A reader thinks that because prices didn’t rise in Trump’s first term, the same is true now.
Why Trumps Tariffs Didn’t Cause Price Hikes Before
- Tariffs were much smaller and targeted to specific countries.
- Tariff avoidance. Trade shifted from China to Mexico and Vietnam
- The dollar strengthened.
I have discussed this before, many times but refuting nonsense is hard when people have TDS Type II, and believe anything Trump says.
Tariff Avoidance
The US trade deficit with China decreased from 2018 to 2024 but it was at the expense of big increases elsewhere.
The improvement with China was mostly a mirage.
I have posted that chart or something similar a dozen times.
Balance of Trade 2018 vs Now
- Vietnam went from -39 billion to -123 billion
- Mexico went from -69 billion to -172 billion
- China improved from -418 billion to -295 billion (yeah right)
The US Trade Deficit with China is Understated by as Much as 30 Percent
On January 18, 2025, I noted The US Trade Deficit with China is Understated by as Much as 30 Percent
Normal trade math does not add up. US imports and China exports are not in sync.
Brad Setser Comments
- Chinese exports started exceeding US imports only in those categories with tariffs, and only after the tariffs were imposed — which provides the basic answer.
- We know the US isn’t counting 1 billion small value (de minimis) packages in the trade data, and that alone is at least $60b in missing US imports that appear in the Chinese trade data. There are other sorts of tariff avoidance/ circumvention as well.
- So right now the Chinese export data is better guide to US China trade than the US import data — which is why I now emphasize the $500b or so China reports in exports to US rather than the $400b or so the US reports in imports
This appears to be an amusing case of China cleverly avoiding US tariffs but not clever enough to hide it better.
The US Dollar
On March 22, 2018, Trump signed a memorandum under the Section 301 of the Trade Act of 1974, instructing the United States Trade Representative (USTR) to apply tariffs of $50 billion on Chinese goods. Trump said the tariffs would be imposed due to Chinese theft of U.S. intellectual property.
The US dollar index rose 10 to 12 percent depending on your end point.
What About Now?
- Tariffs are now 104 percent on China.
- Tariffs on Vietnam are now 46 percent.
- Tariffs minimums are now 10 percent everywhere.
- The US dollar is no longer strengthening.
But hey, don’t worry because prices didn’t rise last time.
Besides Trump says prices won’t rise. He is so confident that Trump Tells Auto CEOs No Price Hikes, Did Comrade Kamala Win?
Now who are you going to believe, Trump or Ford CEO Warns Automakers Could Lose Billions if Tariffs Take Effect
A 25% levy on goods from those countries would cost the company ‘billions and billions’ in profit and lead to industrywide layoffs, he told Bloomberg TV.
Another reader touted the alleged success of steel tariffs.
What About Steel and Aluminum?
After President Trump’s steel tariffs took effect on June 1, 2018, Mid Continent Steel & Wire reports they lost close to 200 employees while losing more than 70 percent of its sales.
Mid-Continent is the US largest producer of nails. It nearly went under until Trump granted the company a tariff exemption.
Tariffs on products (e.g. steel) are not as easy to avoid as tariffs on countries.
Trump’s 2018 Aluminum Tariffs in One Picture
Please consider The Amazing “Success” of Trump’s 2018 Aluminum Tariffs in One Picture
I hope you can take a bit of headline sarcasm because the true story follows.
The 2018 tariffs were such a big hit that Trump needs to double up. And note that Biden kept all of Trump’s tariffs and added more.
The high taxpayer cost of “saving” US jobs
Also consider The high taxpayer cost of “saving” US jobs through “Made in America”
“Buy American” or “Made in America” as a slogan for excluding imports is an economic loser. We calculate that the annual taxpayer cost for each US job arguably “saved” by Made in America probably exceeds $250,000. We put “saved” in quotation marks because buy national requirements essentially shuffle jobs from other sectors of the economy to the procurement sector. And the shuffling takes a toll on economic efficiency, which shows up in elevated price tags on everything from computers to bridges. On balance, buy national requirements create no new jobs, but they do save jobs in domestic firms that supply government needs, often at a high cost to taxpayers.
Trump’s Tariffs Will Increase the Cost of a Pickup Truck by $8,000.
On February 26, 2025, I commented Trump’s Tariffs Will Increase the Cost of a Pickup Truck by $8,000.
A new analysis by the Anderson Economic Group examines the potential tariff damage.
Start with auto prices. The study estimates that a 25% tariff on the U.S. neighbors would increase the cost of a full-size SUV assembled in North America by $9,000 and a pickup truck by $8,000. The cost of an electric-vehicle cross-over would increase by $12,200. Canada is the biggest supplier to the U.S. of nickel, a key critical mineral in lithium-ion batteries.
Such higher prices owe partly to the compounding effects of tariffs on auto parts that sometimes cross the border multiple times. Mexico exports some $136 billion of vehicles and parts to such auto-manufacturing states as Michigan ($53.8 billion), Texas ($26.9 billion), Tennessee ($8.1 billion), Ohio ($2.4 billion), South Carolina ($2.2 billion) and Alabama ($1.8 billion). Canada exports $50.4 billion in vehicles and parts, with large amounts going to Michigan ($22.1 billion) and Texas ($14.8 billion).
Mr. Trump says tariffs will force auto makers to make more cars in the U.S. Not likely, and that would take time in any case. Domestic demand for some vehicle models—especially sedans—isn’t sufficient to justify the cost of building new U.S. factories. Auto makers will have to absorb the tariff, increase prices on cars, or stop selling some models because they are too expensive.
There are about 17,000 fewer U.S. workers employed in motor vehicles and parts than there were six years ago. Average weekly hours worked in the industry have fallen. The President can’t blame imports, which have fallen even more than U.S. car production.
That $8,000 number assumes Trump would not back off. For now, Trump has exempted parts that are USMCA compliant.
Trump Says “Car Companies Will Be Thrilled With Tariffs”
Here’s an amusing revelation from April 2 News Flash: Trump Says “Car Companies Will Be Thrilled With Tariffs”
The word of the hour is “thrilled” by 25 percent tariffs on autos starting April 2.
The lies by this administration on tariffs are nonstop.
Realistically, the only case where tariffs and subsidies make any sense is in cases of genuine national security risks.
The chip sector and AI are possible examples. In contrast, cars and clothes are not security threats.
Conundrum Solved
Tariffs did not cause big price hikes before, for three key reasons that I have explained many times.
I don’t expect better results with this post because extreme TDS II is incurable.
Meanwhile, no one speaks for the little guy anywhere. So it is the little guy who pays the price for export subsidies and tariffs.
Perhaps we ultimately gain a few thousand UAW jobs, with an emphasis on perhaps. But the cost of cars will jump and the loss of jobs elsewhere will be stunning.
For discussion, please see How One Small Business Owner Is Coping With Trump’s Tariffs
Meet Daniel Rogge, CEO of Tormach, a machine-tool maker.
Tormach Coping Synopsis
- Reducing spending on marketing by 25%
- Reduce 401(k) retirement savings plan match
- Eliminating work-from-home stipends and anniversary bonuses
- Shift focus to foreign sales to take advantage of Mexico’s stability and free trade
Multiply that by tens of thousands of small businesses.
Fifty-four percent of small businesses polled said that tariffs would negatively affect their companies, while just 11 percent said they would benefit.
The overall impact due to these economic frictions and attempts to avoid them is a net loss despite the fact that there are some individual winners and losers.
No one wins trade wars.
Q: Where does a tax on imports hit a corporation?
A: Depends on who is the beneficiary and the losers. A few benefit (the tariff seekers). Everyone else loses
Q: What comparative advantage do China, Taiwan, Vietnam, etc. have over the US?
A: Minerals, cheaper labor
Q: Anyone do the math on the subsidies China provides to keep its manufacturing base?
A: Anyone do the math on US subsidies to Boeing, farmers, and weapons manufacturers? That said, China is worse, but that is to the benefit of US consumers.
Q: Anyone you know proud of the quality of Made in China?
A: Yes. The Ford CEO who admitted how great a vehicle BYD produces
Q: What has been the loss to the US as the jobs were shifted overseas?
A: Most of the loss of US manufacturing jobs is due to automation. We produce more steel and cars with fewer workers than before. And why should anyone give a hoot where underwear is made?
Q: Anyone seeing any new manufacturing taking the place of the old?
A: Anyone seen any new revolutionary products?
Q: What’s the cost of foreign aid and US acting as world police?
A: Too much. But trump wants still more military spending.
We have an extremely dangerous underwear gap that threatens our national security.
Sounds like a rough road leaving some skid marks …
I dare someone to post that on Wolf Street – the big bad wolf will lose his mind and ban whoever dares to demonstrate that he is wrong
So, the net costs of trade are simple numbers in that a few gain at the benefit of many depending upon the side of the coin. What are the benefits of having/keeping manufacturing that China holds dear to? I suppose there must be something to it. Isn’t China now a great economy with a middle class now? Maybe that is propped up by subsidies too? IDK.
I would think that automation probably costs the same everywhere. Maybe I’m wrong. If automation is the reason for losses, when there is nothing left to make, why wouldn’t we want to make it? If there is nothing new to manufacture, could the US incentivize it in any other method to return now that these other places have a greater advantage that we funded advances abroad.
If there is nothing new coming, then what are people to do that is productive that leads to jobs? It’s not the only reason, but it seems to reason that govt. spending has been to take the place of the missing money by moving jobs elsewhere.
Trump is wrong to be all in on military spending. That will come back to bite him. However, I would guess our interests internationally include those businesses abroad.
Govt. is all about picking winners and losers. How can we incentivize jobs here versus jobs elsewhere? The crony govt. we have will only do what the powers-to-be truly want. The decision to be a debtor nation rather than producing is deliberate. The incentives provided to business are deliberate. It just seems that a race to increased margins via utilization of cheaper labor has greater costs than included in the typical analysis.
Thanks for the replies.
“TDS Type II”
You need to patent that one Mike. That is a good one
Idaho businessman facing financial issues after tariffs went from $26K to $346K overnight: ‘I may sound calm but I’m not’
https://nypost.com/2025/04/08/us-news/idaho-business-owner-casey-ames-of-harkla-hit-with-huge-tariff-bill/
Just a democrat wokester getting smoked out for reselling made in “Chiner” plastic garbage for a 400% mark-up.
I’d like to know how many people, when choosing between two apparently identical items, would automatically purchase the $20 instead of the $10. Prices are driven in part by what people are willing to pay. That 400% markup apparently keeps 6 people emloyed, who will soon lose their jobs and abillty to spend…
Trump won over business leaders by promising them relief from onerous regulations and government interference.
Now he wants to regulate:
While simultaniously destroying their access to foreign markets.
Business leaders need to rise up together and say “NO” to trump and his radical interference in the free market.
This tariff debacle will probably end up being another of trump’s TV specials.
Maybe titled-“my greatest, most beautiful victory”.
People are just stupid. Banks don’t lend deposits. All bank held savings originate within the banks. Secular stagnation was the impoundment of savings as described in 1961. Today, Powell has shifted deposit classifications increasing AD.
My friend, you are wrong. And proving the Dunning-Kruger effect.
Did you ever see “It’s a Wonderful Life” w/ Jimmy Stewart?
When the public got worried about getting their money (nefarious Potter rumors) J Stewart and the bank couldn’t get the $ back b/e the Mortgagers couldn’t instantly pay back those loans.
See: Bank Asset Liability Mangement (“ALM”) and Gap Management
104% tariffs on China about to kick in.
At first, Trump says he won’t even negotiate with China now.
Then later Trump says he is waiting for a phone call from China.
Then the White House said maybe China doesn’t know how to proceed.
Sounds like Trump assumes China will cave. And is now nervous that they won’t.
Meanwhile Trump has now backed off on reciprocal tariffs on steel, aluminum, and copper. Which is wise. Putting more tariffs on those inputs only hurts US manufacturing.
However, the tariff on Canadian softwood lumber imports just increased from 14.5% to 34.5%. We import 25% of our lumber from Canada. This will allow US lumber producers to raise prices as well.
China is going to sit and watch that old fool cook himself in his own foul juices.
Agree. Trump WANTS to negotiate with China. It’s what he does; Negotiate transactions.
And it will drive him crazy if they simply refuse to negotiate.
He assumed if he bludgeoned them with high enough tariffs that they would be forced to negotiate. But they won’t. And after hitting 104%, they still won’t. He could raise it to a billion percent now and it just doesn’t matter.
They will simply focus on trading with the rest of the world and filling the gap that the US is vacating as Trump pisses off all our allies and trading partners.
Reciprocal Chinese tariffs are here. Midwest farmers will melt.
What a show (sorry)
In fact, that is probably the best strategy for most countries. Don’t negotiate. Let Americans pay the tariffs on their purchases from other countries. Since every country is tariffed, it’s not like America can buy from elsewhere.
Yes, prices may rise for lumber. But the demand may fall.
My partners are putting new construction projects on hold because we can not predict if our buyers will have jobs or what our costs will be.
Who knows what this crazy man will come up with next? It is best to preserve capital and wait for someone with a cooler head to take office.
That leaves us “on hold” for almost four years. Our sub-contractors are seeing business fall off a cliff. In short, we may not need to import lumber from Canada if no one is building anything.
The CCP has been in a trade war with the US for several decades. Artificial cost of capital (cf. Pettis), currency manipulation, State sponsored enterprises demanding transfer of technology, demanding ownership splits in FDI, using de minimum loopholes, rerouting trade thru 3rd parties (Mexico, Vietnam) to avoid tariffs, spying and stealing IP, etc. ad nauseum. What’s that I smell? Yes, wake up, its the coffee. And in the end, CEO pay has skyrocketed and we have more oligarchs scurrying around than ever before, instead of just Walmart we are flooded with Dollar stores, so that the poor can stay unhealthy, but consume, consume consume cheap goods, produced by poisonous pollution, slave labor, enriching the PLA and party members. Oh, but free trade is our savior! Moron literally means “dull” in ancient Greek, so I won’t call any of you morons, but I will go with “dullards” which fits the narrow minded view of unicorns and free ice cream entertained while your house burns down around you. Wake up.
‘completely free market’ libertarians are like Scandinavian tourists in Pakistan. Whom do we sue for the health damages from formaldehyde-emitting Chinese furniture?
You guys remember the Chinese drywall case (huge case). Yet, the economists didn’t see that coming, all they see is prices.
Wake up! China is our enemy who is aligned with Russia, Iran, NK as well as dozens of BRICs nations. Like you say, China has been working feverishly for decades to destabilize America and has largely succeeded. It’s time for payback. Wake up to all of the fentanyl deaths, America, that are directly attributable to China’s goal of dominating the global taking the reins as the sole superpower.
No, I think we destabilized ourselves by somehow voting for the orange menace.
Agreed…not to mention that the chart Mish presented showing drop in China trade deficit while at the same time increase in other trade deficits completely and without mention ignored that effect — i.e. China simply rerouting via other counties to bypass tariffs and other restrictions.
Now they can’t even reroute to an island with nothing but penguins and penguin shit. Sends a message.
I think once the tariffs go into effect there will be an avalanche of lawsuits from multiple businesses claiming harm and challenging the legality of his imposing these tariffs under his national emergency act. Also if this happens it will impair his ability to negotiate with the other countries. If he declares a 90 day wait, like the fake rumor said,it would then disallow those challenges to his legal authority to impose them. This would give him some time to force the other countries into dropping their tariffs. We’ll see. As of now this is a complete clusterfk
Where does a tax on imports hit a corporation? Profit margins? What comparative advantage do China, Taiwan, Vietnam, etc. have over the US? Anyone do the math on the subsidies China provides to keep its manufacturing base? Anyone you know proud of the quality of Made in China?
What has been the loss to the US as the jobs were shifted overseas? Anyone seeing any new manufacturing taking the place of the old? Seen govt spending increase over the same time horizon? What’s the cost of foreign aid and US acting as world police?
Q: Where does a tax on imports hit a corporation?
A: Depends on who is the beneficiary and the losers. A few benefit (the tariff seekers). Everyone else loses
Q: What comparative advantage do China, Taiwan, Vietnam, etc. have over the US?
A: Minerals, cheaper labor
Q: Anyone do the math on the subsidies China provides to keep its manufacturing base?
A: Anyone do the math on US subsidies to Boeing, farmers, and weapons manufacturers? That said, China is worse, but that is to the benefit of US consumers.
Q: Anyone you know proud of the quality of Made in China?
A: Yes. The Ford CEO who admitted how great a vehicle BYD produces
Q: What has been the loss to the US as the jobs were shifted overseas?
A: Most of the loss of US manufacturing jobs is due to automation. We produce more steel and cars with fewer workers than before. And why should anyone give a hoot where underwear is made?
Q: Anyone seeing any new manufacturing taking the place of the old?
A: Anyone seen any new revolutionary products?
Q: What’s the cost of foreign aid and US acting as world police?
A: Too much. But trump wants still more military spending.
What-about-ism
Free trade for thee, but not for me.
Globalists are the enemy of the American people.
Globalists are nothing more than citizens of the world. We should all be globalists and proceed towards world peace and forget all of this demonizing the “other”.
People can (mostly) put off buying vehicles and iphones and whatnot, I’m more worried about food and medicines. You can’t put off eating.
Bernie and AOC suggest eating the rich.
Fauci is saying Covid is coming back – then what?
Get some sun, you’ll be fine – just like last time.
Specifically, flood light up the rectum followed by bleach chaser
But we had the best economy … ever … during the first Trump admin. Based on …. something.
Trump’s opinion?
No, apparently it was based on a lie, constantly repeated and never challenged.
Hey Mish – slightly off topic but just imagine how much fun our old friend Pater Tenebrarum would be having with all this. He always loved Trump’s entertainment value. I think he’d be tickled pink. RIP.
Yes, thanks.
I don’t know if you knew this but he was my first teacher on Austrian economics.
Because M*Vt didn’t rise.
http://bit.ly/LVVuhI ANATOL B. BALBACH and DAVID H. RESLER Eurodollars and the U.S. Money Supply
Urge all to read and distribute this LONG detailed review of tariffs by Armstrong.
https://www.armstrongeconomics.com/international-news/trade-war/why-is-trump-using-tariffs-the-truth-that-has-misled-the-world-on-tariffs/?
If a pickup goes up 8K, I won’t buy the pickup. If people don’t buy what is too expensive, the price comes down until demand returns. Your tariff views tend towards absolutist. This is a complex game. Guessing the outcome is a fool’s errand. Let’s see how the cards are played.
Many are going to wait to see how the cards are played.
The problem is some are going to be forced to make a decision before all the cards are revealed. If your car dies in the next few months, you don’t have a year or more to see what shakes out. You’ll have to buy a car at whatever the current price is, even if you pay an inflated value. This happened to a lot of people in 2021-2022 and they are very under water on their cars.
Buy a used car.
A couple years back, my used car was worth more than I had bought it for 2 years before.
Buy used appliances. Buy used this and that’s. It’s all good! Wow!!! I thought your team was all about a better quality of life for Americans . Good god your lights are really off and you are not home. Egg prices…blah blah blah. You trump supporters are so confused.
Team? Like the Yankees vs. Red Sox? Yeah, no. Is quality of life simply a number total of the things that you own? Some things definitely help. A phone with 6 cameras that NSA can use to spy on everything like the Agents in the Matrix? Not so much. Overkill in technology has become like a religion. If you are overweight and unhealthy, your iPhone will not improve your quality of life. Getting outside for fresh air and exercise and less screen time will. Quality of life is not a number.
*Someone* has to buy new in order for something to later be sold as used.
Besides, what’s your plan for the 9 million new cars the USA manufactures per year. You want all those workers idled for a year? What about all the other bigger ticket items like fridges etc.
Have you seen used car prices? Younger Americans just trying to start out are completely f***ed. We designed a society that’s 100% reliant on owning a car in many places, and now cars are becoming unaffordable.
Carry that thought through. You won’t buy a truck. So, Ford or Chevy or Ram now have trucks they can’t sell but they have to pay employees to make trucks people don’t want to buy. Instead of lowering prices to levels that cannot cover costs they’ll lower costs. And what is the easiest and quickest way to lower costs and lower supply? Shutter factories and lay workers off. We get more unemployment and less production, the precise opposite of what Trump has said the tariffs will accomplish
Could be. Which I would guess is why the Admin is suggesting that the Fed lower rates. Look, Mish has been arguing recession for more than a year. I pretty much agree, but these things always can run longer than you expect. The Fed tried to do away with recession and hence the business cycle, then the fiscal side went nuts in the pandemic. Asset inflation is not a myth, markets got horribly overvalued while the debt has grown astronomically and inflation went rampant in the real economy. Simply put, not sustainable. I wonder how they will reshore enough production at a fast enough pace, a la Musk’s criticism of Navarro. One thing I will say is that the bullshit about tariffs guaranteeing inflation is like listening to a Fed podcast on the economy by Ben Bernanke.
It isn’t that complex for paycheck to paycheck folks.
Pay more for stuff, buy less stuff.
Less stuff needed, less jobs needed.
Multiply by 100 million for the US…
then do something similar for the rest of the world.
CL (WTI Crude) front month is trading 57.58. That’s flashing collapse of demand and recession. It also is signaling inflation is swirling into the toilet.
You are capable of seeing long term damage. Most of his supporters don’t. They are like children. They want their treat and they want it now. They say that we will suffer short term pain, for long term gain. Easy to say. Especially if you know you will not suffer…as billionaires do. But most of trumps supporters are ordinary folks. They will lose.
first principles. number 1. trump doesn’t care about anything. he’s a nihilist. number 2. it’s a cult. trump is a classic demagogue with immense powers of persuasion and salesmanship that all classic demagogues and cult leaders in world history possess. i saw it live in july 2015 the 2nd week of his campaining for potus. all the rest of his actions are only in respect of these 2 principles. to try and deconstruct his words and actions is basically absurd.
Lions and tigers and bears oh my! Get a grip.
not scared. i think it is hysterical. never stop sweetie. it’s like the hasidic world HQ for the lubovitch, cult down the avenue from me. i call it the petting zoo.
You’re hysterical, not in the sense of funny, but in the sense of emotional loss of balance. I would be careful with that petting zoo thing, its not going to take you anywhere worthwhile.
As more and more ordinary Americans suffer, you can expect the “emotional loss of balance” to segue into violence. Americans did not vote for recession and rising prices- they were promised the opposite, and the bait and switch will lead to widespread fury.
Well, he does have a right wing echosphere media that constantly felates him and propagates his lies. So, …., he’s got that going for him.
amerikans are assholes. he got majority. the last guy supplied ukraine with arms to kill millions of young men for profits. and ran shotgun for genocide in gaza.
This should be entitled ” I was wrong about tariffs causing inflation but I have hundreds of excuses.” History shows you’re wrong, Trump 1 proves you’re wrong and right now commodity prices are getting hammered along with your predictions.
Commodity prices are getting hammered because the orange asshat is causing a recession for no reason.
Mish has been advocating for recession for over a year. Maybe you don’t read his economic posts.
And one day there will actually be a recession….one day…..
Lower commodity prices will suppress inflation.
My gosh you are probably as stupid as you sound.
That’s not much of a retort.