Previously, I discussed tariffs and the trade deficit. This post is about Trump’s proposal to use tariffs to fund projects. 
The Council on Foreign Relations Discusses Tariffs
What Is a Tariff?
A tariff is a tax imposed on foreign-made goods, paid by the importing business to its home country’s government.
U.S. President Trump wielded tariffs more than any recent American president, particularly against China. President Biden has largely left these levies in place while imposing his own.
Who authorizes tariffs in the United States?
The Constitution grants Congress the power “to regulate commerce with foreign nations, and among the several states,” which it used for more than a century to impose tariffs. Perhaps most infamously, Congress raised close to nine hundred separate tariffs with the 1930 Smoot-Hawley Tariff Act, which many economists say worsened the Great Depression. But over the past ninety years, Congress has delegated more and more trade authority to the executive branch, in part a response to Smoot-Hawley.
These laws give the president the power to raise tariffs if foreign countries are found to be engaged in unfair trading practices, or if imported goods are deemed to be threatening critical domestic industries and thus harming national security. They also allow the president to impose tariffs if domestic industries are “seriously injured” by import competition, even if there is no alleged foul play.
Many presidents have exercised these powers, though Trump did so to a far greater extent than most of his predecessors, imposing tariffs affecting hundreds of billions of dollars worth of goods from China and some U.S. allies, including members of the European Union (EU). Biden has maintained most of Trump’s tariffs on China and introduced several of his own. However, he has reined in tariffs on EU member countries.
Who pays?
Importers pay tariffs to their home government, but most economists find that the bulk of tariff costs are passed on to consumers. This is particularly true for industries with small profit margins, such as retail.
Ignorance or a Lie?
Trump claims foreigners pay the bill. That either ignorance or a flat out lie.
US importers can either eat the cost or pass it on. In most cases it is the latter.
But foreign exporters can mask the exports by value added processes that hide the origin of the goods. This adds cost frictions as well, but at a lesser rate.
Tracking the Economic Impact of the Trump-Biden Tariffs
The Tax Foundation Tariff Tracker investigates the Economic Impact of Trump-Biden Tariffs.
Key Findings
- The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.
- The Biden administration has kept most of the Trump administration tariffs in place, and in May 2024, announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles, for an additional tax increase of $3.6 billion.
- We estimate the Trump-Biden tariffs will reduce long-run GDP by 0.2 percent, the capital stock by 0.1 percent, and employment by 142,000 full-time equivalent jobs.
- Altogether, the trade war policies currently in place add up to $79 billion in tariffs based on trade levels at the time of tariff implementation and excluding behavioral and dynamic effects.
- Before accounting for behavioral effects, the $79 billion in higher tariffs amounts to an average annual tax increase on US households of $625. Based on actual revenue collections data, trade war tariffs have directly increased tax collections by $200 to $300 annually per US household, on average. Both estimates understate the cost to US households because they do not factor in the lost output, lower incomes, and loss in consumer choice the tariffs have caused.
- Candidate Trump has proposed significant tariff hikes as part of his presidential campaign; we estimate that if imposed, his proposed tariff increases would hike taxes by another $524 billion annually and shrink GDP by at least 0.8 percent, the capital stock by 0.7 percent, and employment by 684,000 full-time equivalent jobs. Our estimates do not capture the effects of retaliation, nor the additional harms that would stem from starting a global trade war.
- Academic and governmental studies find the Trump-Biden tariffs have raised prices and reduced output and employment, producing a net negative impact on the US economy.
Former President Trump Proposes an Up to $3,900 Tax Increase for a Typical Family
American Progress reports Former President Trump Proposes an Up to $3,900 Tax Increase for a Typical Family
Former President Donald Trump has been running on a 10 percent tax on every imported good entering the United States and a 60 percent tax on every imported good from China. The Center for American Progress Action Fund has calculated that this would amount to an annual $2,500 tax increase for a family in the middle of the income distribution.
Now, Trump has opened the door to an even larger tax increase by suggesting that the across-the-board tax on imports could go as high as 20 percent, saying:
We’re going to have 10 to 20 percent tariffs on foreign countries that have been ripping us off for years … We’re going to charge them 10 to 20 percent to come in and take advantage of our country.
Using the same methodology, CAP Action estimates that a 20 percent across-the-board import tax combined with the 60 percent tax on Chinese goods would amount to about a $3,900 tax increase for a middle-income family.* This includes a $200 tax increase on food; a $240 tax increase on oil and petroleum products; and a $210 tax increase on medicine.
A typical family would, therefore, pay between $2,500 to $3,900 from Trump’s import taxes, depending on the precise tax rate between 10 percent and 20 percent that various countries’ goods could be taxed at.
Americans Paid for the Trump Tariffs—and Would Do So Again
The CATO Institute concludes Americans Paid for the Trump Tariffs—and Would Do So Again
During a campaign stop in Wilkes-Barre, Pennsylvania, over the weekend (Aug. 17–18), former President Donald Trump told the audience that “a tariff is a tax on a foreign country. A lot of people like to say it’s a tax on us. No, […] it’s a tax that doesn’t affect our country.”
The statement is consistent with his repeated assertions throughout his presidency, during which he levied heavy tariffs on imported solar products, washing machines, steel, aluminum, and about 70 percent of all products from China.
Despite the former president’s claims to the contrary, however, there is overwhelming evidence that Americans bore the brunt of his tariffs—and would do so again if he is reelected and fulfills his campaign pledge to impose more aggressive protectionism.
As the Tax Foundation’s Erica York wrote in an excellent essay for Cato’s Defending Globalization series, both economic theory and practice—as demonstrated in the interactive decision tree below—teach that unless foreign sellers deliberately lower their prices (and thus, render a tariff ineffective for protectionist purposes), the importers and exporters of the country that imposes the tariff end up paying its cost. In the case of the Trump-era tariffs, the outcome was clear: Americans paid the tab.
The Trump campaign surely believes tariffs and protectionism are a winning message, but there’s reason to be skeptical. A recent Cato Institute survey found that a mere 1 percent of Americans said that trade and globalization are a top three issue for them, and large majorities worried about and were unwilling to pay for tariffs’ costs, including higher prices or lost jobs. No wonder that Trump pretends those harms don’t exist.
Why Trump’s Tariff Proposals Would Harm Working Americans
PIIE comments on the Regressive Nature of Trump’s Proposal
As fiscal policy, the Trump agenda amounts to regressive tax cuts, only partially paid for by regressive tax increases. A lower-bound estimate of costs to consumers indicates that the tariffs would reduce after-tax incomes by about 3.5 percent for those in the bottom half of the income distribution; tariffs would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year. If executed, Trump’s latest tariff proposals would increase manifold the distortions and burdens created by the rounds of tariffs levied during the Trump administration (and sustained during the Biden administration), while inflicting significant collateral damage on the US economy. Domestic job creation claims for the 2018–19 return to protectionism have simply proved false.
This Policy Brief highlights the distributional implications of Trump’s proposed fiscal switch. First, we discuss the incidence of tariffs, reviewing recent literature that concludes that US purchasers of imports bear the burden of tariff increases. Second, we leverage recent research to provide approximate calculations for the cost of the higher proposed tariffs to US consumers, considering the impact of higher prices. Lower-bound estimates of the costs are substantial, nearly 2 percent of GDP. Third, we estimate the likely revenue consequences of Trump’s proposed tariffs, comparing them to the fiscal costs associated with extending the TCJA tax cuts. Upper-bound projections of tariff revenues would fall far short of what is needed to cover the tax cut extensions, even ignoring the negative effects of tariffs on economic activity that are likely to further dampen fiscal revenues. Fourth, we examine how the burden of tariffs is distributed across US households. Both the tariffs and candidate Trump’s tax proposals entail sharply regressive tax policy changes, shifting tax burdens away from the well-off and toward lower-income members of society. Finally, we describe why tariffs fail to meet other policy objectives, instead causing harm to many US workers and industries, prompting retaliation from trading partners, worsening international relations, and, in the end, expanding trade deficits.
Analytically, we can think of a tariff as the combination of a tax on domestic consumption, since it raises the price buyers pay domestically, and a subsidy to producers, since it raises the price producers face when they sell to domestic buyers. Tariffs are considered an inefficient way to raise revenue because they generate losses to domestic buyers that exceed the sum of benefits to producers and tariff revenues.
The scale of trade barriers proposed by candidate Trump is unprecedented, but their costs to the US economy is informed by the empirical evidence from studies of the 2017 tariffs on solar panels, washing machines, aluminum, steel and iron, and Chinese imports. Importantly, these studies convincingly find no evidence of terms-of-trade benefits for the United States from these tariffs. Rather, the data show that higher tariffs are fully reflected in higher prices for US buyers.
Tariffs are a regressive tax because tariffs are a tax on consumption and lower-income households consume a much higher share of their income than higher-income households.
Impact on the Trade Deficit
Former President Trump often claims that foreigners bear the burden of tariffs, despite the analysis above, and he plans to use tariffs to punish other countries for what he views as undesirable trade practices. For example, he points to trade deficits as indicators that the United States is being taken advantage of, suggesting that tariffs might right such wrongs.
These claims ignore the simple macroeconomic reality behind trade deficits. Countries that have low savings rates (both public and private) relative to their investment rates run trade deficits, and countries that have the opposite pattern run surpluses. Strong macroeconomies are also frequently associated with increased trade deficits due to greater investment and lower savings.
Since Trump’s proposed fiscal policies would likely increase the fiscal deficit and may appreciate the exchange rate, his policy suggestions are more likely to increase than reduce the trade deficit.
Trump Claims Tariffs Will Reduce the Trade Deficit
On September 26, I commented Trump Claims Tariffs Will Reduce the Trade Deficit. Let’s Fact Check.
Trump proposes 60 percent tariffs on China. Would that reduce the trade deficit? Where? How?
We already have overwhelming evidence that tariffs will not improve the trade deficit.
Nor can tariffs be used to pay down debt or fund much of anything,
We have the largest tariffs in decades, and although there was a tiny improvement with China, the US has a much bigger deficit elsewhere as China masked the origin of its exports.
Critical Materials Risk Assessment by the US Department of Energy
Please consider a Critical Materials Risk Assessment by the US Department of Energy
The US Department of Energy has placed some of the rare earth minerals we need for weapons systems, windmills, batteries, and aircraft on a critical materials list.
Nearly all of them are mined or refined in China. Yet Biden just blocked production in the US.
So, how might China respond to 60 percent tariffs?
Trump is willing to double down on tariff foolishness. Not only is it regressive, it’s inflationary madness.
Jack
I would not be surprised if Trumps plan long term plan is to replace the corrupt income tax scheme with tariffs. He is already promoting the idea of not taxing tips. Over 100 years ago there was no income tax
It that really is his plan, it will blow up in Trump’s face
I am a 100 percent sure that a Trump tariff of 20 percent on bananas and coffee will stimulate massive banana and coffee production in the US.
The case of Chilean sea bass needs more study.
My question is do tariffs make locally produced products more competitively priced for the consumer and keep more money circulating in the U.S. economy from the wages and profits produced in our country? Is it wiser to produce certain critical products, drugs, items essential to national security and infrastructure in the U.S.? There are trade offs that may not be apparent initially.
Tariffs detrimental to the wealthy, benefit the working man. Price increases offset by increase in wages.
what you are describing is inflation… which every trump supporter keeps telling me is a bad thing
There is nothing that occurs in a vacuum. What goes around, comes back around, due to cycles of human nature. Glass Steagall was instituted to prevent what is happening now, then was dismantled when it got in the way, as the cycle came back around to the Roaring 20’s era again. Past is prologue. The U.S. became producer to the world and that gave way to China becoming producer to the world. There were consequences to that. Those consequences have lead to where we are now. Smoot Hawley happened in spite of the warnings. Dismantling of Glass Steagall happened in spite of the warnings. The New Deal happened in spite of the warnings. A 35 trillion national debt has happened in spite of the warnings.
“Academic and governmental studies find the Trump…”
Did anyone have a need to read beyond that sentence? I didn’t. We all know how biased academic and governmental studies are when it comes to hot political talking points. Just look at climate change for another example.
When it comes to the consequences of Trump’s tariffs, there is no need to turn to theory, speculation or the opinion of others. Because we all lived it. During Trump’s administration, we had low inflation, high job growth, a soaring stock market and a more peaceful world. And we had a path to repatriating many of the industries that our politicians had sold to China. Then China unleashed COVID and the Biden/Harris Regime took over.
So while there may be some merit to discussing the effects of tariffs on the economy in a test tube, let’s not make the mistake of using that to dictate what should be done in the real world.
Trump doubled deficit spending by 2019. Then he tripled deficit spending in one year over Covidcon. No wonder David Stockman wrote a book titled “Trump’s War on Capitalism”.
Artificial cost of capital (cf. Pettis) deployed by a centralized government is a weapon. In China’s case, mercantilist. More complicated when the American Empire runs on an over financialized feedback loop (Reserve currency, over consumption, over financialization) which has led to our current malaise, including the propagation of oligarchs and a corporate / gov symbiosis extending beyond the military industrial complex. So no, the markets are not in any way free and “we” are our own worst enemy. Not to drop the thread, so yes, tariffs but only if it pushes production onshore. Another complexity. In a perfect world, China would increase share of consumption in GDP and the US would decrease consumption and increase production share of GDP.
Good piece. You have to be really deep into the MAGA cult to not realize that Trump’s tariff ideas are the stupidities of an ignoramus.
The Council on Foreign Relations? They have staffed the State Dept. and many other government positions since the 1940s.
How have they done?
“But foreign exporters can mask the exports by value added processes that hide the origin of the goods.”
They can also lower their prices using their margin, thereby selling items for less to importers who then don’t have to pass along all or part of the tariff to the consumer.
Go do some research and found out whether or not that’s happening and report back.
Thanks!
Hilarious. Mish’s article literally quotes multiple studies – academic and otherwise – that dispel that thesis on a general and specific tariff basis.
I realize many of you can’t fathom the MAGA leader may be BS-ing you. But you could at least give Mish his due and read what’s he’s writing before spouting nonsense. You’re lucky Mish is a libertarian and (probably) believes everyone is entitled to an opinion, even if demeaning and idiotic
MAGA is a cult. it’s wonderfully entertaining, to watch unfold…………like 1/3 of the country is like the Charlie Manson acid head family………….i especially enjoy mocking my family and friend MAGA cultists, by playing along to their madness. fat dumb, old donald of queens. our families knew each other during his father’s era………..
You are naive. Maga is raising a flag in your face that the middle class is hurting.
You can see from the bmcc post that he is not interested in considering facts or sincerely held opinions.
What he is interested in is presenting himself as a person that is immensely superior to at least half the population.
bmcc has stated that he does not have to work for a living, so his concerns are different than mine.
Many on this forum have no particular skills other than knowing how to operate a keyboard and accumulate unearned income.
Those who actually create something for a living, and personally add value to this economy are always going to think differently than those who gamble and speculate for a living.
If you want the middle class to hurt even more, the Trump tariffs are the way to go.
The Democrat Party is a cult.
I reviewed the 3 research studies pointed to by Mish’s article. There’s not a single example that they show actual data to support their claims that tariffs raise prices. They simply make broad claims, without specific examples which his easily subject to interpretation.
With that said, I’m not saying tariffs don’t raise prices. Of course, they can. But again, not a single one of these studies breaks down a specific example into what % is absorbed by the exporters & importers vs what % is passed onto the consumer. Nor do any of these studies try to extrapolate what the result would be of STRATEGIC tariffs with onshoring production and increasing middle class wages.
I’m not for huge, broad-based tariffs. And I’m smart enough to know that Trump isn’t going to raise tariffs on all imports from China by 60%. However, 10-15% may be doable. And if prices do rise, then what’s the calculation of people simply not spending as much discretionary money on things that they probably can go without, which would increase the savings rate some. This would be a good thing.
Ultimately, IMHO we’ve arrived at a point where we’ve got to decouple STATEGIC goods from China. That may include buying products from other friendly nations or onshoring. If I were president, that would be my goal, and I believe that’s what Trump is going to try to do.
Ever since China became a member of the WTO in 2001 and even before, America has been losing manufacturing to China. That has to be reversed when it comes to strategic goods. I’m fine with us buying all the BBQ grills and bicycles we want from China, but pharma, solar products, essential electronics, rare earth metals, etc need to come back to America.
trump is always right. he’s our ubermensch and fuhrer
Generally opposed to tariffs, Adam Smith didn’t object to them absolutely. For example, he thought they were important for preserving domestic production of goods essential to national security:
He also thought tariffs could be useful in circumstances where reciprocity was lacking, such as
there is 3 pages in republic of plato that is better and more succinct and thorough, than adam smith’s wealth of nations endless pages of dribble………
I don’t know which three pages of Plato you are talking about but every observation he may have made about social organization and economics was from a position of personal success in a slave holding society.
And he (who ever was the actual source of his comments) definitely was not calling for the destruction of his contemporary society. He considered slaves as simple property that should be accorded no more freedom or even comforts than was necessary for them to carry out their functions.
He was a member of the elite of society and his ruminations were all about an ideal society where money and trade didn’t exist. Every one would know their position in society and voluntarily fulfill their responsibilities without friction. Or else.
Judging by the tenor of your posts here I can see why you think that Plato has the answer.
That last quote is referencing what’s likely to happen if Trump is successful and raises many new tariffs and much higher. China and other countries will quote Adam Smith and say the US started these “high duties or prohibitions of importation” so I need to respond in kind. Hope you can grow your own bananas, coffee beans, uranium, rare earth minerals, etc.
If you talking about America, then yes they can *grow* their own items on your list and much more if it is worth it to do so.
Nice ending caveat of “if it is worth it to do so”; THAT is the point
Do you have any inkling how much it would cost the US consumer to switch Iowa from growing immense amounts of corn (a lot of which is sold abroad for farmer profit) to growing bananas and coffee beans? That’s why I included those examples. Of course we “can grow” those items, but you’re crazy if you think we’d all be better off by trying to do so. It would be massively expensive and inflationary, and you (and/or others) would be crying about how the government has caused inflation LOL
Some things we don’t have enough of for what we want, like rare earth minerals. So we’d have to live without them with high tariffs (or pay exorbitant prices) and we’d be worse off.
Everything else we consumers buy voluntarily from abroad (like iPhones) is less likely to be as exorbitantly costly as these particular items, but they would be more expensive, period. Would we have a few more jobs assembling iPhones here, sure. But our cost of those phones, coffee, and batteries using rare earth minerals would all be more expensive and every American (poor and rich) would be able to afford less.
So if that’s what you want, vote for the candidate espousing those higher tariffs. But please do remember your vote was the cause of that final outcome
Adam Smith today would vomit up what fancial, state and corporate capitalism devolved into after Wealth of Nations
Tariffs are just selective duties, which are already imposed by almost every country on almost every imported good. If you as the consumer don’t want to pay any increased price caused by the tariff, don’t buy the products. Almost all imported products are unnecessary. You don’t need a new cell phone every year. You don’t need a large screen TV in every room. If you want it, pay the increased cost and shut up about the tariff. We are at war with China, which you should have known ever since Covid when China covered up the infections until they could stockpile N-95 masks. When China controls the production of all essential goods, they have the ability to shut down the USA. Wise up.
Fine, but don’t say you weren’t forewarned that you’re advocating for someone in government (that may not be your one) make those decisions for you. So when the price goes up for something you want, “pay the increased cost and shut up about it”. When someone in government outlaws your specific wanted purchases for, say, climate-change or union rules reasons, you need to “wise up” and realize it’s for your own good LOL
LMAO on picking and choosing imported goods since the list is stuff that most US consumers don’t want from domestic manufacturers or can’t get due to US policy of exporting jobs or US exporting domestic energy.
Cars, phones, computers, medications, car parts, petroleum processed oils, furniture, trucks, computer parts, etc.
The Smoot-Hawley tariffs were introduced nearly a century ago and have been called protectionism ever since, until Trump.
In the short term, they resulted in high unemployment, a crash in stocks, a more severe depression, reduced trade and higher inflation. In the longer term, they introduced much more socialism, the New Deal and other stupidities, into the previously capitalist USA, a socialism which continues to this day and probably cannot be reversed without bloodshed ?
Higher taxes are never the solution. Big govt. is the problem. After all, Big Govt. is just another of the many names for socialism ?
Dumpy and his cult are too stooooopid. they know nothing. nor does Mamala’s hoards of idioits. we live in pax dumbfuckistan. the empire of idiocracy.
In the early 1900’s mfg used Real Goods promissory notes that expire within 90
day expecting retail sales and payments. That’s how small and medium businesses operated and paid their bills. Those note were the blood flow of private economy. They moved from one mfg to the next in hypothecation similar to O/N hypothecation. The banks made good money discounting them. In 1913 the Fed was born with Real Goods notes, but Wilson decided that the Fed should serve him, not the private sectors. Wilson needed money to finance the war against Germany. GB and Germany used Real Goods notes, but London Real Goods notes exchange was close. The economic war against Germany cont after WWI. German mfg could pay their bills in the 1920’s. Ten years later US mfg couldn’t pay their bills.They failed. Their money pipelines were clogged. Tariffs didn’t caused the depression.
Source : Antal Feket.
Tariffs and bilateral trade agreements protected US mfg from the deflating, collapsing German mfg.
Antal Fekete, Hungarian Jew, Canadian math prof 1932-2020.
I think one of the issues is that when a foreign nation acts in a short-term uneconomic manner, like china subsidizing production of a particular good to lower the export price, the importing nations feel compelled to respond in a manner that can help their domestic industrial competitors. I understand the tariff issue, but I have not seen a better solution proposed by those who bemoan their outcome. clearly, in the short run, buying stuff cheaper is great, but if it destroys domestic industry and the nations productive capacity, it doesn’t seem to be an effective long-term strategy.
Now, while tariffs may have cost $80 billion, what was the value of the Trump tax cuts? estimates are $2 trillion, many multiples of the tariff costs, so perhaps people were net better off anyway. in fact, that seems likely.
And zero posts here about aftermath of Helene.
Trump has said that he loves the uneducated. One can understand this love. Trump has told the American public a lie about tariffs for the last 8 years and continues to spew the same bold faced lie that the importing countries pay the tariffs that the U.S. imposes on their exported goods. That is a purposeful lie! He has done the same thing by telling the American public time and time again that NATO members pay “dues” to NATO and had been delinquent in paying their dues for years until he was President. That is a purposeful lie! His surrogates get on TV and state that Japan and Europe impose 80-100% tariffs on American cars. This is a purposeful lie that very few voters will ever fact check for themselves. The amount of gaslighting that Trump himself and his acolytes impose on the American public is like nothing we have every experienced.
Another person easily disproven by the fact Biden kept the tariffs. How are your readers this stupid
Japan imposes tremendous non-tariff barriers to selling foreign cars there. Retailers of imported cars cannot have any ownership in Japanese car dealerships. So, a Toyota dealer can’t just start selling imports. Imported cars also are put through an inspection rigmarole designed to make it unworkable for all but the most expensive cars like Rolls Royces.
I wonder why some people like to call people who they disagree with a liar. Maybe they are just talking about different things than you. Maybe they think an outcome you despise is better for them than what you propose.
Exporters pay the cost of tariffs but not the price. If someone thinks that increased cost to the exporter is beneficial, or at least more beneficial for someone somewhere in their domestic market, they aren’t lying. You like to select the range of those negatively affected (in your opinion) and then say that those are all that count so everything else connected to it is a lie.
NATO countries *do* pay dues to the organization in the form of the absorbed cost of their written agreements. They agree to provide gratis specified goods and service when called upon under the appropriate circumstances. The agree to have a defense budget of two percent to ensure they can meet those minimal obligations.
Most of the NATO countries do not meet that most basic requirement and are thus not able to meet most of the other agreed upon obligations. In short, they are not paying the dues that matter. Which is….making their contribution to the agreed upon force structure.
It is not a lie to define dues in a different manner than you do. NATO dues come in the form of absorbed cost not in the form of a simplistic price paid in cash at some kind of door before they are allowed into meetings.
The U.S. exceeds those agreed upon obligations by a massive amount. Some other small NATO countries also meet or slightly exceed the basic dues obligation. But all the major members of except the U.S. do not fully pay their dues. Dues that they agreed to pay. Dues that are real line items in their defense budget costing. (or at least are supposed to be included)
Other posters in this thread have dealt with your wide claims based on narrow definitions when it comes to Japan and other countries import duty practices
Nobody is lying. Some of them are just talking about different things than what you believe is the sum total of all that needs to be considered.
This sounds like a word salad comprised of what many would consider “alternative facts.” Lets simply look at the NATO example. Nowhere in any published NATO material is the word Dues used. The U.S. audience of voters understand what the word dues mean, thus using that word to describe NATO member contribution to the alliance is purposely disingenuous. Saying that the members who are not meeting the 2% of GDP dues obligation to NATO are delinquent and should not get the benefit of the alliance until they are “paid up” is purposely disingenuous. The countries who were not meeting the 2$ agreed upon defense spending guidance originally put in place in 2007 and recommitted to in 2014 after Russia seized Crimea were not “delinquent.” From NATO material, the original 2% guidance agreed upon in 2007 was largely deferred due to the unforeseen 2008-09 financial crisis, but recommitted to in 2014. That 2014 recommitment specifically called for nations not meeting the 2% guidance should not allow their spending to backslide from their current spending and achieve the 2% guidance by 2024. As of 2024 virtually all NATO members are spending on defense at the 2% guidance or higher. It was not Donald Trump, as he took credit for, that saw the countries that were not meeting the guidance ramping up spending toward the 2% guidance, it was the 2014 agreement. There are no alternative facts, there are facts using clear language and then there is gaslighting and purposeful misinformation.
Kamala sending joy to the NC flood victims
Aren’t tariffs on foreign made products put in place to make American made products more competitive? Robust labor and safety laws in America come with a price. Isn’t it reasonable to ask Americans to pay more for an American made product than for a cheaper product manufactured by a foreign country, especially when the increased cost of an American product is partially caused by government mandated labor and worker safety laws? Aren’t American products made more expensive due to labor protectionist efforts?
It seems the tariffs are an effort to level the playing field to offset the increased cost of producing goods in a society that protects its workers. It is certainly inflationary, but a far better added expense than the climate motivated mandates that drive up the cost of living. Asking for a friend.
All that you say here is only true is you have a truly free market. The US doesn’t have this thanks to oligopolies, labor unions, lobbyists etc. These 3 groups conspire to maximize their own gains at the expense of everyone else. Cheaper imports actually act as a way to combat this.
For example US drugs often costs 10x as much in America as the same product in Canada. Should we be able to import that drug at 1/10 the cost from Canada or should we be forced to pay the exorbitant price thanks to lobbyists/oligopolies in the medical industry?
The other thing tariffs do is prop up uncompetitive industries. The Steel industry is a great example of this where US plants are decades behind those of other countries now so that the tariff is really just acting as a barrier against the US steel industry modernizing itself because ‘it doesn’t have to’ thanks to tariffs. Same with the Auto industry and the Sugar industry and so on.
You’re right about how we should be able to buy pharmaceuticals at prices similar to what they cost in other countries, but that’s not really analogous to tariffs. Importing drugs is flat-out prohibited. Since the issue arises of safety and quality control another way to approach it is to say that the price charged in the U.S. can be no more than 110% or 115% of the lowest price paid anywhere in the world. That would equalize prices. Who proposed that? Bernie Sanders. When he’s right he’s right.
The Canadian federal government works with the provincial health departments to come up with a list of pharmaceuticals that the publicly funded health care system will provide to the consumers for a price. The appropriate federal agency then goes out and negotiates the best price they can get for their massive bulk order. Thus the selected drugs are extremely cheap (comparatively).
Sounds great right? Just try getting drugs that aren’t on the list judged suitable for widespread use. A judgement made by unaccountable, faceless bureaucrats. Since any drugs not on the government supported list are really expensive in comparison, hardly anyone in Canada makes the often completely unaffordable choice to buy the more expensive alternative.
So if the government provided generic drug alternative is the not best match for you, count on paying a fortune for the brand name or even an unlisted generic. And that’s if you can even get it because the market for such drugs is so limited because the availability of much, much cheaper generics provided by the system that everybody in Canada pays for, means there is no market for them.
Interesting observation about Canadian drug policies and prices.
Forget Canada, mexican prices even better
price fixing is never right…or maybe only right once, like a broken clock. Foolish to believe such things. Con artists like Bernie rely on fools for their success.
Excellent post, TT!
But, I don’t suspect you’re going to change Mish’s mind. He hates tariffs.
no need to change somebody’s mind when they have the truth on their side…..
Exactly! Everyone wants to bash tariffs, especially corporations. Why? We’ll they have to make one of three choices:
1) Pass the cost along to the consumer and potentially lose market share.
2) Lower their price to cover the cost of the tariff, thereby lowering their profits.
3) Find some place cheaper to buy the goods which in some cases might end up being making the product here in the US.
Tariffs, if done right, will lead to more production at home. It may cost more, but the overall / net economic benefits, oftentimes, are greater than the added cost.
America is at a point where we MUST start decupling from China in strategic areas. To name a few would be:
Pharmaceuticals
Rare earth minerals
Mid to lower end electronics that are strategic for national defense
Last, Chinese companies should not be allowed to buy land in the US. GM doesn’t own the land that they make cars on in China. The state owns it. In fact, almost any company in China has to lease the land from China. The same thing happens with homes. Chinese citizens don’t own the land. They lease it. Chinese companies should not be allowed to own strategic companies in the US. For example, Smithfield foods, the largest provider of pig-based meats in the US, is owned by a Chinese company. That shouldn’t be allowed to happen.
I still remember the American made cars of the 1970’s. Please don’t force me to waste money on these abominations.
you are arguing for choice and free market….
My oh my, the JOLTS report shows 8 million jobs open, trending UP from last report. Could it be too many boomer retiring? Or is it not enough young workers? You be the judge.
https://www.bls.gov/news.release/jolts.nr0.htm
The “good” news is that people aren’t job hopping as much.
Trump’s tariffs won’t solve the real problem above. Trump won’t save you, only you, dear readers, can do that.
That’s odd. The Biden admin kept almost all the tariffs. The more you know
it’s a uniparty. those caught up on the D v R game are basic nit wits and useful idiots.
I’m curious – does the typical American understand “tax incidence” and who actually pays a tariff? I really doubt it. Tariffs have the sound of something the other country pays, not us. Not the way it works, but I think people can be forgiven for the misunderstanding. Maybe articles like this change that? Probably not, but it’s good to get it out there.
No, the typical American does not understand that.
I would argue/speculate that the average non-American also does not understand that, including people educated in the “West”
Tariff phobes don’t necessarily have a grasp on things either. If a foreign exporter cuts their prices in response to an American tariff, then the foreign exporter “pays” the tariff – or at least part of it.
The foreign exporter may be able to cut prices somewhat to try to offset U.S. import tariffs charged at the port of entry. However, that is not the end of the story. Tariffs that way Donald Trump envisions them would inevitably trigger additional and higher tariffs on U.S. exports to the affected countries. This will cost our exporting companies and potentially cost us U.S. jobs. Tariffs, other than very targeted tariffs to counter dumping or other trade abuses, have no historical precedent of working in a highly globalized economy.
Read Lighthizer’s book.
From a game theory perspective, a myopic free trade strategy can be easily taken advantage of by an adversary.
This is how China emptied out the industrial base of the U.S.
Tax/Tariff = Theft
But OF course a tarriff reduces deficit, cuzz net-affect is purchasing Less of the Import.
I’m still angry about the 40% Tariff on imported motorcycles over 700cc. This was to “pay” the bill to Save Harley Davidson. I’d prefer HD to make a better motorcycle instead. Unintended consequence was the foreign bike makers created the 600cc class of sportbikes.
Are you better off now than you were 4 years ago? Not likely.
Trump accomplishments before Fauci gave us Covid.
Tariffs on the list.
https://trumpwhitehouse.archives.gov/trump-administration-accomplishments-2018/
For me, most of what Trump says sounds like madness (or at least anger).
I yearn for a constitutional amendment calling for the separation of govt and corporations.
Here ill fix that for you: remove and replace Corporations with “business”
“Corp” is a paper tiger. Crooks are the real culprit, on both sides of the theft/transactions.
10% tariff on all imports and 25% tariffs on imports from non democracies. Had this been in place 50 yrs ago china would not be the rival it is today and there would be more democracies around the world. Revenues would go partly to shore up social security and medicare finances and partly to cut the job killing payroll tax for SS & Medicare. We need the inflation to dissolve the debt bubble and when domestic firms ramp up to take advantage of higher margins the price of the taxed products would come back down. USA rose to superpower status between Alexander Hamilton and FDR under high tariff regime proposed by Hamilton.
The US rose to a super power because it had almost ZERO government interference in the markets in that time frame (including environmental and labor).
Resources were also cheap and abundant.
World wide trade did not exist anywhere near the scale it does today due to the inability to transports goods (no refrigeration, no fossil fuel engines etc).
Tariffs did nothing to make the US a super power and they only thing they are going to do now is lower standards of living because you’ll be able to afford to buy less of everything.
pre ww1 the world had huge international trading………..and yes, tariffs and land sales and many free land grants…….. by our governments at fed and state level paid for government. no need for any income tax for 99% of people. we are now a world wide empire. the first mistake of the republic was wanting to be an empire. old george washington nicknamed NYS the empire state. he knew where this was heading. we invaded new spain/mexico shortly after our fledgling nation got going. let’s keep it real. no passports needed to go from nation to nation either, for most travelers. the southern border was always wide open as were most ports of entry. some big cities had custom houses.
Like Mish, I am opposed to tariffs, with the possible exception of state subsidized goods. But the fact remains, tariff policy and tax policy cannot be divorced; they are not separate. You cannot have 50% income taxes (or there about) without 50% tariffs. Or, if you would like to consider that the average income tax rate is closer to 25%, then tariffs have to be in the order of 25%. If a nation tries to maintain high internal taxes and low tariffs, all goods manufacturing and indeed services as well that can be offshored, will be offshored.
Some argue that offshoring is driven primarily by low cost labor, and that is partly true. But also true of low cost labor regimes is that personal and corporate taxes are low! Part of what you have to pay labor is the tax that labor itself must pay. Put another way, if we consider the average tax on labor to be 25%, then if labor taxes (income taxes) were lowered to zero, labor could work for a 25% reduction in wages with no reduction in living standards. But it is even more profound than that, as the cost of goods and services would also drop due to the lower labor costs.
Tax rates must be universal. Any attempt to distort that eventually causes the invisible hand to distort economic activity to the lowest possible tax rate, including exporting jobs if necessary.
Who cares, it’s Trump or Marxism. I’ll vote Trump.
I don’t recall Harris being for canceling private ownership of the means of production.
She had previously been in favor of outlawing private health insurance – which is a step beyond offering a “public option”. I’m sure she now purports to have changed her mind, but that’s only because she’s full of shit.
obamacare was the backdoor to “medicaide for all”. not medicare for all. btw in some big cities, the medicaide is outstanding care. everything is free including one’s aspirin…..it’s great. i wonder who is paying? bwaaaahhhh. the salaried w2 suckers.
Democrats support crony capitalism with government providing large levels of subsidies, regulations, litigation, and taxes. Democrats do not want to abolish private property directly. They just want to exert lots more control on private property.