by ckcheng on 4/5/25, 10:55 AM with 41 comments
by throw0101d on 4/5/25, 12:52 PM
Instead we got a default rate of 10%, and higher rates on (e.g.) Madagascar whose main export to the US is vanilla—which the US can't grow anyways so it's not like they they need to protect anything. Or the Falklands Islands, whose chief export is… the Patagonian toothfish. Does the US have a strategic in that? (And let's not get into the meme-worthy penguin islands.)
There are good reasons for tariffs: national security concerns, infant industry protection, national champions.
* https://www.noahpinion.blog/p/when-are-tariffs-good
But the recent policies are not that.
It's important to also consider industrial base:
> Democratic countries’ economies are mainly set up as free market economies with redistribution, because this is what maximizes living standards in peacetime. In a free market economy, if a foreign country wants to sell you cheap cars, you let them do it, and you allocate your own productive resources to something more profitable instead. If China is willing to sell you brand-new electric vehicles for $10,000, why should you turn them down? Just make B2B SaaS and advertising platforms and chat apps, sell them for a high profit margin, and drive a Chinese car.
> Except then a war comes, and suddenly you find that B2B SaaS and advertising platforms and chat apps aren’t very useful for defending your freedoms. Oops! The right time to worry about manufacturing would have been years before the war, except you weren’t able to anticipate and prepare for the future. Manufacturing doesn’t just support war — in a very real way, it’s a war in and of itself.
* https://www.noahpinion.blog/p/manufacturing-is-a-war-now
But the recent policies are also not that.
by impure on 4/5/25, 12:49 PM
But then it says 'That would lead U.S. GDP to rise, resulting in higher employment, higher wages, and less debt.' This is clearly false as tariffs distort the market. With free trade every country can specialize in what it is best at (their comparative advantage) maximizing GDP. So no, the GDP would fall because Americans are forced to divert resources from more lucrative industries.
by haraball on 4/5/25, 12:20 PM
by smileysteve on 4/5/25, 12:31 PM
If high level broad tariffs (or sales tax) are implemented as a replacement for the progressive income tax (or regressive payroll taxes), and with a universal basic income program, then the shift would be more tolerable.
What you would really not want to do is, prior to raising tariffs, significantly reduce GDP efficient government spending, reduce welfare programs, and decrease public sector jobs.
For success, you would also want to avoid headline tariffs - people, business, and countries can make changes if you announce you are permanently changing your taxation system 1% at a time over the course of a year - and you definitely would want to avoid chastising trading partners that could reduce the control you have.
by littlestymaar on 4/5/25, 12:28 PM
But like all tools it must be used with care in order to have the desired effect. What we've seen with Trump so far is akin to smashing everything at reach with a hammer, it's not how hammers are supposed to be used…
by Juliate on 4/5/25, 12:33 PM
And it misses key related points: who are interested in more local production? who will produce in what factories in the US? and who will adjust to the excess production?
by kiviuq on 4/5/25, 3:06 PM
big difference
by tzs on 4/5/25, 12:19 PM
by safety1st on 4/5/25, 12:30 PM
* If America is one of your largest export markets, you were just put on notice that all of that business is about to disappear - along with everyone else in the world. Everyone's going to react differently but there really isn't a replacement for the American consumer out there, China is not going to magically step in, the EU is not going to magically step in and buy all your exports, etc.
* Trump has been super loud for many years about his desire to get everyone to buy American. He's now gone as far as to put the largest tariffs on the countries that buy the least. This is all a blaringly loud signal that when the deals start getting cut if you agree to buy more American goods your tariffs will get lowered.
* Ergo we will at some point this year see those deals start to get cut and as things start to inch back in the direction of normalcy, American firms will find themselves benefiting from a ton of new demand from overseas.
* None of this upside is priced into the market today, because the tariffs look like more volatility than anyone wants to deal with - they are obviously amazingly disruptive to many American businesses if they stick around, fear is overwhelmingly the emotion of the day, as opposed to greed. Hatred for Donald Trump is absolutely crushing every other sentiment. This is what I sometimes see referred to as an artificially induced bear market, it's not linked to any clear forecast of future earnings.
But presuming that negotiated trade deals materialize, and I don't see why they wouldn't sooner or later, then things will normalize over time, and the new status quo will almost certainly be better for American earnings. So I'm all in, Buy Buy Buy.