OT: Tariff Economics Discussion

[scott in nashville]

If we can all put politics aside for a moment (not likely), what's the general consensus on the tariff strategy? Just from a pure economics standpoint it looks to me like:

Short-term possible outcomes:
*Price-hikes will happen on those goods while different manufacturing options are sought (high)
*Scarcity of some goods (medium)
*Panic in the markets due to the unknown (high)
*China relents and a settlement is reached (medium)

Long-term possible outcomes:
*Manufacturers outside of China step in and prices return to pre-tariff rates (medium)
*Prices remain high driving some inflation (medium)
*China pulls more goods from us (low)

 

[OrangeBaron]

Like everything else it depends to degree and market distortion. It is relative to market disparity. In other words, if China is significantly cheating us then they can theoretically absorb significant increase before passing along to US consumers. If increase is too large then US manufacturers (or others) fill the void.

Reality is that we have been practicing free trade WITHOUT fair trade. Their authoritarian socialist government has deflated “market” prices creating decades long artificial demand balance. They can continue this distortion if we allow them. This is an inflection point. Doing so likely gives them legitimacy. Calling them on the Ponzi scheme creates the economic/social correction required for a society that balances social/economic/environmental good.

 

[blythewood tigers]

If we can all put politics aside for a moment (not likely), what's the general consensus on the tariff strategy? Just from a pure economics standpoint it looks to me like:

Short-term possible outcomes:
*Price-hikes will happen on those goods while different manufacturing options are sought (high)
*Scarcity of some goods (medium)
*Panic in the markets due to the unknown (high)
*China relents and a settlement is reached (medium)

Long-term possible outcomes:
*Manufacturers outside of China step in and prices return to pre-tariff rates (medium)
*Prices remain high driving some inflation (medium)
*China pulls more goods from us (low)

First off and the most important reason you will NEVER hear on T.V., the Constitution doesn't allow for the use of tariffs as a form of economic warfare. The purpose of a tariff was to raise money for government use.

With that said, basically the ONLY purpose (in today's economic environment) of a tariff is to counteract the value of currency, i.e. the reason tariffs were not used the way they are now when countries used money instead of currency. This topic may sound confusing to most because we are never taught the difference so the term currency and money become synonymous, which couldn't be any further from the truth.

Once a country has gone down the tariff road as a form of economic warfare, there is no turning back because they have thrown in the economic "towel" and are from that point forward reliant upon tariffs to "equal" (what we hear on t.v.) the playing field, when in reality, the outcome is always an increase (what some incorrectly call inflation) in prices which is a direct correlation to the decrease in said country's currency value. The cost of education, medicine, healthcare, food, coaches salaries (nice touch), transportation, etc.. is not going up, on the contrary, the value of the currency is going down and will forever continue to go down until a tipping point is reached, i.e. hyperinflation or default, the only two possible outcomes for currency.

China could care less what we do, they are in worse shape than we are.

 

[jtjosey]

I hope we keep turning the screws to China. They cheat and will continue to be duplicitous. I’d rather our country go into recession than let them continue to rob us blind.

To HELL with the Chinese government. It is evil and needs to understand that there are consequences to flouting the rules.

Bottom line: they need us more than we need them!

 

[gcsoccer16]

I think we should continue to lose half a trillion dollars a year to them in trade. That seems sustainable

 

[blythewood tigers]

I think we should continue to lose half a trillion dollars a year to them in trade. That seems sustainable

So behind door number 1 is the US value our currency to match the Chinese.
And behind door number 2, the Chinese value their currency to match the US.

Think about your two choices before you answer.

Who so-called "wins"?

 

[jtjosey]

We should’ve kicked them out of the WTO the moment they started to cheat (which was basically from the outset). Too many people in our government have turned a blind eye to China’s complete disregard for trading norms and it’s outright theft of our intellectual property.
I believe we need to severely limit Chinese immigration to this country. The amount of people China is sending over to engage in spying and corporate espionage is staggering. That government will continue to rob us blind as long as we continue to let it happen.

 

[CU_4734]

So behind door number 1 is the US value our currency to match the Chinese.
And behind door number 2, the Chinese value their currency to match the US.

Think about your two choices before you answer.

Who so-called "wins"?

I don’t disagree completely with what you’re saying but I think it’s more of we think our economy is strong enough to make this move. We have legitimacy, and leverage for the move. China really doesn’t. China needs the American market. But I agree with the notion of it’s really a no win situation.

 

[johnhugh]

We should’ve kicked them out of the WTO the moment they started to cheat (which was basically from the outset). Too many people in our government have turned a blind eye to China’s complete disregard for trading norms and it’s outright theft of our intellectual property.
I believe we need to severely limit Chinese immigration to this country. The amount of people China is sending over to engage in spying and corporate espionage is staggering. That government will continue to rob us blind as long as we continue to let it happen.

Cutting off immigration isn’t the solution to every problem

 

[scott in nashville]

First off and the most important reason you will NEVER hear on T.V., the Constitution doesn't allow for the use of tariffs as a form of economic warfare. The purpose of a tariff was to raise money for government use.

With that said, basically the ONLY purpose (in today's economic environment) of a tariff is to counteract the value of currency, i.e. the reason tariffs were not used the way they are now when countries used money instead of currency. This topic may sound confusing to most because we are never taught the difference so the term currency and money become synonymous, which couldn't be any further from the truth.

Once a country has gone down the tariff road as a form of economic warfare, there is no turning back because they have thrown in the economic "towel" and are from that point forward reliant upon tariffs to "equal" (what we hear on t.v.) the playing field, when in reality, the outcome is always an increase (what some incorrectly call inflation) in prices which is a direct correlation to the decrease in said country's currency value. The cost of education, medicine, healthcare, food, coaches salaries (nice touch), transportation, etc.. is not going up, on the contrary, the value of the currency is going down and will forever continue to go down until a tipping point is reached, i.e. hyperinflation or default, the only two possible outcomes for currency.

China could care less what we do, they are in worse shape than we are.

So help me understand more of your point on constitutionality of tariffs. State to state is off limits, but that was the main source of income until income taxes came along. I may have missed your point.

 

[jtjosey]

Cutting off immigration isn’t the solution to every problem

I’m not suggesting it is. I’m merely saying that the Chinese government is sending many people to our country for nefarious purposes. I have nothing against Chinese people or their culture. I actually greatly respect the Chinese culture.
The problem I have is with the Chinese government which is arguably the most repressive on earth. It will do anything to supplant us as the world’s great power.

 

[scott in nashville]

Cutting off immigration isn’t the solution to every problem

Beat it, the adults are talking. (I think you missed his point)

 

[wmnesbitt]

One of my biggest concerns is what happens in 2020 or 2024 when Trump is out of office. How many of these deals or tariffs or whatever will be quickly overturned because it was Trump? How will the next round of negotiations go when we bend over agin and take it in the shorts.

 

[scott in nashville]

One of my biggest concerns is what happens in 2020 or 2024 when Trump is out of office. How many of these deals or tariffs or whatever will be quickly overturned because it was Trump? How will the next round of negotiations go when we bend over agin and take it in the shorts.

It most probably depends on what we get in exchange for loosened tariffs. What drives that political motivation then is anyone’s guess.

 

[Johnnyboy8]

The effects of the trade negotiations are much more punitive on them versus us. There is an economic factor and a defense factor involved. Economically, our economy has proven much more resilient to absorb the negative impact of tariffs, which run counter to free market theory. However, Chinese IP theft and currency manipulation has been a major problem and the current strength in our economy provides the opportunity to use that strength to our advantage in negotiations. Add to that the trade imbalance that are funding an unprecedented military build-up on their part and their aggressive actions in the South China Sea, and we have actions that must be countered with strength. Consequently, I am fully supportive of tough negotiations while we have the leverage on our side, despite the short-term impact on our economy and the stock market. It would be the easy path to agree to terms now and catalyze the economy. The right thing to do is to continue to weaken their leverage and cut a better deal that impairs their investment in their military, our greatest threat.

 

[blythewood tigers]

So help me understand more of your point on constitutionality of tariffs. State to state is off limits, but that was the main source of income until income taxes came along. I may have missed your point.

There is nothing in the Constitution that permits economic warfare (which is exactly the way tariffs are used now, make no mistake, it is a form of war) during peacetime. Embargo, tariffs, etc.. are to only be used when a country (our country) is making an economic point/gesture during wartime.
You don't seem to have missed my point.

 

[blythewood tigers]

I don’t disagree completely with what you’re saying but I think it’s more of we think our economy is strong enough to make this move. We have legitimacy, and leverage for the move. China really doesn’t. China needs the American market. But I agree with the notion of it’s really a no win situation.

With respect to our currency, China is holding all the cards in this game. With respect to their currency, they are going down the rabbit hole faster than we are.

There is no financial/economic possibility for the US to stop exporting "dollars"-for-stuff to China. The moment this stops, all of these dollars come flooding back to the US like a currency tsunami, unlike the world has ever seen. You will be paying $200 for a loaf of bread overnight. While China is sitting there with all the machines to make the tractors that make the bread. The question really is, how far can each country (attached at the economic hip) bend before the other breaks?

 

[yeti24]

There are many were sound theories on what current tariffs, and proposed new ones, would do to the economy. That’s all theoretical. We are in a real life example in a heavily globalized 21st century trading “game theory” environment.

Such uncharted territory with a trade war (on multiple fronts), economic expansion, Fed policy on hold, gov’t spending high, real wage increases, good/tight jobs market, fairly tame inflation, totally different corporate tax policy, new found energy independence/dominance, SALT deduction caps matter, real estate slumping in some parts of the country not others, no major wars (right now), Americans divided as ever, Clemson winning 2/3 Natties, Dogs and Cats living together, etc.

Major competitor is an authoritarian, mercantilist, high tech, militaristic regime with designs on supplanting America as #1. But have enough major demographic and financial debt problems of their own.

all the things we assume(d) are being challenged in such unprecedented ways. So many crazy variables it’s going to be a wild ride.

 

[emajor2]

You guys (well a few of you) really seem to know what you are talking about when it comes to the short/long term impact of these tariffs. Any suggestions on a "primer" that a neophyte (on this issue) like myself could read to get up to speed?

 

[steele-tiger]

The US put tariffs on washing machines primary from South Korea last year and it cost consumers in the US $1.5 Billion as US based manufactures simply raised their prices roughly 12% to match the tariff on both washing machines, but also dryers, which was not even part of the tariff.

A study said that the US industry created ~1,500 new jobs in response to the tariffs at a cost to consumers of about $800,000 per job.

Similar story when tariff on tires was imposed during Obama years. Millions/Billions extra spent by US consumers on tires to create a a couple thousand jobs.

A lot of these tariffs turn out to be nothing more than subsidies to US companies paid for by American consumers.

Perhaps the tariffs on China will end up differently as different factors are at play here outside of trying to boost a certain industry like the recent tire, washing machines, steel and wood tariffs, but skeptical that you can tariff your way to a positive result over the long-term.

 

[tigerGUY]

I’m not suggesting it is. I’m merely saying that the Chinese government is sending many people to our country for nefarious purposes. I have nothing against Chinese people or their culture. I actually greatly respect the Chinese culture.
The problem I have is with the Chinese government which is arguably the most repressive on earth. It will do anything to supplant us as the world’s great power.

Somewhere in China intelligent people say the same thing about our Government. To be honest, I despise our Government.

 

[firegiver]

What if China is fine with us taxing their goods if the total loss on their side is sustainable.
What if the new normal becomes certain goods cost more and the government now has a new stream of revenue.

 

[Casa_del_Tigre]

If we can all put politics aside for a moment (not likely), what's the general consensus on the tariff strategy? Just from a pure economics standpoint it looks to me like:

Short-term possible outcomes:
*Price-hikes will happen on those goods while different manufacturing options are sought (high)
*Scarcity of some goods (medium)
*Panic in the markets due to the unknown (high)
*China relents and a settlement is reached (medium)

Long-term possible outcomes:
*Manufacturers outside of China step in and prices return to pre-tariff rates (medium)
*Prices remain high driving some inflation (medium)
*China pulls more goods from us (low)

The short term negatives won’t be nearly as bad as the media points out. South America has became more profitable to do business with in certain situations. Steel tariffs being one.

The issue is neither side really has a grasp of the economy. US trade deficits have increased since the trade war started. Europe’s economy is coming to a stop. Timing isn’t ideal for a lot of this. I’d feel much better if a trade war had started 5 years earlier when the economy was better suited for short term negatives.

People have every right and should question Donald Trumps ability to handle the economy. He is trying to uproot the fed so they will continue to pump more printed money into the economy. This and his track record of over spending and losing money in the private sector doesn’t make people feel good.

It’s a weird time where Republicans are supporting liberal economic policy and democrats are against it but this happens with 2 party systems. It isn’t the policy, it’s which party is pushing it.

 

[Casa_del_Tigre]

I hope we keep turning the screws to China. They cheat and will continue to be duplicitous. I’d rather our country go into recession than let them continue to rob us blind.

To HELL with the Chinese government. It is evil and needs to understand that there are consequences to flouting the rules.

Bottom line: they need us more than we need them!

Lol. I guess you have no clue about how business operates in America. An article just came out accusing Coca Cola or shutting down funded university research that was putting their product in a negative light.....

The only difference is our government has done a great job brainwashing citizens. We hear legal and assume it’s ethical. It makes sense why big pharma and food are the two major killers in America.

 

[cu1974]

First off and the most important reason you will NEVER hear on T.V., the Constitution doesn't allow for the use of tariffs as a form of economic warfare. The purpose of a tariff was to raise money for government use.

With that said, basically the ONLY purpose (in today's economic environment) of a tariff is to counteract the value of currency, i.e. the reason tariffs were not used the way they are now when countries used money instead of currency. This topic may sound confusing to most because we are never taught the difference so the term currency and money become synonymous, which couldn't be any further from the truth.

Once a country has gone down the tariff road as a form of economic warfare, there is no turning back because they have thrown in the economic "towel" and are from that point forward reliant upon tariffs to "equal" (what we hear on t.v.) the playing field, when in reality, the outcome is always an increase (what some incorrectly call inflation) in prices which is a direct correlation to the decrease in said country's currency value. The cost of education, medicine, healthcare, food, coaches salaries (nice touch), transportation, etc.. is not going up, on the contrary, the value of the currency is going down and will forever continue to go down until a tipping point is reached, i.e. hyperinflation or default, the only two possible outcomes for currency.

China could care less what we do, they are in worse shape than we are.

This is which economy can survive warfare. This is the last hope for us to be dominant over China. Right policy, right time.

 

[cu1974]

What if China is fine with us taxing their goods if the total loss on their side is sustainable.
What if the new normal becomes certain goods cost more and the government now has a new stream of revenue.

Point is, their economy is not sustainable. They are counting on the US giving in due to public pressure like we have before. Trump ain’t playing that game, popular or not.

 

[MBRO]

The US put tariffs on washing machines primary from South Korea last year and it cost consumers in the US $1.5 Billion as US based manufactures simply raised their prices roughly 12% to match the tariff on both washing machines, but also dryers, which was not even part of the tariff.

A study said that the US industry created ~1,500 new jobs in response to the tariffs at a cost to consumers of about $800,000 per job.

Similar story when tariff on tires was imposed during Obama years. Millions/Billions extra spent by US consumers on tires to create a a couple thousand jobs.

A lot of these tariffs turn out to be nothing more than subsidies to US companies paid for by American consumers.

Perhaps the tariffs on China will end up differently as different factors are at play here outside of trying to boost a certain industry like the recent tire, washing machines, steel and wood tariffs, but skeptical that you can tariff your way to a positive result over the long-term.

This. China isn’t paying tariffs, you are.

Tariffs are a tax on the American consumer.

 

[firegiver]

Point is, their economy is not sustainable. They are counting on the US giving in due to public pressure like we have before. Trump ain’t playing that game, popular or not.

Whats the end game here? They sign a piece of paper saying they won't steal secrets? They agree to buy more soy beans? What? I don't see this huge upside coming out of this. They will go back to stealing no matter what they agree to.

 

[cu1974]

Whats the end game here? They sign a piece of paper saying they won't steal secrets? They agree to buy more soy beans? What? I don't see this huge upside coming out of this.

One, we are getting revenue in the coffers. Two, we are hurting Chinas capacity to build their military. Three, we are causing unrest among the subjugated masses. Four, we are making other manufacturers competitive. Five, they are a bully, and bullies back off when confronted. Six, we are finally risking short term results, for long term gain, something politicians have no stomach for. This same thinking will needed to solve the problem of Medicare and social security.

 

[Da Swami]

Tariffs were a great mechanism to use against countries for dumping, violation of trade agreements and etc 30-40 plus years ago. Using tariffs now or 20 years ago in a global economy is a determent to the charging party and the country that invokes tariffs. You use tariffs with the knowledge it's a nuclear option that is going to negatively effect both parties but your message is going to be sent loud and clear.

 

[firegiver]

One, we are getting revenue in the coffers. Two, we are hurting Chinas capacity to build their military. Three, we are causing unrest among the subjugated masses. Four, we are making other manufacturers competitive. Five, they are a bully, and bullies back off when confronted. Six, we are finally risking short term results, for long term gain, something politicians have no stomach for. This same thinking will needed to solve the problem of Medicare and social security.

Yah i don't see any actual calculations there. Just a narrative. It scares me that people would hop on board with this policy without so much as a cursory knowledge of what exactly they are trying to accomplish, the pit falls of failure and success.

 

[Da Swami]

One, we are getting revenue in the coffers. Two, we are hurting Chinas capacity to build their military. Three, we are causing unrest among the subjugated masses. Four, we are making other manufacturers competitive. Five, they are a bully, and bullies back off when confronted. Six, we are finally risking short term results, for long term gain, something politicians have no stomach for. This same thinking will needed to solve the problem of Medicare and social security.

You may want to fact check your comments or not instead of repeating what Trump said. US Treasury data states $7 billion (0.2 %) was brought in however majority went to bailouts. Companies pass on the surcharge due to to tariffs onto consumers so there is no benefit to you or I. Let's not turn a blind eye that the U.S. government closed the 2018 fiscal year $779 billion in the red, its highest deficit in six years according to the Treasury Department financial statements.

 

[Tmassen1]

The short term negatives won’t be nearly as bad as the media points out. South America has became more profitable to do business with in certain situations. Steel tariffs being one.

The issue is neither side really has a grasp of the economy. US trade deficits have increased since the trade war started. Europe’s economy is coming to a stop. Timing isn’t ideal for a lot of this. I’d feel much better if a trade war had started 5 years earlier when the economy was better suited for short term negatives.

People have every right and should question Donald Trumps ability to handle the economy. He is trying to uproot the fed so they will continue to pump more printed money into the economy. This and his track record of over spending and losing money in the private sector doesn’t make people feel good.

It’s a weird time where Republicans are supporting liberal economic policy and democrats are against it but this happens with 2 party systems. It isn’t the policy, it’s which party is pushing it.

I don't think Trump is trying to "uproot" the Fed as much as he is trying to get them to slow down. Most people don't realize that The Feb was both buying Trillions of $ in bonds with make believe money and lowering interest rates to an almost zero for close to a decade. Suddenly, after Trump gets into office the Fed decides that they need to: 1. Stop Increasing the Bond Buy Rate. 2. Reduce their Total Bond Holdings (has decreased from $2.5 Trillion to $2.1 Trillion in 2+ years) and 3. Start increasing interest rates several times.

I do not disagree that the Fed probably needed to pump massive amount of money into the economy to keep us from a Depression and it now needs to stop (and even reverse over time), but Trump was not the only one that was concerned that the new Fed policies were going too fast too soon and was about to drive the economy into a recession. And for Trump, the recession would hit right before an election.

Another item that most fail to realize is that our Federal Government is somewhere around $20 Trillion in debt. The interest payment on this debt must be included in the annual Deficit calculation. If my math is correct, every 1% increase in Interest Rate translates to about an additional $200 Billion a year right off the top of every new budget.

 

[cuandcofcfan]

When an economy as big as China practices as many unfair trade policies as they do you really have no choice unless you are a cowardly politician that doesn't want to strain the short term economy to greatly benefit the long term. They make it very difficult for US companies to do business there. They sell products at below market rates to ruin whole industries in a free market. They steal intellectual property that takes billions of dollars of research and development by US companies. You have to utilize every tool you can including shutting them out of US markets all together if need be. It is akin to letting a bully punch you in the face every day and acting as if nothing happened and expecting a different outcome without making things difficult on them.

 

[Woody1405]

Simply stated, tariffs are a terrible idea. They have never worked and they won't work this time. The only thing they accomplish is to tax American consumers and hurt industries like BMW which imports steel and aluminum to use in its manufacturing plant in SC. If a country is willing to sell us goods at a lower cost than we can create them, that is a good thing because it frees up money for our consumers to use for other purposes. If the Idiot-in-Chief understood economics, which he doesn't, he would know that our massive deficits, financed by the Chinese are far more negative than trade deficits.

 

[Solid Orange Blood]

I'm 1000% for it.

 

[ChicagoTiger85]

Do any economists actually think tariffs are a good idea? My guess is many of the people who like the current tariffs wouldn't have liked them a few years ago when they were for free markets ("everything will be different with Trump! "). Many of the people pretending to hate tariffs right now probably would've been for them a few years ago, too ("everything will be different with Trump! ").

 

[FLaw47]

Do any economists actually think tariffs are a good idea? My guess is many of the people who like the current tariffs wouldn't have liked them a few years ago when they were for free markets.

Protectionism was bad policy when my party advocated for it and it's bad policy now. You're right, though.

 

[ChicagoTiger85]

Somewhere in China intelligent people say the same thing about our Government. To be honest, I despise our Government.

 

[treetiger]

China will break. They need us much more than we need them. Heck, they have to rely on Russia for their oil, so even Russia is leading them by a leash. Sure we may have to sacrifice in the short term (higher prices, availability, etc.), but China will have to give in, or their whole economy will eventually collapse.

Once they are forced to play the game on a level playing field, or as close to a level playing field as possible, because I do not think even Trump will be able to accomplish that, but on a near level playing field will mean an incredible bump in the US economy. This conversation will soon revert to "look how great things are in America" narrative. People will be saying, "Why didn't we do this before, and stand up to China, Russia, and Europe before?"