Now that President Trump’s tariffs on Mexican and Canadian imports have gone into effect, I wanted to repeat my view of them. I think that tariffs on Mexican and Canadian imports are a very bad idea for the reasons that many are mentioning. They are paid by consumers. They will raise prices and the effects will be regressive—they will fall hardest on those least able to afford them.
Hopefully, the president will have accomplished whatever it was that he intended by them and they’ll be rescinded soon.
In contrast I think that much higher tariffs should be imposed on imports from China. As I’ve said before I think tariffs in the amount of the total of the value of American intellectual property infringed on by the Chinese, the costs borne by American companies and governments to defend themselves against state-supported Chinese hackers, and the subsidies China provides to state-owned enterprises that export to the United States should be applied. I haven’t checked lately but the last time I did that amount was a multiple of total U. S. imports from China.
I will state that Trump will hopefully get what he wants on fentanyl with Mexico and Canada soon.
If the tariffs get extended on Mexico and Canada, someone will sue; and if Trump strays much from its imputus of fentanyl, the tariffs will be stricken by the courts.
The IEEPA is a powerful tool, but for a limited purpose.
“They are paid by consumers.”
You don’t know that (nor do economists), anymore than you know the tax incidence of the corporate income tax.
“They will raise prices and the effects will be regressive—they will fall hardest on those least able to afford them.”
With, “raise prices, or reduce consumption,” and “on balance, regressive,” I think this is the much better argument, but now we have something to juxtapose. Those same people who have been most harmed by the gutting of the US economy by China/Mex/Canada’s mercantilist policies are now harmed by tariffs. Let the cost/benefit argument ensue; and what is the alternative?
As I’ve said any number of times I think the corporate income tax should be eliminated.
I agree with that. I honestly don’t know what sort of country those who lead the deindustrialization charge want. There seems to be some sort of illusion of a country in which 50% of people have college educations with jobs that require them and the other 50% are Amazon drivers.
Dave Schuler: As I’ve said any number of times I think the corporate income tax should be eliminated.
As a general rule, the more efficient tax puts the burden on the entities using the services. Corporations use government services.
Kind of half heartedly* watching an interview with Lutnick. I find the shift to focusing on fentanyl instead of jobs interesting. As we know, almost no fentanyl comes from Canada, so that claim doesnt fit at all. Also of note, if you follow drug OD deaths, they have taken a sudden rapid drop. Reasons why arent clear but most likely it’s just the ending of the cycle that all drugs seem to go through. Anyway, it’s expected that they will continue to fall. My prediction is that the next batch of data will show a continued drop and Trump will take credit.
Later in the interview he did get back to jobs. The interviewer noted that labor is cheaper elsewhere. His claim is that we would use robots but we would have millions and millions of high paying jobs for the people repairing and running the robots. So we are going to have just as many people with manufacturing jobs as in the past, all paying a lot AND have robots. Doesnt add up. Also, IIRC, China now leads the world in robots.
*It’s really hard listening to any Trump rep talk. About half their time is spent praising Trump instead of just covering the topic they are there for.
Steve
NBER
Tax Foundation
Senate Finance Committee
Recent findings on corporate income taxes
Keynes supported taxes on corporate income but his vision was for something considerably more dynamic than any country has ever tried.
Paul Samuelson opposed corporate income taxes on the grounds that I’ve suggested.
Milton Friedman opposed corporate income taxes on the grounds that I’ve suggested.
My observation about efficiency is the consensus among economists.
As I’ve said many times before I think that corporate income taxes should he eliminated, increasing the personal income tax rates to compensate for the lost revenue. I have opposed every reduction in the personal income tax over the last 30 years.
I also think that Friedman’s negative income tax idea would be worth trying, replacing what we’re doing now which is basically a subsidy to the upper middle class.
We should eliminate them because they are so easily corruptible and manipulated. It’s way for Congress to pay back and support their donors and favored causes.
Steve
steve:
I honestly don’t understand Trump’s fentanyl argument for tariffs. I can only speculate there’s something in the law which empowers him to raise tariffs for that purpose. IMO such a thing should not exist.
I would add that we can offset the income inequality effects of low corporate income taxes with a negative income tax, among other strategies.
My wife watches CNBC for the business stuff nearly constantly. I largely ignore it and read but look up occasionally. When i have been watching, there has been a lot fo concern about tariffs and the markets dropping in response. A lot fo people thought he was never serious about them so are surprised. Others think he still isn’t really serious and will find ways to keep extending dates. Others think he maintains them.
My best guess is that they honestly thought this would be greeted positively by investors, kind of like with Iraq and they thought they would greet us as liberators. So since things arent going so well on the economic angle they are changing to fentanyl. As i noted that is a pretty risk free emphasis as fentanyl deaths are already trending down. If they dont continue down then he can blame Mexico and Canada again and either maintain the tariffs or modify them.
It’s the only thing I can think of, besides just wanting to punish Mexico and Canada. Canada sends almost zero fentanyl to the US so the claims on their face make no sense.
Steve