currency is unpredictable. You would have to manage the dollar better if you wanted to predict tariffs perfectly.”

Rep. Ron Estes (R-KS-4) was the sole member who seemed moderately in favor of tariffs.  Most of the JEC members present also sit on the House Way & Means Committee’s subcommittee on trade. As members, they are supposed to be the high echelons of trade law setters in the House. 

“A lot of countries will have a stated goal of having free and fair trade, but they will require licensing agreements to get into their markets, or flat out reject your imports,” he said, alluding to non-tariff barriers that exist in the West, like in Europe for agriculture, for example. Estes pushed back against the idea that tariffs were inflationary, all the while recognizing that this new proposal is much bigger than the 2018 Section 301 and Section 232 tariffs. “Inflation was low under Trump even with record tariffs in place. It is important to remember that Americans know the difference in inflation between the Trump years and these last four years; they recognized that every time they paid their utility bill or put gas in their car,” he said. 

Rep. Jimmy Panetta (D-CA-19) said Congress needs to think of tariffs as part of the trade narrative now, but hinted that he is hopeful corporate America will convince Trump to use tariffs sparingly. 

“Corporate CEOs are flocking to Mar-a-Lago asking him, I hope, to not move forward with these policies,” he said. “I think his approach will weaken the U.S. economy.”

Members and panelists brought up trade retaliation against agriculture. American farmers were given billions in bailouts to counter China’s tariffs, which essentially amounted to soybean bans that lasted roughly one and a half harvest cycles. China then returned to the American soybean market and has broken import records ever since.

Members also talked about how tariffs would cause prices on imported Canadian lumber and other home building materials to rise, forcing housing prices to increase.  

Housing prices rose nearly 50% between 2001 and 2008 and another 25% between 2010 and 2015. Housing prices went up another 30% or so between 2018 and 2023, according to the St. Louis Federal Reserve. How any of that can be blamed on tariffs when housing prices rose similarly or more in prior years with no tariffs at all was not discussed at the hearing.