Tariffs and the anchor heuristic

It feels like President Trump is cutting tariffs. He has agreed to tariff deals with China and the UK, and he paused his biggest Liberation Day tariffs after financial markets revolted. But those feelings are deceptive. Even after those cuts, tariffs are still about quadruple what they were before his inauguration. What’s going on?

 Over at National Review’s Capital Matters site, I argue that a psychological concept called the anchor heuristic is at work:

For example, the anchor heuristic is a common deceptive advertising tactic. Think of an infomercial that advertises a new product for $100. Seconds later, they reduce the price to $70, a 30 percent discount. That sounds much more reasonable, even if $100 was never a realistic option. Then they cut the price again to $50 and throw in some accessories, too. What a fantastic deal, especially compared to that $100 anchor.

Maybe it really is a good deal, and maybe it isn’t. But that initial $100 offer has nothing to do with whether it is or isn’t. Yet we still use $100 as a basis for comparison. It became the anchor our brains latched onto, not because of the merits, but because that was the first number introduced.

As with Sham-Wows, so with tariffs. Be on your guard.

Read the whole thing here.