- MrWonderland
- 11-06-2024, 04:59 PM
I’m not the biggest supporter of Trump’s plans, but the thinking is sound within the bounds of modern economic theory. Yes, tariffs will increase inflation and yes, prices for certain goods will go up. However, Trump plans to reduce inflation by bringing down energy costs and, hopefully, reducing the size of government. More importantly, the market is driven by outlook and the markets are loving Trump. That’s really the “secret” to the Trump economy, high consumer outlook. On the balance, we should see normal levels of inflation, nothing catastrophic. Important factors to consider though are the overseas wars and the looming collapse of the everything bubble. These will play a much larger economic role than a few tariffs levied against China; for good or bad.
- HDGristle
- 11-06-2024, 05:20 PM
We can touch on energy costs in a different thread. Whole different monster.
You're hoping for this
https://www.barrons.com/articles/tru...china-d1da2d50
That the most draconian tariff actions aren't enacted and force China to the table. Can he finish the deal in 4 years?
Tariff revenue isn't going to bring in enough. And if the tariffs hurt enough in the short term those midterms could mean he only has 2 years to get the job done before it becomes the next president's problem because he's stuck with divided governemnt.
You're hoping for this
https://www.barrons.com/articles/tru...china-d1da2d50
That the most draconian tariff actions aren't enacted and force China to the table. Can he finish the deal in 4 years?
Tariff revenue isn't going to bring in enough. And if the tariffs hurt enough in the short term those midterms could mean he only has 2 years to get the job done before it becomes the next president's problem because he's stuck with divided governemnt.
- HDGristle
- 11-11-2024, 07:16 PM
- lustylad
- Yesterday, 11:05 PM
About Trump’s ‘Reciprocal’ Tariffs
He wants to raise your taxes, and he thinks I’m the stupid one.
By Pat Toomey
Oct. 27, 2024 3:46 pm ET
Donald Trump recently declared that only stupidity could explain my opposition to his reciprocal-tariff proposals. There are other explanations. Concern for Americans’ jobs and standard of living comes to mind.
I understand the emotional appeal of trade-rules reciprocity—it satisfies an urge for revenge. But that revenge will be less satisfying for the working-class Americans facing unemployment and higher prices if Mr. Trump carries through on his import-tax promises.
As I tried to explain to Mr. Trump when he was president, another country’s misguided decision to tax its citizens on what they buy from American manufacturers isn’t a good reason to punish Americans who wish to buy that country’s products. But Mr. Trump is determined to punish American consumers for the misfortune indirectly imposed on our export-heavy manufacturers. This is his idea of fairness.
Mr. Trump sees low tariffs as a concession the U.S. makes to other countries to our own detriment. But low taxes on imports give American consumers more choices, cheaper prices and a higher standard of living. Low tariffs also make American manufacturers more competitive: Imports and foreign competition allow for low input prices. Americans benefit the most from low tariffs.
Mr. Trump’s reciprocal tariffs would effectively allow other countries to determine how the U.S. taxes its own citizens. So much for America first. And Mr. Trump often contradicts himself on reciprocity. On a trade-weighted basis, the U.K., Europe and Canada all impose lower taxes on American manufactured goods than the U.S. imposes on comparable imports. Mr. Trump isn’t proposing that we match their lower tariffs, but to add another 10 percentage points—minimum—to the tariffs we impose on Americans who buy goods from Europe and Canada.
Mr. Trump contradicts himself again when he claims that tariffs won’t lead to higher prices for Americans and that tariffs will drive an American manufacturing renaissance. Both can’t be true: If American consumers don’t face higher prices on tariffed imports, why would they begin purchasing domestic products?
Mr. Trump’s strategy would be reasonable if his tariffs were intended to persuade countries to lower theirs. Zero trade restrictions with allies is the economically optimal arrangement. If tariffs could get us there, they might be worth the try. But Mr. Trump declared himself “Tariff Man” because he sees trade restrictions as superior to free trade.
No country has ever tariffed its way to prosperity. China’s growth took off as it lowered tariffs. Today the nations with the highest tariffs are economic basket cases, including Iran and Venezuela. The American economy has dramatically outperformed developed economies, such as Japan, that have pursued a more protectionist path.
Free trade benefits all Americans, even when the terms are asymmetrical. I obviously failed to convince President Trump with my economic arguments, so I’ll try a political angle: There is a historical example of a presidential candidate who ran on a platform to raise Americans’ taxes. It didn’t turn out well for Walter Mondale.
Mr. Toomey, a Republican, served as a U.S. senator from Pennsylvania, 2011-23
https://www.wsj.com/opinion/about-tr...-one-5dc3c56c?
He wants to raise your taxes, and he thinks I’m the stupid one.
By Pat Toomey
Oct. 27, 2024 3:46 pm ET
Donald Trump recently declared that only stupidity could explain my opposition to his reciprocal-tariff proposals. There are other explanations. Concern for Americans’ jobs and standard of living comes to mind.
I understand the emotional appeal of trade-rules reciprocity—it satisfies an urge for revenge. But that revenge will be less satisfying for the working-class Americans facing unemployment and higher prices if Mr. Trump carries through on his import-tax promises.
As I tried to explain to Mr. Trump when he was president, another country’s misguided decision to tax its citizens on what they buy from American manufacturers isn’t a good reason to punish Americans who wish to buy that country’s products. But Mr. Trump is determined to punish American consumers for the misfortune indirectly imposed on our export-heavy manufacturers. This is his idea of fairness.
Mr. Trump sees low tariffs as a concession the U.S. makes to other countries to our own detriment. But low taxes on imports give American consumers more choices, cheaper prices and a higher standard of living. Low tariffs also make American manufacturers more competitive: Imports and foreign competition allow for low input prices. Americans benefit the most from low tariffs.
Mr. Trump’s reciprocal tariffs would effectively allow other countries to determine how the U.S. taxes its own citizens. So much for America first. And Mr. Trump often contradicts himself on reciprocity. On a trade-weighted basis, the U.K., Europe and Canada all impose lower taxes on American manufactured goods than the U.S. imposes on comparable imports. Mr. Trump isn’t proposing that we match their lower tariffs, but to add another 10 percentage points—minimum—to the tariffs we impose on Americans who buy goods from Europe and Canada.
Mr. Trump contradicts himself again when he claims that tariffs won’t lead to higher prices for Americans and that tariffs will drive an American manufacturing renaissance. Both can’t be true: If American consumers don’t face higher prices on tariffed imports, why would they begin purchasing domestic products?
Mr. Trump’s strategy would be reasonable if his tariffs were intended to persuade countries to lower theirs. Zero trade restrictions with allies is the economically optimal arrangement. If tariffs could get us there, they might be worth the try. But Mr. Trump declared himself “Tariff Man” because he sees trade restrictions as superior to free trade.
No country has ever tariffed its way to prosperity. China’s growth took off as it lowered tariffs. Today the nations with the highest tariffs are economic basket cases, including Iran and Venezuela. The American economy has dramatically outperformed developed economies, such as Japan, that have pursued a more protectionist path.
Free trade benefits all Americans, even when the terms are asymmetrical. I obviously failed to convince President Trump with my economic arguments, so I’ll try a political angle: There is a historical example of a presidential candidate who ran on a platform to raise Americans’ taxes. It didn’t turn out well for Walter Mondale.
Mr. Toomey, a Republican, served as a U.S. senator from Pennsylvania, 2011-23
https://www.wsj.com/opinion/about-tr...-one-5dc3c56c?
- lustylad
- Yesterday, 11:23 PM
Phil Gramm is another former US Senator. He holds a Phd in Economics.
Trump’s Tariffs Would Smother His Economic Successes
A minimum 10% levy on all goods would hike domestic prices, reduce wages and invite foreign retaliation.
By Phil Gramm and Donald J. Boudreaux
Nov. 13, 2024 4:44 pm ET
Donald Trump hopes to supercharge economic growth, restore manufacturing employment, and raise wages by imposing across-the-board tariffs of at least 10%, with even higher duties on Chinese goods. Yet any understanding of international trade, and of Mr. Trump’s first term, provides strong evidence that such measures wouldn’t achieve the president-elect’s objectives. The decline in economic growth caused by tariffs—along with reduced wages and income-tax collections—would at least partially offset any additional customs revenues. Implementing the tariffs would also likely trigger a trade war that would erode, if not overwhelm, the positive effects of tax reform and deregulation.
After Mr. Trump’s regulatory and tax relief boosted real economic growth from 1.8% in 2016 to a 13-year high of 3% in 2018, tariffs stunted growth. That was as the Congressional Budget Office predicted, with growth slowing to 2.6% in 2019, the first full year of the tariffs. Employment in manufacturing continued falling as a percentage of total employment at the same rate as the previous decade. Before the tariffs were imposed, manufacturing jobs were 8.5% of total employment. The figure fell to 8.4% by the end of 2019 and 8.1% today. Manufacturing output, after rising 2.5% during the first three quarters of 2018, fell when the tariffs fully kicked in. By the end of 2019, the inflation-adjusted value of manufacturing output was 6.2% lower than when the tariffs were imposed.
Mr. Trump’s pro-growth tax and regulatory policy attracted a surge of foreign investment, including from American companies operating abroad. Such investment required dollars, and the currency’s value soared. That made U.S. exports more expensive, imports cheaper and the trade deficit larger. The last was 24% larger when Mr. Trump left office than when he entered.
Imposing a 10% tariff on all imports would more than triple the average U.S. tariff rate on all imports, which in 2022 was 2.8%, slightly above the average tariff rate for Organization for Economic Cooperation and Development countries. A 60% tariff on Chinese imports would hike the average. The surge in Americans’ costs of acquiring imports—now 13.7% of gross domestic product, the lowest of any developed country in the world—would be economically convulsive.
An across-the-board tariff would stimulate U.S. production of goods that we now import more cheaply. To produce these goods at home, American workers and capital would be drawn away from producing other goods and services that we produce more efficiently. Productivity, wages and the return on capital would fall as we produce things at home that we could buy more cheaply abroad. This would simultaneously reduce production in industries for which our labor productivity and capital returns are higher. Moreover, because half of our imports are component parts used by U.S. producers, tariffs would further increase our production costs and reduce our competitiveness at home and abroad.
The retaliation by our trading partners would compound tariffs’ costs by reducing U.S. exports in the industries where wages and capital returns are highest. A trade war could trigger global results similar to the consequences of the Smoot-Hawley tariff, which reduced the volume of world trade by approximately 14% and deepened the Great Depression.
The yearning to return manufacturing employment to yesteryear’s levels is misguided nostalgia. A half-century ago nearly 25% of American workers were employed in manufacturing, down from the all-time high of 39% in 1943. This percentage continues to fall because of technological advances, not trade. Modern technological prowess allows American industry to produce nearly 2.5 times as much manufacturing output as in 1974 with a fraction of the labor force.
Researchers estimate that 10% across-the-board tariffs would shave a full percentage point off U.S. GDP growth. An additional 0.8% of GDP would be lost from the 60% duty on Chinese imports, raising the yearly cost per household of the tariffs to almost $4,000. And as an October report from the Yale Budget Lab concluded, “a consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country” exporting the given product.
The burden of the tariff would be regressive, too, considering lower-income households spend a larger share of their income on consumer goods. Kimberly Clausing and Mary Lovely of the Peterson Institute estimate that the tariffs Mr. Trump has proposed would impose disproportionately large losses on these households. Those in the bottom income quintile would find their purchasing power reduced by 4.2%, while households in the middle-income quintile would lose 2.7%. Highest-quintile households would lose less than 1%. Any ensuing retaliation could multiply these costs.
Restoring the factories our parents left decades ago would also resurrect many old—and unsavory—economic conditions. Inflation-adjusted average hourly compensation a half-century ago was only about half of what it is today. Two-thirds of American households now have real incomes that in 1967 would have put them in the top quintile of earners. In 1967 the share of the working-age population without a high-school diploma was more than 45%. In recent years it was under 10%.
Who would fill the jobs of the 1960s if we could bring them back? It’s a safe bet that those who long to restore such factories didn’t have parents or grandparents who worked in one.
Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University and the Mercatus Center. This article is based on their forthcoming book, “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism.”
https://www.wsj.com/opinion/tariffs-...tion-d1a3dd18?
Trump’s Tariffs Would Smother His Economic Successes
A minimum 10% levy on all goods would hike domestic prices, reduce wages and invite foreign retaliation.
By Phil Gramm and Donald J. Boudreaux
Nov. 13, 2024 4:44 pm ET
Donald Trump hopes to supercharge economic growth, restore manufacturing employment, and raise wages by imposing across-the-board tariffs of at least 10%, with even higher duties on Chinese goods. Yet any understanding of international trade, and of Mr. Trump’s first term, provides strong evidence that such measures wouldn’t achieve the president-elect’s objectives. The decline in economic growth caused by tariffs—along with reduced wages and income-tax collections—would at least partially offset any additional customs revenues. Implementing the tariffs would also likely trigger a trade war that would erode, if not overwhelm, the positive effects of tax reform and deregulation.
After Mr. Trump’s regulatory and tax relief boosted real economic growth from 1.8% in 2016 to a 13-year high of 3% in 2018, tariffs stunted growth. That was as the Congressional Budget Office predicted, with growth slowing to 2.6% in 2019, the first full year of the tariffs. Employment in manufacturing continued falling as a percentage of total employment at the same rate as the previous decade. Before the tariffs were imposed, manufacturing jobs were 8.5% of total employment. The figure fell to 8.4% by the end of 2019 and 8.1% today. Manufacturing output, after rising 2.5% during the first three quarters of 2018, fell when the tariffs fully kicked in. By the end of 2019, the inflation-adjusted value of manufacturing output was 6.2% lower than when the tariffs were imposed.
Mr. Trump’s pro-growth tax and regulatory policy attracted a surge of foreign investment, including from American companies operating abroad. Such investment required dollars, and the currency’s value soared. That made U.S. exports more expensive, imports cheaper and the trade deficit larger. The last was 24% larger when Mr. Trump left office than when he entered.
Imposing a 10% tariff on all imports would more than triple the average U.S. tariff rate on all imports, which in 2022 was 2.8%, slightly above the average tariff rate for Organization for Economic Cooperation and Development countries. A 60% tariff on Chinese imports would hike the average. The surge in Americans’ costs of acquiring imports—now 13.7% of gross domestic product, the lowest of any developed country in the world—would be economically convulsive.
An across-the-board tariff would stimulate U.S. production of goods that we now import more cheaply. To produce these goods at home, American workers and capital would be drawn away from producing other goods and services that we produce more efficiently. Productivity, wages and the return on capital would fall as we produce things at home that we could buy more cheaply abroad. This would simultaneously reduce production in industries for which our labor productivity and capital returns are higher. Moreover, because half of our imports are component parts used by U.S. producers, tariffs would further increase our production costs and reduce our competitiveness at home and abroad.
The retaliation by our trading partners would compound tariffs’ costs by reducing U.S. exports in the industries where wages and capital returns are highest. A trade war could trigger global results similar to the consequences of the Smoot-Hawley tariff, which reduced the volume of world trade by approximately 14% and deepened the Great Depression.
The yearning to return manufacturing employment to yesteryear’s levels is misguided nostalgia. A half-century ago nearly 25% of American workers were employed in manufacturing, down from the all-time high of 39% in 1943. This percentage continues to fall because of technological advances, not trade. Modern technological prowess allows American industry to produce nearly 2.5 times as much manufacturing output as in 1974 with a fraction of the labor force.
Researchers estimate that 10% across-the-board tariffs would shave a full percentage point off U.S. GDP growth. An additional 0.8% of GDP would be lost from the 60% duty on Chinese imports, raising the yearly cost per household of the tariffs to almost $4,000. And as an October report from the Yale Budget Lab concluded, “a consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country” exporting the given product.
The burden of the tariff would be regressive, too, considering lower-income households spend a larger share of their income on consumer goods. Kimberly Clausing and Mary Lovely of the Peterson Institute estimate that the tariffs Mr. Trump has proposed would impose disproportionately large losses on these households. Those in the bottom income quintile would find their purchasing power reduced by 4.2%, while households in the middle-income quintile would lose 2.7%. Highest-quintile households would lose less than 1%. Any ensuing retaliation could multiply these costs.
Restoring the factories our parents left decades ago would also resurrect many old—and unsavory—economic conditions. Inflation-adjusted average hourly compensation a half-century ago was only about half of what it is today. Two-thirds of American households now have real incomes that in 1967 would have put them in the top quintile of earners. In 1967 the share of the working-age population without a high-school diploma was more than 45%. In recent years it was under 10%.
Who would fill the jobs of the 1960s if we could bring them back? It’s a safe bet that those who long to restore such factories didn’t have parents or grandparents who worked in one.
Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University and the Mercatus Center. This article is based on their forthcoming book, “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism.”
https://www.wsj.com/opinion/tariffs-...tion-d1a3dd18?
- HDGristle
- Yesterday, 11:23 PM
Thanks, Lusty. Toomy's points are cogent and sincere. Sadly, that seems out of touch with today's Cons.
And we'll be poorer for it
And we'll be poorer for it