This reminded me of an earlier headline I had read about "16 Nobel-Prize winning economists signing a letter saying that the economic policies put forth by the Republic party would ignite inflation again".
In a sane political system, we would’ve raised taxes (across the board). That would’ve slowed down consumption and allowed the Fed to lower interest rates, which would’ve raised investment. It also would’ve reduced the deficit, which would also be good for long term economic health.
Instead, we blew up the deficit and lowered taxes (but only for the really rich).
So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.
Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.
So I lived in Canada (Ontario) for 18 years, and I've been back in the US for 4. In Canada (and here) I don't see how you "raise taxes across the board" when most tech salaries (90-180k) by the time you add in sales tax and fuel taxes you're already paying 45-50% tax rate. For example, hypothetically one year I was buying a house, so no RRSP contributions that year. On my hypothetical 160k salary I paid $58k in income tax and withholding, plus 13% HST on just about every single purchase, plus something like 24% for fuel/road taxes. That means an effective tax rate of something like 45%. But we don't get pensions or anything like that, so you also need to save. A lot. If my hypothetical example doesn't sound so bad, imagine if you were making $45k. Sure, lower tax rate, but still.
I'm sorry, as bad as it sounds to everyone, it's time for the capital class to pay up, the middle class can no longer subsidize society because it's simply too small now.
edit I want to be clear that I am not against taxes, I am for social services, I'm just tired of paying 10% of my net worth every year while folks worth tens to hundreds of millions of dollars pay very little tax because they have limited "income", but then I pay for the roads they drive on and the public services they use.
What a wonderful success the Federal Reserve redefinition of "inflation" has been. We will never get anywhere if everything that causes price increases is called inflation. Inflation is an increase in the money supply which also happens to increases prices.
Everything has trade offs. Diluting the dollar increases prices for nothing in return. Pretty much all downside for everybody but the top. Tariffs increase prices to the benefit of domestic producers and benefits everybody.
What we will see is if prices are more important than building skills and wealth of our fellow citizens.
> Inflation is an increase in the money supply which also happens to increases prices.
This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.
It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.
Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.
If the money supply increase slower than production, you get deflation (temporary, as deflation stop investments, which slow production), so hopefully no one important use your definition of inflation.
> Tariffs increase prices to the benefit of domestic producers and benefits everybody.
I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.
> What we will see is if prices are more important than building skills and wealth of our fellow citizens.
So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?
These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.
> Tariffs increase prices to the benefit of domestic producers and benefits everybody.
Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.
You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.
Otherwise you’re just sawing off your leg to repair a broken ankle.
If only he could seek the financial wisdom of the former owner of his home and his long time neighbor, adviser to the rich and powerful, high school drop out Jeffrey Epstein.
Obviously we trusted the economic prowess of the author of “The Art of the Deal”, the convicted felon who bankrupted a casino and should have been barred from running for his actions on J6.
I’m glad we’re all in such tiny, bruised, felonious hands.
Are they really that sneaky? Literally every economist who's not trying to give Trump a handy says this is the obvious outcome of tariffs (heck, the entire way that tariffs protect native jobs is by making foreign goods more expensive so native goods, which are more expensive to produce due to higher labor costs/lower productivity, are competitive).
Saying stuff like "China will pay the tariffs" was always bloviating fantasy to anyone who can stitch 2 brain cells together to make a coherent thought.
The Obama folks were correct about demographics being destiny: https://www.politico.com/blogs/politico44/2012/07/demographi.... Mass immigration killed the Mccain/Romney GOP. What they overlooked is that, the vacuum would be filled by a right wing party that looks more like the right wing parties you see in the rest of the world.
Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable. Blue Rose research estimates Trump tied with naturalized citizens. Little Bangladesh in Queens swung 50 points to the right from 2020. Populist rhetoric unrooted in facts is really popular among third world voters.
The economic incidence of tariffs (like any tax) depends on elasticity. But yes, in general, some portion of the tax will be passed onto consumers. So what? Economists agree that taxing consumption is better than taxing income or capital gains: https://www.npr.org/sections/money/2012/07/19/157047211/six-... (points 3 and 4).
A tariff is a consumption tax that’s less than 100% passed onto consumers, which has the effect of discouraging imports. All good things.
It's a giant pet peeve of mine when people post a link that very superficially backs their argument, but then when you go and read it, it directly contradicts their point. Critical sentence from point 4: "Instead, impose a consumption tax, designed to be progressive to protect lower-income households."
Tariffs are the exact opposite of that, they're highly regressive.
It's not about so what, it's about how many are brainwashed not to understand the obvious thinking they'll get tax reductions, while they are getting tax increases in practice. Same ones elected these people in the first place.
ah yes, raising taxes is great when Dear Leader does it. You do realize you've got about three years until you're waxing eloquently about the virtues of eating the bugs, right?
I'm frankly stunned that there is an argument in the US about "who pays for tariffs". It's like dictionaries don't exist or something. The literal definition of the word reveals who the tax is effectively applied to.
I’ve noticed that people are often just lying as well. I’ve encountered people who will argue that someone else is paying them when it’s convenient to hand-wave away a tax increase for the sake of an argument, and later complaining about the same tariffs.
It’s very easy to be this lazy when you’re playing Politics: Tribes. There’s all sorts of dumb-shit slogans and obviously wrong memes about making china or Mexico pay, or cat boxes. They don’t care because it isn’t what’s important, it’s just expedient to parrot some shibboleths.
There is a debate. The issue is you have first order effects, second order effects, third order effects, etc. If we want to be naive, we only look at first order effects, which gives us the people tariffed pay the tariffs. If we want to be intelligent, we include first order and second order (and so on) effects. What certain people are doing is focusing on particular higher order effects while totally ignoring first order effects. For certain goods this might even be a roughly accurate analysis, but in general it is nonsense. But this is the genesis of the "debate".
The first order effect would be raising prices. A second order effect would be people buying different goods. A third order effect would be importers lowering prices to remain competitive (this is where we get the idea that they pay the cost of tariffs). Another third order effect would be local producers raising prices. A fourth order effect would be importers raising the prices again, because local producers raised prices also. The net effect is higher consumer prices, but potentially not by that much, while foreign producers might have to substantially lower prices. I don't know what good this would apply to, one that is neither a commodity, but it has a very competitive local market. Movies maybe? Trump also came up with the idea that local sellers wouldn't raise prices, and instead eat the price difference. This is highly questionable, but maybe for some goods it would work out...
You’re applying a literal definition, but in practice, it can be different.
For (a simplified) example, if there’s a 30% tariff on a $100 item, all else equal, the price is now $130, and the customer that originally would have paid $100 is now paying $130.
But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Also, the foreign supplier can do the same thing. Rather than lose the business of the US retailer, they may, in turn, eat some/all of the tariff.
I’ve seen both of these happen with products I’ve purchased over the past few months.
I’m not saying this happens a lot, but I don’t know that it doesn’t, either.
I’m just saying that it’s not as clear cut as the definition.
The supplier absorbing the tariff isn't sustainable, they will always ultimately pass the cost on to the consumer one way or another. And your $130 example still demonstrates that the consumer just ends up paying more.
The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead. But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
Anyway I just think everyone in the US are very silly for allowing this to happen. Very silly indeed.
> But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Please show me retailers that have 30%+ margins that let them happily absorb all of the tariff. Walmart's margin is 3-4%.
Even if they absorb just some of the tariff, it means the customer still ends up paying more.
> But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
There are limited cases where this might happen, but when you're talking about the likes of Walmart... Supermarket profit margins are generally below 5%. There is not much scope to absorb additional costs without passing them on.
The article we're commenting on shows that in reality, the retailers are actually increasing their margins in the face of increased costs due to tariffs.
I always surprised that people defending these tariffs don't see the conflicting defenses.
The default defense comes from Trump who has - since 1980s has pushed for tariffing other countries to raise government revenue. The idea being - America drives lot of market demand. This seems to ignore basic economic facts. Importers pay tariffs and also that corporates are all about profit maximization.
Companies might eat some of the tariffs in short term but they will always reduce costs in long term. That means jacking up prices slowly, finding ways to circumvent tariffs, using low cost - maybe even harmful but unbanned substitutes in products to name a few. Even the domestic company has a reason to hike up prices just below the price of imported goods. And also, because there is less competition domestic company might even reduce R&D because they can continue to rake in profits from local markets.
The second defense is around domestic companies. I don't think anyone will disagree that each country needs to protect its most crucial domestic industries. But in those cases tariffs ae a precision tool, not a hammer. Tariffing everything doesn't make sense except it goes back to original defense - the point is to raise revenue.
If you have two competing providers, technically one could reduce margins to wear some of the tariff to out compete their competitor. Even if that DID happen, chances are wallmart etc would STILL put up prices, blame the tariffs, and just enjoy a higher profit margin.
Essentially even in an unrealistically optimistic position, the consumer will STILL get stuck with higher prices.
Readit News
Instead, we blew up the deficit and lowered taxes (but only for the really rich).
So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.
Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.
So I lived in Canada (Ontario) for 18 years, and I've been back in the US for 4. In Canada (and here) I don't see how you "raise taxes across the board" when most tech salaries (90-180k) by the time you add in sales tax and fuel taxes you're already paying 45-50% tax rate. For example, hypothetically one year I was buying a house, so no RRSP contributions that year. On my hypothetical 160k salary I paid $58k in income tax and withholding, plus 13% HST on just about every single purchase, plus something like 24% for fuel/road taxes. That means an effective tax rate of something like 45%. But we don't get pensions or anything like that, so you also need to save. A lot. If my hypothetical example doesn't sound so bad, imagine if you were making $45k. Sure, lower tax rate, but still.
I'm sorry, as bad as it sounds to everyone, it's time for the capital class to pay up, the middle class can no longer subsidize society because it's simply too small now.
edit I want to be clear that I am not against taxes, I am for social services, I'm just tired of paying 10% of my net worth every year while folks worth tens to hundreds of millions of dollars pay very little tax because they have limited "income", but then I pay for the roads they drive on and the public services they use.
Everything has trade offs. Diluting the dollar increases prices for nothing in return. Pretty much all downside for everybody but the top. Tariffs increase prices to the benefit of domestic producers and benefits everybody.
What we will see is if prices are more important than building skills and wealth of our fellow citizens.
This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.
It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.
Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.
If the money supply increase slower than production, you get deflation (temporary, as deflation stop investments, which slow production), so hopefully no one important use your definition of inflation.
I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.
> What we will see is if prices are more important than building skills and wealth of our fellow citizens.
So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?
These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.
Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.
You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.
Otherwise you’re just sawing off your leg to repair a broken ankle.
I’m glad we’re all in such tiny, bruised, felonious hands.
Also, lo, PS5 https://www.reddit.com/r/PS5/comments/1my6t3o/sony_discounts...
Deleted Comment
Remember future contenders... bribery is legal now.
Saying stuff like "China will pay the tariffs" was always bloviating fantasy to anyone who can stitch 2 brain cells together to make a coherent thought.
You'd think this is obvious, but you'd think people wouldn't vote for such ones either in the first place.
Trump, with his lying and outright vote buying (No Taxes on Tips) is the kind of right wing candidate that can win enough immigrants to be nationally viable. Blue Rose research estimates Trump tied with naturalized citizens. Little Bangladesh in Queens swung 50 points to the right from 2020. Populist rhetoric unrooted in facts is really popular among third world voters.
A tariff is a consumption tax that’s less than 100% passed onto consumers, which has the effect of discouraging imports. All good things.
Tariffs are the exact opposite of that, they're highly regressive.
It’s very easy to be this lazy when you’re playing Politics: Tribes. There’s all sorts of dumb-shit slogans and obviously wrong memes about making china or Mexico pay, or cat boxes. They don’t care because it isn’t what’s important, it’s just expedient to parrot some shibboleths.
Thus, "tariffs" can be made to mean anything.
The first order effect would be raising prices. A second order effect would be people buying different goods. A third order effect would be importers lowering prices to remain competitive (this is where we get the idea that they pay the cost of tariffs). Another third order effect would be local producers raising prices. A fourth order effect would be importers raising the prices again, because local producers raised prices also. The net effect is higher consumer prices, but potentially not by that much, while foreign producers might have to substantially lower prices. I don't know what good this would apply to, one that is neither a commodity, but it has a very competitive local market. Movies maybe? Trump also came up with the idea that local sellers wouldn't raise prices, and instead eat the price difference. This is highly questionable, but maybe for some goods it would work out...
For (a simplified) example, if there’s a 30% tariff on a $100 item, all else equal, the price is now $130, and the customer that originally would have paid $100 is now paying $130.
But what can — and I’ve experienced firsthand — happen, is that the US retailer will eat some/all of the tariff in order to not lose the customers business (or even just out of goodwill).
Also, the foreign supplier can do the same thing. Rather than lose the business of the US retailer, they may, in turn, eat some/all of the tariff.
I’ve seen both of these happen with products I’ve purchased over the past few months.
I’m not saying this happens a lot, but I don’t know that it doesn’t, either.
I’m just saying that it’s not as clear cut as the definition.
The whole idea is to dissuade the consumer from buying a foreign product, and choosing a domestic one instead. But if there is no domestic alternative, then it is always just going to be a case of "pay more or don't have it".
Anyway I just think everyone in the US are very silly for allowing this to happen. Very silly indeed.
Please show me retailers that have 30%+ margins that let them happily absorb all of the tariff. Walmart's margin is 3-4%.
Even if they absorb just some of the tariff, it means the customer still ends up paying more.
There are limited cases where this might happen, but when you're talking about the likes of Walmart... Supermarket profit margins are generally below 5%. There is not much scope to absorb additional costs without passing them on.
The default defense comes from Trump who has - since 1980s has pushed for tariffing other countries to raise government revenue. The idea being - America drives lot of market demand. This seems to ignore basic economic facts. Importers pay tariffs and also that corporates are all about profit maximization.
Companies might eat some of the tariffs in short term but they will always reduce costs in long term. That means jacking up prices slowly, finding ways to circumvent tariffs, using low cost - maybe even harmful but unbanned substitutes in products to name a few. Even the domestic company has a reason to hike up prices just below the price of imported goods. And also, because there is less competition domestic company might even reduce R&D because they can continue to rake in profits from local markets.
The second defense is around domestic companies. I don't think anyone will disagree that each country needs to protect its most crucial domestic industries. But in those cases tariffs ae a precision tool, not a hammer. Tariffing everything doesn't make sense except it goes back to original defense - the point is to raise revenue.
Essentially even in an unrealistically optimistic position, the consumer will STILL get stuck with higher prices.