Daniel Kahneman and Amos Tversky are kings of behavioral economics. Their groundbreaking research in behavioral economics has deeply influenced our understanding of the ways in which people make decisions. Their research illustrates the critical importance of communication, specifically how the “framing” of information can have profound impacts on perception and decision-making. Recent global economic developments have ushered back a focus on this idea. This has been particularly so after each of former President Donald Trump’s tariff-related announcements.
Kahneman, who authored the acclaimed book “Thinking, Fast and Slow,” explores the cognitive biases that affect human behavior in economic contexts. His observations, combined with Tversky’s groundbreaking work, illuminate how humans often act counter-intuitively with the information they receive. Rather, they let themselves be governed by decision architecture—by the way that choices are presented to them. For instance, a decision-maker might react differently to a pricing strategy depending on whether it is presented as a discount or a penalty.
Michael Lewis’s book “The Undoing Project: A Friendship That Changed Our Mind” further explores the groundbreaking collaboration between Kahneman and Tversky. Along the way, it showcases how their friendship and collaborative research turned the world’s conception of human psychology in economics on its head. Their findings highlight the central role of framing and its effects in all aspects of decision making.
Framing is especially important in the context of Trump’s tariff announcements. One of the men’s biggest trespasses included how he shared news about tariffs, which set up the world market for soaring tariffs. For instance, Trump’s earlier statements about imposing exorbitant tariff rates, such as 145 percent on Chinese imports, set a precedent that influenced global perceptions and reactions to subsequent tariff levels. Behavioral economists argue that this prior framing led people to accept current outcomes more readily, even if those outcomes were substantially higher than expected.
Due to this clever tactic, effective tariffs on Chinese goods are at 30 percent. Tariffs on imports from all other U.S. trading partners are capped at just 10 percent. This differential treatment is an ideal example of how framing can manufacture a narrative, or story, that elicits a public—and through it, political—response. Had Trump not threatened to raise rates even higher, the international response to these new tariffs would have been a lot different. His earlier comments created the narrative for his response today.
Beyond shaping American attitudes toward tariffs themselves Trump’s framing has drawn different kinds of reactions from trading partners. Others have explicitly supported him in public testimony, even while risking a direct economic fallout from his policies. This example is an incredible demonstration of how powerful framing can be in producing very counterintuitive actions from all the players impacted by economic decisions.
The implications of this kind of framing go above and beyond international trade and tariffs. In widespread consumer practice, companies regularly use framing to get you to buy a product. For instance, vendors may offer two pricing descriptions that yield the same outcome: a price of $90 for early purchases versus $100 for late ones. This high-stakes strategy deck holds the power to influence customers’ choices through perceived value and urgency.
The impacts of such framing in economic spaces are deep. As behavioral economists have noted, people often come to accept certain fates due to having been steeped in specific storylines. These stories can train people to be more forgiving, even if the result is bad. Trump’s tariff increases are a modern case study in how political framing can skew public perception and even the state of economic reality itself.