• A libertarian think tank is warning tariffs mean higher prices and fewer goods for Americans, and the broader they are, the more prices will increase. Any other explanation for tariffs doesn’t track with economics, The Cato Institute claims.

A Fox Business host recently shared a hypothetical where the price of one good goes up, but the price of another goes down because people have less to spend. It was a defense of President Donald Trump’s tariffs. The Cato Institute, a libertarian think tank co-founded in 1977 by billionaire Charles G. Koch, doesn’t share that perception. 

“If Trump’s tariff proposals singled out just one or two individual goods, this hypothetical may have been a valid example of the administration’s (still bad) policies,” vice president and director of The Cato Institute’s Center for Monetary and Financial Alternatives Norbert Michel and research fellow Jai Kedia wrote Monday. Fox News did not immediately respond to Fortune’s request for comment.

But tariff defenders are missing the economics of it all, the authors wrote. The tariffs in place are broad, and reciprocal tariffs are set to be even broader, they said. So a lot of products will be taxed, and companies tend to pass those extra costs onto consumers. And while tariff-induced  inflation might be transitory because it could be a one-off increase, that increase could be substantial and will hurt the economy, they argued. Not to mention, the hypothetical itself suggests Americans will feel tariffs, Michel and Kedia noted.

“Justification for the president’s trade policies keeps getting stranger by the day and moving further away from anything recognizable as economics,” Michel and Kedia wrote. To be clear, libertarians value free markets and free trade; tariffs can get in the way of that. 

Still, the authors called tariffs “a recipe for making Americans worse off.” 

Consumers are harmed in two ways, Kedia told Fortune. For one, they’ll suffer through an increase in prices. Tariffs are meant to protect the domestic industry from import competition, but it is more expensive to produce goods in the U.S, which in turn means higher prices. Consumer prices hit a four-decade high in June 2022, and while prices are no longer escalating at such a rapid pace, people are still feeling the pain. Secondly, tariffs reduce the amount of products that can be supplied, meaning Americans have fewer goods to buy.

Economists warned tariffs would be inflationary before Trump was elected. Since his victory, The Peterson Institute, another think tank, estimated Trump’s tariffs would cost a typical American household an extra $1,200 a year. Homebuilders estimate levies could mean an additional $9,000 on the price tag for every home; the housing market is at a standstill mostly because so many people can’t afford to buy a home. And transitory or not, the central bank left interest rates unchanged so it can keep an eye on prices while the administration’s tariff and trade policies play out.

“The President has sometimes used tariffs as a negotiating tool, but the administration should understand that the tariffs hurt U.S. consumers just as they hurt foreign producers,” Kedia told Fortune. “As the trade war escalates and reciprocal tariffs start being imposed in both directions, no one is economically better off.”

This story was originally featured on Fortune.com

The U.S. Postal Service is facing an uncertain future after the resignation this week of Postmaster General Louis DeJoy and the suggestion by President Donald Trump and Elon Musk, who heads the Department of Government Efficiency, that the mail service could be privatized.

Unions representing postal workers have balked at the idea of privatization, staging protests across the country.

While they support modernization efforts, including those initiated by DeJoy, union leaders warned that allowing private corporations to run the U.S. mail will ultimately harm everyday citizens, especially the estimated 51 million people living in rural areas who depend on the Postal Service.

“It’s a terrible idea for everyone that we serve,” National Association of Letter Carriers President Brian L. Renfroe said during a panel discussion at the National Press Club in Washington, D.C., on Tuesday.

What happens next may depend on who becomes the next postmaster general. The U.S. Postal Service Board of Governors, an independent establishment of the executive branch that oversees the Postal Service, has retained a global consulting firm to conduct a search for the 76th postmaster general and CEO.

USPS currently employs about 640,000 workers tasked with making deliveries from inner cities to rural areas and even far-flung islands.

Trump and Musk look to make big changes to the USPS

In February, Trump said he may put the U.S. Postal Service under the control of the Commerce Department in what would be an executive branch takeover of the agency, which has operated as an independent entity since 1970.

“We want to have a post office that works well and doesn’t lose massive amounts of money,” Trump said during the swearing-in ceremony for Commerce Secretary Howard Lutnick. “We’re thinking about doing that. And it’ll be a form of a merger, but it’ll remain the Postal Service, and I think it’ll operate a lot better.”

While he didn’t say anything about privatization at the event, the president has voiced support for the idea in the past. In December, he suggested privatizing the service given the competition it faces from Amazon, UPS, FedEx and others.

“It’s an idea a lot of people have had for a long time. We’re looking at it,” the president said.

Musk, meanwhile, voiced support this month at a tech conference for privatizing the Postal Service, saying, “We should privatize anything that can reasonably be privatized,” the New York Times reported.

Postal workers protest, warn Americans may lose a beloved service

Across the country, postal workers have been staging protests in recent days, many chanting “U.S. mail not for sale,” and some holding signs that read: “The post office belongs to the people, not billionaires,” a reference to Musk.

Renfroe said the goal of the protests is to make the American public aware that drastic changes are being considered for the Postal Service.

“Our message is: ‘No.’ Private business is interested in doing things that are profitable, as they should be,” he said.” But that is the distinction between private business and what we are, a public service, where we serve everyone, everywhere, no matter where they live, for the same price every day.”

How did the USPS end up in such a bad financial position?

Since a reorganization in 1970, the USPS has been largely self-funded. The bulk of its annual $78.5 billion budget comes from customer fees, according to the Congressional Research Service. Congress provides a relatively small annual appropriation — about $50 million in fiscal year 2023 — to subsidize free and reduced-cost mail services.

Amid challenges that include the decline in profitable first-class mail and the cost of retiree benefits, the Postal Service accumulated $87 billion in losses from 2007 to 2020. However, the service reported a $144 million profit last quarter, attributing it to DeJoy’s 10-year plan to modernize operations and stem losses. The service had reported a net loss of $2.1 billion for the same quarter last year.

“By steadily improving our product portfolio, we are increasing our competitive position in the shipping marketplace,” DeJoy said in a written statement February accompanying the first quarter results for Fiscal Year 2025.

Union leaders said Wednesday that they hope the next postmaster general sticks with the modernization plan and considers harnessing the Postal Service to provide other services to the public, including basic banking, electric vehicle charging and even U.S. Census work.

“Our network of physical locations, retail locations … our delivery network, puts us in a position to do so many different things,” Renfroe said.

This story was originally featured on Fortune.com

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