I just wanted to write a brief post about the broad array of tariffs President Trump announced.
First, I think that reciprocal tariffs are long overdue. That’s one thing Mr. Trump is right about. We shouldn’t have quietly put up with the tariffs that other countries impose on our goods as we have for as long as we have.
Second, I don’t believe that tariffs are the only tactic or even the most important tactic that other countries have for reducing their imports from the United States. There are also quotas and the direct and indirect subsidies they provide for their own products. And, of course, there’s outright theft of U. S. intellectual property which is widespread all over the world.
Third, over the last ten years the S&P 500 stocks have increased in value by more than 10% per year. The capital investment that will be required to reindustrialize the United States is unlikely to produce that level of return that fast. Said another way, you’re better off putting your money into a stock index mutual fund than you are in building a factory with a lot less risk.
Fourth, inadequate domestic business investment is not the only reason we don’t build as much here as we used to. There are fifty states and thousands of local governments that all have their own regulations that increase the cost of building things in the United States.
Consequently, I think that President Trump will be disappointed by the results of his tariffs. They are likely to raise prices on a vast array of goods without reshoring much.
When you look at the actual amount of the tariffs, especially our traditional trading partners, the actual tariffs are very small and in many cases our total tariffs are higher than theirs. So these were in no way reciprocal tariffs, unless things have changed in the last few hours. The equation they used to choose the tariff rates is one I have never seen before and Chat-GPT couldn’t find evidence of it being used before, though I will confess I dont think I am that good at using GPT yet. At any rate, looking at the actual amount of the tariffs its hard to believe that other than for a very few products they are so small its hard to believe there is much effect.
Importantly, the formula they used doesnt really rely on tariffs. They look at trade surpluses and deficits and they look only at goods, ignoring services. So based upon the actual metrics they are using they arent really looking so much at tariffs as trade numbers and countries will need to eliminate a trade surplus in goods if they have one while accepting our surplus in services.
Steve
Dave Schuler: What Will the Tariffs Accomplish?
The rapid decline of America.
Dave Schuler: We shouldn’t have quietly put up with the tariffs that other countries impose on our goods as we have for as long as we have.
Tariffs are subject to negotiation, and there are a number of treaties involved that have resulted in lower tariffs. Trump has been against such deals, including NAFTA (North American Free Trade Agreement) and TPP (Trans-Pacific Partnership). Trump has even reneged on the (CUSFTA) Canada–United States Free Trade Agreement, which he himself signed after bullying other countries into it.
It’s typical for smaller, developing countries to have tariffs to protect local industries; otherwise, their local businesses will be overwhelmed by their larger trading partners. On the other hand, developed countries usually have low tariffs.
But even developed countries often have agricultural tariffs to prevent dumping. The United States subsidizes dairy products, which can result in oversupply, so Canada imposes a tariff, but only when the imports are very high indicating the United States is dumping their oversupply.
The overall weighted average rate of EU tariffs for the US are only about 2%, Canada 3%, Mexico 4%. But keep in mind that these were negotiated and agreed to.
It’s not just the tariffs. Trump is fracturing long-standing relationships based on mutual trust and shared democratic values, instead siding with authoritarians while denigrating and punishing allies.
Dave Schuler: inadequate domestic business investment is not the only reason we don’t build as much here as we used to.
The United States has ten million guest workers and still can’t find enough workers (at least until the economy crashes). Thinking you can expel all the guest workers and still find enough workers to make jeans and harvest crops and do everything else everyone is doing is just nonsense. Why would an American youth want to migrate from state to state to pick fruit from sunup to sundown while staying in crowded dormitories, when they can design new software or even have a steady income working at the local coffeeshop close to home?
Dave Schuler: What Will the Tariffs Accomplish?
The rapid decline of America.
It is natural that America will decline *relative* to other nations. China, India and other countries have a right to their place in the world. They are growing up! It’s the very world America dreamed of and helped build. But a graceful bow while leading as first among equals is better than a precipitous collapse, a collapse which will enable the worst actors on the world stage.
Zachriel:
You wrote:
Can you cite an example of that happening at any time anywhere in the world? The “leading as first” part not the “precipitous collapse” part.
Dave Schuler: Can you cite an example of that happening at any time anywhere in the world?
That would be the international system the United States and its allies built and nurtured since the founding of the United Nations in 1945, the purpose of which was to give all nations a say in their shared future. This is contrary to the current bout of American jingoism, which asserts American supremacy and the rule of the strong—the lashing out of a declining power, yearning for a mythical past.