The real reason for the tariffs

[Smit]

At least this kind of makes sense of what the people steering Trump are thinking. Not that it's not a stupid idea, just that it puts a thought process to what they're doing. I don't think Trump even knows wtf reciprocal means.

So basically the intent of the tariffs is to raise prices to the point Americans no longer want to buy foreign made stuff which will have the effect of evening the trade imbalance.

Of course as we've seen in the past, the price of American made goods (when they eventually become available) follows the price increase of foreign made goods.

How much will tariffs raise prices? Trump's economists just revealed their answer

Excerpt:

Holding up a sign on the White House lawn, Trump pointed to a new, 34% tax on imports from China; for the EU, a tax of 20%. Vietnam got 46%; India, 26%. Nigeria? Just 15 percent. Trump claimed that these "reciprocal" tariffs reflect how other countries already tax American products. "That means they do it to us and we do it to them," he said. "Very simple."

That is not true. These are not reciprocal tariffs. They do not correspond to the tariff rates in other countries. The truth behind where these tariffs came from is far more interesting.

Here's how Trump's math says it would work: The 67% tax should raise the prices of Chinese products in the United States. And those higher prices should discourage Americans from buying Chinese products or products that contain Chinese components.

This is contrary to Trump's previous public statements, where he has variously denied that tariffs would raise prices or has said that he "couldn't care less."

But according to Trump's math, the tariffs are supposed to raise prices. Because those higher prices are the driving force that will close the trade deficit.

There are a couple of major assumptions in Trump's math. The biggest assumption involves how much the tariffs would cause prices to go up. Here, the administration makes an eyebrow-raising admission: It guesses that for every 10% hike in tariffs, there will be a 2.5% increase in prices.

Translation: Trump's economists think that about a quarter of his tariffs will be passed onto American consumers in the form of higher prices.

Going back to the China example, here's how it would all play out. According to Trump's math, the 67% tariff on Chinese products would cause prices of those products to go up by 16.75%.

By coincidence, the administration also assumes that for every 10% increase in the price of foreign products, there will be a 40% decrease in how much Americans buy. (This is on the higher but still reasonable end of what mainstream economists believe.) So, faced with 16.75% higher prices, Trump expects Americans to decrease their purchases by four times that amount. Which brings us back to 67%.

In other words, a 67% tariff on Chinese products would reduce demand for Chinese products by ... also 67%. So if Americans are currently buying $439 billion worth of Chinese products each year, Trump's economists expect that the new tariffs will reduce that spending by $294 billion — which would close the trade deficit. At least in theory.

What's wrong with Trump's tariff math?

Certainly these new tariffs are not "reciprocal" tariffs. But the math behind them is not wholly invented or nonsensical, despite what some online have claimed.

In fact, for possibly the first time ever, the administration is explicitly acknowledging some of the basic economic logic of tariffs. Tariffs do raise prices. And higher prices do cause people to buy less stuff. And if Americans buy less foreign stuff, then America's trade deficit with other countries will narrow.

But that's not to say that any of Trump's tariff calculations arrive at the right answer. For one, these are very rough, back-of-the-envelope calculations. As laid out, this formula treats every trading partner, every good and every industry the same. Bananas, oil, clothing, computers or cars — it doesn't matter what a country sends to the U.S.

More importantly, the formula hinges on a big assumption about how much tariffs will raise prices. Trump's math assumes that only a quarter of the tariffs would be passed onto American consumers in the form of higher prices. But economists who have studied Trump's tariffs in 2018 — on steel and aluminum and various products from China — calculate that almost all of those tariffs ended up being passed onto Americans.

Aside from that, Trump's tariff math also ignores the broader economic consequences of these sweeping new tariffs. They will have an effect on the overall American economy. They will influence exchange rates. And they will likely provoke retaliatory tariffs from other countries.

So, will Trump's new tariffs actually close the trade deficit? Maybe, maybe not. But finally, at least, the administration has shown its work. And according to their calculations, raising prices and closing the trade deficit is what these tariffs are designed to do.

[neurosis]

How many popular consumer products aren't made in America at all and not likely to be any time soon? Things like cell phones and televisions.

[Smit]

How many popular consumer products aren't made in America at all and not likely to be any time soon? Things like cell phones and televisions.

I know, it's crazy and ignorant, but it makes sense out of something that just doesn't make any sense! 

[Newbeeee™]

At least this kind of makes sense of what the people steering Trump are thinking. Not that it's not a stupid idea, just that it puts a thought process to what they're doing. I don't think Trump even knows wtf reciprocal means.

LMFAO OxyMoron.
So Trump is making "the decision", yet he doesn't know what reciprocal means 

[neurosis]

it makes sense out of something that just doesn't make any sense!

Another one of the unintended consequences that we're seeing locally, and this was already a problem due to inflation. People aren't donating to food banks and other charities. According to the local food banks, donations slowed weeks ago in anticipation of higher grocery prices.

[Smit]

unintended consequences

There are going to be a fuck load of unintended consequences in both the near and far future.

[Del.]

There are going to be a fuck load of unintended consequences in both the near and far future.

Thanks Kreskin.

[neurosis]

There are going to be a fuck load of unintended consequences in both the near and far future.

Part of the problem with the food banks is coming from recent Federal Budget cuts. I guess it's not all entirely unintended.

[Smit]

Part of the problem with the food banks is coming from recent Federal Budget cuts. I guess it's not all entirely unintended.

Personally I don't believe they think about it enough for it to be truly intentional, so in an ignorant kind of way, I think it's not intentional. But the "elite" Repugs have little love for the parasite class so who knows?

[gcode]

How many popular consumer products aren't made in America at all and not likely to be any time soon? Things like cell phones and televisions.

Do you remember TV brands like Zenith, RCA, Magnavox, and GE? They are all dead and gone and have been for decades.
Japan had ruinous tariffs on American imports into Japan, while at the same time, they were selling their TV's at a loss in the US. They kept that us until the US brands are were dead and they have controlled the market for TV's ever since. Japanese consumers also paid much higher prices for Japanese electronics that Americans paid.

Even as late an 1976/1077 when I was stationed in Okinawa, Japan, the base PX had amazing deals on stereo components.
The same items were 60% high in the stores out in town. The Japanese consumers were forcibly subsidizing the destruction of the American electronics industry.



 

[mkd]

Anyone talking about tariffs on trade and only talking about one side of the trade, as in "US consumers pay the tax" is a flat out liar. Just sayin

[mkd]

This tariff deal is the best big brain 4D chess move of the century. Several factors at play.
 I say that when there is a real good chance my job gets blown up if these high tax numbers stick.
 Obama's and Biden's handlers believed in subsidies, obviously. Picking winners and losers. Many fruitless boondoggles were the result.
 
  Trump doing tariffs to generally support US industry...
 Which one has a better chance?

[Smit]

Anyone talking about tariffs on trade and only talking about one side of the trade, as in "US consumers pay the tax" is a flat out liar. Just sayin

I don't think anybody said that but you but alright.

On your sliding scale, where does a fat orange mfer who says tariffs won't raise prices stand?

Keep in mind the fat orange mfer knows it's not true before he says it.

[mkd]

I don't think anybody said that but you but alright.

On your sliding scale, where does a fat orange mfer who says tariffs won't raise prices stand?

Keep in mind the fat orange mfer knows it's not true before he says it.

Got a link on him outright saying it won't raise prices, without being hyperbolic or ironic?
 You know he's got great standup comedy street cred, right?

[Smit]

You know he's got great standup comedy street cred, right?

Is it still comedy street cred if it's ignorance? Or he means it? Or is just a flat out lie?

Asking for a friend.