They still constitute regressive taxes that hurt business. The US is a lot more involved in and reliant on international trade since the mid 20th century.
Domestic consequences of the 2024 US presidential election: the quickening
- Thread starter Scotttheking
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In what way?
If there is a one to one correlation between the strength of the dollar vs foreign currencies vs tariff rates then what are the negative externalities of tariffs?
Before you say it’s nuts, that’s literally what is happening now.
In the short term, prices would drop. Then in the longer term, economies would try to rebalance away from the dollar… but they haven’t had any success yet.
Tariffs do hit eventually but it’s interesting that we are paying more for domestic and European goods, not foreign tariff commodities. Solar panels may be an outlier. We will see.
So far, tariff countries just add a middleman and then they profit off the increased exchange rate.
Remember kids, astrology is a science and economics is an art.
What? Want to break that down? How would a 25-35% tax on the majority of material and energy (the US imports a very large amount of crude from Canada and Mexico) coming into the country translate to a stronger dollar? Not just an effect, you claim a one to one correlation.
Not to mention US goods will also be less competitive in said countries, Mexico has already promised retaliatory tariffs, China and Canada won't just do nothing either. They are the top three for US exports.
Not to mention US goods will also be less competitive in said countries, Mexico has already promised retaliatory tariffs, China and Canada won't just do nothing either. They are the top three for US exports.
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VividVerism
Ars Tribunus Angusticlavius
We aren't seeing the tariff impacts yet because....uh...the tariffs aren't in place yet, because Trump isn't president yet.
US manufacturing's strength is in high-quality, high-tech goods; computer chips (not necessarily packaged up into electronics, which is normally done in low-wage countries), high-performance/high efficiency engines (eg, modern gas turbines), etc. That's the US competitive advantage.
Almost none of these have any relevance to your average consumer, who imports goods from countries with low wages and the ability to produce lots of 'good enough' goods for cheap. That's China's competitive advantage.
Putting a giant tarrif on everything coming from China isn't going to make your typical Wal-Mart goods cheaper; if they could be made cheaper in the US they probably already would be.
Tarrifs don't put a stop to the law of competitive advantage. It just forces costs up to negate the competitive advantage someone else has.
Almost none of these have any relevance to your average consumer, who imports goods from countries with low wages and the ability to produce lots of 'good enough' goods for cheap. That's China's competitive advantage.
Putting a giant tarrif on everything coming from China isn't going to make your typical Wal-Mart goods cheaper; if they could be made cheaper in the US they probably already would be.
Tarrifs don't put a stop to the law of competitive advantage. It just forces costs up to negate the competitive advantage someone else has.
The currency markets are reacting now.
You’re not being serious right?
https://www.bloomberg.com/news/arti...ar-stronger-for-longer-in-a-new-tariff-regime
Tariffs aren’t priced in the stock market yet but they will be in the following weeks.
This is esoteric stuff but everyone here knows not to quote jackasses on MSNBC, right?
Ok yes if you’re Adam Smith or David Ricardo and this was 1709 it’s true. But we have a slightly different situation with two relevant parts.
One, the US is the premier consumer in the world. And, two, the vast majority of transactions have to be settled in dollars. So every country wants to sell to America but they also have! to get dollars someway.
So if you are Mexico, how do you get dollars? You sell to America. But how do you compete when there is a tariff? You devalue your currency so the price shock isn’t as bad.
Which makes the dollar go up. Hence. .. why the dollar is up…. now because currency markets are futures.
By the way, this only works with America. ( and Germany). Because our main export is dollars and our financial markets which run in dollars.
So we have to run insane imports which cause us to export massive dollars and as long as there is a massive demand for dollars to invest in our financial markets and as long as other countries prefer to settle in dollars, then we will always run deficits and we will always have a much stronger currency than another country.
This cuts both ways.. a stronger dollar makes our exports less competitive… making it harder for our industries to compete. Unless demand for the dollar drops… then it will go down and make our exports more competitive.
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I claimed a one to one correlation as a thought experiment.
Let’s think your example through. Mexico sells oil to the US for $10 a barrel. Trump levies a 20% tariff. So now the price is $12 a barrel, right?
Not so fast.
America and Saudi Arabia pump oil for $11. Americans can buy oil for $11 a barrel. 10% increase right?
Not so fast.
Mexico used to sell oil to America and got American dollars. Which made their currency stronger because if someone wanted dollars they could get pesos and convert them. But now there are less dollars in Mexico… which makes the peso cheaper.
So now the Mexican oil is $11.50 a barrel.
How do we get back to the $10 a barrel? Well… Mexico has lots of debts in dollars so they have to shore up their currency. So what do they do? They buy up bonds and make the dollar go up against every currency.
now it gets interesting. Saudi Arabia’s $11 a gallon becomes $10.50 a gallon.
So yeah… we will pay 50 cents more for gas. But your vacation to Mexico will be cheaper. So it’s a wash.
The ones rooting for tariffs are concerned about all businesses? Like the VC strip-mine asset capitalists, it is a very long bet that they are even concerned with businesses that they own, only assets that can be sold.
That last line… Tell me you’re out of touch with lower income people without telling me you’re out of touch with lower income people.
VividVerism
Ars Tribunus Angusticlavius
I don't give a shit what currency markets are doing.
You started talking about current prices of goods and how tariffs aren't hitting them. Or will even make them go down sometime. And about how there are no negative externalities.
The negative effects haven't hit yet. They will cause real-life prices to main street consumers to go up. The new Trump tarrifs are not in effect yet. The only effects we can possibly be seeing right now is from speculative day-trader parasites pushing around gobs of imaginary money for imaginary goods, making bets on what the effects of the tariffs might be in the future.
Your views on other countries reacting by just sucking it up and eating the cost is hopelessly naieve. That's never how it has worked. There's a reason most governments for the past, I dunno, 80-100 years or so have sought more open trade, not less. At best, the higher prices for specific products in a targeted tariff regimen will encourage more domestic production of these specific products. Across the board tariffs like this are just bad policy serving no real benefit.
Pretty strong General Ripper energies on how easy it would be ride out a trade war of that magnitude, if everyone starts retaliating in kind.
“Mr. President, I'm not saying we wouldn't get our hair mussed. But I do say no more than ten to twenty percent inflation, tops. Uh, depending on the breaks.
“Mr. President, I'm not saying we wouldn't get our hair mussed. But I do say no more than ten to twenty percent inflation, tops. Uh, depending on the breaks.
There's a couple problems I see with this, assuming it goes as you say and the cost for crude only goes up a bit, say 5% like you spit balled.
Thats 5% for gasoline and diesel, shipping is more. That's 5% more for gas powerplant energy (some 40% of the grid with a quick lookup). Heating, plastics, industrial processes, the list goes on.
So, now US goods are more expensive, and less competitive. And USD is theoretically stronger, therefore the exports are also simply more expensive from that as well.
And just sticking with Mexico, you've now cratered the economy of the US' 2nd largest trading partner, they aren't buying as much.
Now less money coming back to the US, the economy is going to get worse. That trip to Mexico may cost less (more for the flight, see crude), but you'll also have less disposable income.
What happened domestically during Trump’s first term when he put tariffs?
Do we have an economic analysis of this since we have much more time and distance to explore the impact Trump’s tariffs had the first time round?
I do remember farmers suffering and suicide rates going up amongst farmers because the tariffs impacted their ability to sell beef and grains to China (iirc). Brazil and Argentina covered the demand so they won out and China didn’t have less beef or grains to feed their population.
But that’s trade between countries outside the US.
What happened within the US? I genuinely have no idea because Trump’s presidency was so chaotic I began to minimise news about the US to keep my sanity.
Do we have an economic analysis of this since we have much more time and distance to explore the impact Trump’s tariffs had the first time round?
I do remember farmers suffering and suicide rates going up amongst farmers because the tariffs impacted their ability to sell beef and grains to China (iirc). Brazil and Argentina covered the demand so they won out and China didn’t have less beef or grains to feed their population.
But that’s trade between countries outside the US.
What happened within the US? I genuinely have no idea because Trump’s presidency was so chaotic I began to minimise news about the US to keep my sanity.
Last time pretty much everyone went after agriculture. China taxed pork, soybeans, and other produce. Canada and the EU otherwise were quite targeted, went after things like whiskey and motor bikes, things that were from key Republican states. (Jack Daniels in particular was mentioned, being from McConnell's district)
Canada also somewhat amusingly went after pillows.
https://www.cnbc.com/amp/2018/06/30...begin-sunday-and-include-whiskey-ketchup.html(Above link is from 2018.)
The big issue with Trump's blanket tariffs is the retaliation will probably be just as strong, but much more targeted.
Canada also somewhat amusingly went after pillows.
https://www.cnbc.com/amp/2018/06/30...begin-sunday-and-include-whiskey-ketchup.html(Above link is from 2018.)
The big issue with Trump's blanket tariffs is the retaliation will probably be just as strong, but much more targeted.
I don’t think that’s correct. If you’re an importer, you sure as shit don’t want to wait for the tariffs to hit - you want to bring in more stock before they hit. But container ships move slowly so if you want to get in before the tariffs hit you better be placing orders yesterday. In other words, the market is (totally rationally) moving as we speak in reaction to the announcement of future tariffs.
Markets move on the news.
Also worth mentioning, the other effects of this kind of action. Canada and Mexico moved to make trade agreements elsewhere when the US started acting irrationally the last Trump presidency, both making or finalizing agreements with the EU in 2016-2017, and a pacific agreement (without China or US, mind) came into agreement in 2018.
Making key partners look other directions is quite the failing, when at the same time the US department of defence is directly investing to have mines open in Canada
https://www.defense.gov/News/Releas...llion-to-enhance-north-american-cobalt-and-g/
Making key partners look other directions is quite the failing, when at the same time the US department of defence is directly investing to have mines open in Canada
https://www.defense.gov/News/Releas...llion-to-enhance-north-american-cobalt-and-g/
That and China is more prepared this go around (paywalled Economist article). They’ve slashed their imports of soyabeans from the US (down from 40% to 18%) and opted for Brazilian imports instead, are devising local alternatives for pig feed, and are settling trade in reais and yuan to bypass the American financial system. Similarly, they’re importing a lot of discounted oil from Iran.
Continued undermining of the international trade system will just accelerate the moving away from the US as a financial center (especially given the increased use of sanctions) and trading partner, and just make the domestic consequences even sharper. At this point, other countries will just treat us as the unreliable, transactional partner we’ve become.
(More of what @Rick Rumble was saying basically)
Meanwhile, domestically, American consumers will just face higher prices, empty promises of a manufacturing boom in markets that we can’t compete in, and increased uncertainty.
Let's not forget that part of the (unspoken) reason for the creation of the EU was to be able to go up against the US on a more equal footing. It failed in that regard... but with Trump 2.0, it could very well succeed on the backswing.
There’s another Economist article regarding Germany’s stagnating economy, in part because China has shifted away from being a heavy consumer of their exports to a heavy competitor up and down the line (eg, cars, the Mittelstand companies, which tend to be family owned, specialized, mid-to-high end companies). So Germany is looking at other markets, which may include the US, since Chinese imports will face higher tariffs than the EU.
To keep things domestic focused, that still means markedly higher prices for Americans because of pointless tariffs.
VividVerism
Ars Tribunus Angusticlavius
Good point. Thanks for the correction.
The parasite class throwing around gobs of money to speculatively put their name on imaginary goods, and actual companies throwing around gobs of money to move purchases forward that they otherwise would have bought later, meaning they now need to keep it in inventory and steal from future economic activity. That and some everyday consumers buying cars or computers or whatever earlier than planned, while they still can. Again biting into future economic activity. Doubly so, if they use credit at a worse rate than they otherwise would if they had more time to plan.
Trump was triggering a massive manufacturing recession but then came COVID and a shower of liquidity fuelling insane consumer spending which held things in place until Biden came along.
Working for a manufacturer who exports to the US (among other countries) from Aus, we're waiting for a bit more clarity.
Big tariffs mean we'll possibly abandon the US market altogether.
Big tariffs mean we'll possibly abandon the US market altogether.
OK, your argumentation is sound most of the way. It's absolutely true that a 20% tariff on a commodity will not generally result in a 20% end user price increase of that commodity. If the beginning and end of your argument is that, yes, you are correct - tariffs generally result in less price increase than the tariff amount.
However, that doesn't follow into the rest. The country most affected by the tariff is going to be the tariff-levying country, in this case the USA. It will see the strongest devaluation of its currency, followed by the countries that proportionally have the largest-to-smallest exports going into the USA (because of lower demand). That amplifying effect is felt throughout the economy and is the biggest reason tariffs are such a double-edged sword. Tariffs on commodities cause a ripple effect throughout the economy that results in a usually permanent increase in the cost of living, and a consummate permanent decrease in the competitiveness of an economy.
So after seeing this Larry Page, Google Co-Founder, Said He'd Leave His Fortune To Elon Musk Over Charity Because Of His Plans 'To Go To Mars To Back Up Humanity', and Bezos preventing the Washington Post from endorsing Harris it occurred to me that a plausible explanation of Musk's radical embrace of Trump and willingness to throw the rest of us under the bus is to accelerate efforts for him and a cabal of the ultra wealthy (Bezos, Page etc.) to get to get to Mars. Of course it could also be drug induced psychosis.
What's ironic is the very process of doing it this way ensures that these people would just recreate what has happened on Earth as they exemplify and bring along the same selfish behavior that led us to an effed up planet and society in the first place.
What's ironic is the very process of doing it this way ensures that these people would just recreate what has happened on Earth as they exemplify and bring along the same selfish behavior that led us to an effed up planet and society in the first place.
VividVerism
Ars Tribunus Angusticlavius
I saw that article the other day. The opening line notes he said it in 2014. That's, as the bumper sticker says, before we knew Elon is crazy. Has anyone talked to Larry about it since then? Particularly in the last 2-3 years?
But it was also before Musk started operating a huge not-for-profit, x.com.
I didn't see the date on the Page article. But we went from Elon Musk says it’s time for Trump to ‘sail into the sunset’ in 2022 to what we have today. I still think billionare exodus to Mars is a plausible explanation, conspiratorial and dystopian but plausible.
When reality is more distorted than fiction. It all looks too much like that episode in love, death and robots on Netflix "exit strategy".
I hope those assholes do fuck off to Mars.
Elon's obsession with Mars was the first point where I knew he was actually actively dumb. I knew he was a terrible engineer and product person before that from his "contributions" to the dotcom and dotcom aftermath era.
The idea that humans actively ruining (entirely through their intractable human-ness and nothing else) a planetary living situation of incredible bounty, that humans are literally tailor made for through evolution, will somehow thrive in celestially inhospitable circumstances where minor mistakes, malfunctions, or malevolence will doom everyone nearly instantly is absolutely unabashedly the notion of a duly feeble and stupid mind.
All it will take to permanently end a Mars contingent of humans is the presence of a single sociopath or narcissist and those things are in our DNA. We have people on Earth who become school shooters. Everyone on Mars isn't going to be the platonic ideal of Jesus Christ, but that's the only possible way it could survive.
Elon Musk is an abject moron who read too many issues of Popular Mechanic as a child. We think he's smart because he's rich and talks funny.
That's exactly WHY I hope the ultra rich fuck off to Mars. It would simultaneously be them getting what they most deserve and an object lesson on why we need to learn to manage things better here.
I don’t think anyone here needs this, but LegalEagle has a great explainer on tariffs and their expected impact, including historical examples of how it worked out.
Quite good and seems to get around all the bases.
View: https://youtu.be/_V8mE3xmtLw?si=LIyFvd_jKD_u5hZo
Quite good and seems to get around all the bases.
View: https://youtu.be/_V8mE3xmtLw?si=LIyFvd_jKD_u5hZo
Made the mistake of running the video at work. Guy walking by my office "it doesn't matter if your stuff costs 12% more when you will have your whole paycheck to pay for it".
SMH
I'd prefer Venus myself, might want to actually go to Mars someday...
So why did the dollar go up when Trump announced the tariffs?
Because the dollar is the reserve currency for everyone... and because the USA is the aggregate demand importer for the entire world... as a function of its currency and as a function of its consumer market.
@Macam
despite the US levying tariffs during Trump and Biden, more of the world's economy is transacted in dollars than before the tariffs.
Again, that is because tariffs (and the post pandemic economy) conspired to devalue other currencies and increase the US dollar, creating more demand for the US dollar because the US Dollar despite BRICS is the only game in town and the only way to get dollars... is to sell something to the US.
If you need dollars, you have to sell us something or buy bonds. In either case, that means you make the dollar stronger.
I'm sorry but the comments here are too simplistic.
OK this is just stupid. The dollar went up because of forex markets, not because anything related to tariffs has actually happened. I gave you too much credit
