What's the actual strategy behind the current US administration slapping tariffs on everything? Feels like they're handing them out like Halloween candy. Is there a long game here, or is it just managed chaos and alienating trade partners for short term optics?
They claim that they are "reciprocal" tariffs, and their chart shows them at exactly half the tariffs they claim are imposed by the target or 10%, whichever is higher. But it is suspicious that the column on their infographic showing the foreign tariffs has fine print indicating that includes other non-tariff things that you can't easily calculated as a neat rate the way tariffs are. And, some people running the numbers have determined that the quoted foreign "tariff" amounts are consistently the US trade deficit in goods with the target country divided by that country's exports to the US, with a minimum of 10%.
So, despite being labelled "tariffs", the actual basis for calculating the "reciprocal tariffs" has nothing to do with tariffs.
A rebirth of mercantilism. Peter Navarro is a huge fan of it, and in his heterodox fever dreams, laments that most of the world abandoned it several centuries ago. In his mind, a net surplus of currency is every bit as important as having a strong military. People like Lighthizer have drunk the coloured sugar-water.
Kill people's savings, might happen. Discretionary spending is about to get clobbered. Restaurants may be at the top of that list, and travel.
I rather doubt Walmart is going to increase the price of only Chinese made goods 25%. I think everything goes up 25% and they pocket the margin as long as they can get away with it.
It doesn't work because it's basically illegal to be poor in America, or rather to live like a poor person in a developing country. Because of theories about gentrification and such we just banned everything like SROs, company dorms, etc.
It worked for a little while in the 2000s because earlier flight from cities had left a lot of empty housing open to gentrify, but none of that is left.
There's a few classes of people left like supercommuters and people who live in RVs in the Amazon warehouse parking lot, but not going to run a big factory like that.
Well yeah, that's just some weird French place we bought and turned into a slave labor camp.
But memes about suicide nets aside, Chinese factory workers are there by their own choice, because it's better than their alternatives, and we've eliminated such choices by simply making it illegal to have the low cost of living it requires.
This was done to make the poor underclass go away (homeless people) but it also makes this type of working class (factory workers) go away. Luckily for us, we have a service economy with email jobs for them to work instead.
I mean, I was just thinking about the civil law system.
The problems I described are mostly in blue states, although Texas has different problems that somehow result in basically the same issues. Like Houston doesn't have zoning, but still ends up with sprawl due to other restrictions.
Unless you’re dealing with wills and stuff, and real property the civil law system isn’t really affecting people that much because you have to have some compatibility with the other 49 states. Even divorce is not as unique as it was. But yeah, it still is a disadvantage to incorporate here.
I'm on the side of free trade and dont think there is a single policy. The strongest arguments I can think of are:
1) raise tax revenue in a way that partially falls on foreign nationals
2) reduce trade deficits and foreign purchasing of treasuries.
3) Increase relative power if other economies are damaged more than the US. There are situations where zero and negative sum strategies are optimal, like war, where it is better to have a larger % of a smaller overall pie.
Im talking about trade deficits, not budget deficits. Im not convinced trade deficits are a bad thing to begin with, but that is a whole sperate can of worms.
My understanding is that yes, the national debt is still increasing, although the administration is counting on tariff funds to supplement revenue. Would you agree?
> the national debt is still increasing, although the administration is counting on tariff funds to supplement revenue
Not the debt, the deficit. The debt is the card balance. The deficit are new swipes. Nothing in the current policy package is about deficit (let alone debt) reduction.
(Valid on trade deficits. I guess we can run trade surpluses if we give up dollar hegemony. That, of course, means no more deficits.)
> My understanding is that yes, the national debt is still increasing, although the administration is counting on tariff funds to supplement revenue. Would you agree?
Let me see if I am following. The tariffs are ostensibly about spurring domestic industry so that American companies can flourish and we don’t have to pay tariffs on imports of foreign goods in the long term. Is that right? If so, then long term, aren’t we hoping that the “tariff funds” are small? But they are simultaneously supposed to supplement revenue to pay down debt too?
The TLDR is Miran sold to Trump US can Plaza Accord everyone, devalue USD to reindustrialize US, draw down US debt/commitments, keep exorbitant privelege... all by slapping tariffs (Trump's fav hammer) to scare countries into signing (converting) existing US commitments to "century bonds" in US favour while tying them to US orbit for foreseeable future. Is US strong enough to coerce others to sign on? IMO doesn't matter, this seems like plan specifically tailered to Trump preferences and ego, so as long as Trump thinks so Miran gets the job.
E: there is logic to the plan, logic that appeals to Trump -> US strength and monetary manipulation skills can force others to fall in line. And TBH countries have fallen in line in the past.
Yeah that’s not going to work. America is about to find out that the era of bully pulpit is over. Why work with a recalcitrant and quite frankly obnoxious US when you can cut bilateral EU/Asian deals?
Trump is using century-old misinformation about tariffs to raise tax revenue to pay for tax cuts on the wealthy. In reality, it's an added tax on all spending that accelerates inflation.
Tariffs are theoretically supposed to encourage domestic production, but rely on the false premise that all raw and intermediate materials can be sourced domestically at a cost below the import price. That has generally proven to not work unless tariffs are in the hundreds of percent. But at that level, import taxes tend to poison entire sectors due to supply lag instead of drive domestic economies.
It's a bit difficult to nail down direct citations for what is basic knowledge of how tariffs work in reality. It's covered in AP/college macroecon and U.S. history classes.
Wikipedia's articles on Smoot–Hawley and the Tariff of Abominations both have sections on their effects.
In short, we'll see a brief rise in the domestic economy, then a sharp recession. One of the reasons SE Asia, BRICS, and the EU have been so active to disconnect themselves from the U.S. is they don't want to get caught up in the U.S. economic failure like they did in the 1930s.
Category error to think there's a strategy. Trump doesn't even know what a tariff is. People try to project a strategy because it's probably too discomfiting to believe that the greatest superpower the world has ever known elected a complete nimrod king.
