[a] trade imbalance is not an inherently bad thing. it can be a very good thing, a beneficial thing. this idea that if we buy $50bn more goods from kermeowistan every year than they buy from us that it implies that they are somehow “taking advantage” or this this is “unstainable” or negative is flatly false. it’s actually ridiculous. it ignores complex trade flows and balancing factors like “capital flows.”
people really seem to struggle with this, but it’s not that difficult. you’ll will have a large lifetime trade deficit with the grocery store. you will buy much from them. they will buy nothing from you. is this a problem for you? is it unsustainable? most people seem to sustain this beneficial grocery trade their whole lives.
why is it any different if it crosses a border or gets aggregated by nation? (spoiler alert, it’s not)
you’ll likely run a lifetime trade deficit with many countries too. you buy a BMW. that’s a deficit to germany. you run a restaurant in toledo. you have no german customers. does this fact harm you in some way? did germany take advantage of you? would it be better for you if we imposed a tax that made that BMW 25% more expensive? no, and if we do, it might create automotive jobs in the US, but the cost to do so is YOUR choice and your budget.
Follow the link, read the whole thing.
From the American Enterprise Institute, a broadly pro-free market think thank, is this line-by-line demolition of the Trump tariffs:
At my last look, over 85 countries have approached the US to discuss mutual trade issues since the tariffs were announced.
A trade deficit is not necessarily a bad thing – but not for most of the reasons the article suggests.
A trade deficit is not necessarily a bad thing if (if) it is caused by importing capital goods (machinery and so on) for future production.
Sadly the modern practice is the create “money” from nothing – and use this to “pay for” consumption imports.
Modern economies are so insane that the arguments of the classic Free Trade economists are not really relevant – because those arguments were based on a sane economy, where money was a commodity that people choose to value before-and-apart-from its use as money – and where imports had to be funded, in the end, by exports.
Writing as if this was still a sane economy that Sir Dudley North, or Dean Tucker, or Adam Smith – or even A.L. Perry, would recognise – will not do.
In a sane economy imports are funded, in the end, by exports – not by creating “money” from nothing.
By the way – although I oppose the philosophy of David Hume, he was fairly sound on economics – his opposition to Credit Money and Credit Bubble banking, and his deep suspicion of Corporations.
The modern world praises Mr Hume for what he was bad on, and ignores what he was good on.
Here we go again, a whole string of Highly Credentialled Economists explaining in mind-numbing detail exactly why these tariffs are Bad, Very Bad, and will inevitably lead to All Sorts of Bad Things. Despite their having been wrong so many times before, it’s vital that we believe that they are right, This Time. Really.
Repeat after me – It’s Not About The Tariffs. The long-term, theoretical impacts of the tariffs are simply irrelevant, because It’s Not About The Tariffs. It’s about all sorts of things – free trade, removal of trade barriers, trade deficits – but It’s Not About The Tariffs. The tariffs are simply a means to an end, and President Trump has made it fairly-clear what the goal is. And – blow me down – look at all those nations lining up to try and negotiate a new trade and tariff deal with the US. Why, it’s almost as if the tariffs are having the desired effect.
And – to add to bobby b.’s point – if tariffs are so awful for the world economy, as well as for the economies of the nations that apply them – how come virtually-all the nations of the world have been tariff-ing the hell out of each other for decades, and yet the world has not come to an end? Or are tariffs only bad when that vulgar Mr Trump applies them to everybody else? Inquiring minds want to know.
The global economic holocaust that was so confidently predicted just a few days ago (and secretly wished-for by so many) simply hasn’t happened. Nations around the globe have taken a few days, run some economic models, and decided that a) they don’t have serious leverage here b) the tariffs will end up hurting them quite a bit and c) it’s time to make a deal. And the White House phone is ringing off the hook. But it’s instructive to note all of the people who so-confidently predicted TEOTWAWKI, and also those who were perfectly-happy to let that happen because it would somehow damage President Trump.
llater,
llamas
No, I’m pretty sure on the topic of tariffs a great many economists through history have been quite correct about why they are a bad thing. If there is a huge wave of concessionary responses to Trump’s tariffs that lead to everyone (or even a lot of countries/blocs) dropping their own tariffs, well that would be great.
Do you really think that is how this will play out? I very much doubt it.
I think the problem with the analogy in the OP is that even though I have a trade deficit with my grocery store, that is fine only insofar as the grocery store is not my employer. Were I to work at the grocery store as my source of income, then having a trade deficit with the grocery store really would be a big problem. Those extra net dollars we send abroad have to be used sometime after they circle around the world a few times. And ultimately that means either lending it to the government, causing our overwhelming debt, or buying up American assets and equities. And eventually, you run out of the family silver to sell.
If some big Slavic country invades a smaller Slavic country, the smaller country could capitulate and suffer the consequences. Or they could fight back. Fighting back is brutally expensive in terms of lives lost, infrastructure ruined, capital destroyed, and devastation. However, a short term loss, no matter how horrifying, may well be the only way to a long term settlement. Though I’ll certainly grant you that surrender and capitulation are sometimes the least worst options.
In a trade war, one in which foreign countries have absolutely taken advantage of the generosity and often weakness of the USA, sometimes a short term period of fighting back is necessary to bring about a longer term fairer settlement. Fortunately, in such a war, the body count is often considerably lower.
I’m not an advocate of tariffs any more than I am an advocate of machine gunning troops or blowing up villages containing civilians. However, if a trade war ends up with tariffs lower for everyone (or, TBH, for America since Trump’s only concern should be that) then the short term pain might be worth it. And it does seem that a lot of countries are trying hard to re-negotiate their trade deals. I don’t know what is going to happen, it seems to have escalated today with the situation in China. And I pray to a god I don’t believe in that this does not end up kinetic.
But, like I said before, the west is totally fucked. Our national debt is outrageous, our people deskilled and uneducated, our personal debt out of control, our culture imbued with insanity, regulation at levels that makes it almost impossible to do anything. A budget trillions of dollars over revenue collection. A congress feckless, corrupt and moribund. I have for the past ten years fully expected the west to collapse in my lifetime: I can even tell you the four or five ways it might collapse. However, Trump’s plan is the first serious plan to try to reverse that inevitability. I don’t know if it will work, but four more years of the same most certainly won’t.
If your ship is sinking you might as well try to swim to shore, even through shark infested waters. Because some chance is better than no chance.
If short term tariffs might bring about a reduction overall in tariffs that might be a good outcome. If they become permanent, let me know and I’ll be happy to eat my hat. I mean I’ll have to, because we will all be so poor that hats might well be considered a delicacy by then.
Paul, a big factor has been capital inflow to the US, from investors regarding the economy as still being the most vibrant.
One big worry I have is that the chaos under the current administration is going to frighten investors away. The dollar will fall, and yes, this will make US exports cheaper but it will also slow the investment flow to the US.
@llamas
And – to add to bobby b.’s point – if tariffs are so awful for the world economy, as well as for the economies of the nations that apply them – how come virtually-all the nations of the world have been tariff-ing the hell out of each other for decades, and yet the world has not come to an end?
I’ll answer for the anti-tariff team here since I largely consider myself one of them. Because even if long term tariffs aren’t economically good, they are politically good. Sticking it to Johnny foreigner is always popular with the crowd. Stopping them from “stealing our jobs” is always a vote winner. Why hasn’t the world collapsed? Because free markets so powerful and productive it can take the thousand insults the political class throw at it and still come back in the black.
But my question for the anti tariff crowd on the news (not so much for the sensible people here, many who make quite cogent arguments, but for the baying crowds on CNN and the BBC) is, if you hate tariffs so much why are you not protesting just as vehemently in China and Europe and the UK over the huge tariffs they have? And if “tariffs are a tax” argument is so effective, why are you not arguing so vehemently for getting rid of taxes too? Especially that tax which is in many respects most analogous to tariffs, namely the corporate income tax, or in Europe the VAT?
Llamas, you can sneer as much as you like, but it’s evident to anyone with a rough understanding of trade and business that these tariffs were not reciprocal in any coherent sense. Using trade “imbalances” in the way Trump and his advisers gave done is bizarre. Several countries that have no tariffs have been hit. These are allies and friendly nations.
Protectionism has a poor history.
I can’t pretend to understand the illogic of many, but I’d argue that those of us who support things like low, flat taxes, limited, constitutional government, free trade, light regulation, etc, are seen as an eccentric minority. Most people seem to have a jumble of incoherent view about all this.
For instance, many of those raging about the Trump trade policy are happy to see high income tax, think our mixed economy is broadly a good thing; they think it’s fine to block imports of goods they think inferior (chlorinated chicken, GM crops), and don’t mind much about Brussels bureaucracy and centralising power. All if a sudden, some of the “Davos” are waking up to the arguments for free trade. Well, where have they been?
If selling more than you buy is such a terrible idea, why do most of the countries that run trade surpluses seem like pretty decent sorts of places to live then? And why do most of the sh*tholes run deficits?
I think the problem with tariffs is that for any given country they work, as long as everyone else doesn’t have them, or at least there’s enough that don’t. But they don’t work if everyone has them. And thus the existence of the huge US tariff free market has allowed many countries (and blocs) to have their cake and eat it. To protect their own producers while exporting into the open US market.
So I see Trumps tariffs as an ultimatum to the rest of the world – we can either have proper free trade, where every market is open, or we can have a series of closed shops, which will be bad for everyone, but probably worse for everyone else than for the US. What can’t continue is the half and half scenario we have now, with the US as the sole open market, and everyone else behind tariff (and non-tariff) barriers.
It’s not a binary solution set – “freedom or slavery.”
There’s a continuum between big government control and no government influence. The fact that you are further out on that continuum doesn’t render my position “incoherent”, any more than it renders yours “dogmatic and unrealistic.”
“We just disagree.” (Dave Mason, 1977.)
If you want to be libertarianish in a big-gov world, you need to carry a big stick, in order to beat off the power of the rest of the world that would like to use you as grazing territory.
Right now, Trump is a Big Stick, saying “go graze elsewhere.” We do not support him because we want huge government control. We support him because he’s our best shot to at least limit the control over us to our own government.
Again, Fortress USA. For a little while, at least, until relationships change.
@ PdH, and for that matter @ Johnathan Pearce – you are both parroting what one might call ‘the yearbook answer’. You hear the word ‘tariff’, and you thumb to the tab marked ‘tariff’ in the classical economics text, and you read off the yearbook answer. Tariffs are Bad!
And no doubt, within the parameters of the economic model, over time, if all other things are equal, and the dollar does this, and the yen does that, and the exchange rate does the other thing, tariffs are probably bad, overall.
But that’s not what we’re looking at here. The long term goal is low tariffs or no tariffs. President Trump has said as much – do you suggest he’s lying? But the route he’s chosen to get to low tariffs or no tariffs is the threat of high tariffs, a threat which he has followed through on, and which the US has the ability to sustain far-longer than anyone else does. And, indeed, it is already having the desired effect, as more and more nations line up to negotiate a new deal. Low tariffs or no tariffs – isn’t that what you wanted, what you said was best?
I’m not even talking about the possible collateral benefits. I read an article today claiming that the US tariff threat is already driving the effective price of Russian crude oil below $50 a barrel, which will have an immediate and real effect on their ability to prosecute the Ukraine war. Not silly-ass sanctions, or Biden’s stupid gestures – let’s confiscate their yachts! That’ll show ’em! – or promises of this-or-that weapon months or years in the future – a direct hit on the pocketbook, today.
Once again – It’s Not About The Tariffs. There are so many more variables at play than the relatively -crude models on which economic theory is based.
And – who’s going to answer the question that I and several others have now asked? Why are only Trump’s tariffs an economic disaster, while everybody else’s tariffs for decades past have been just fine and dandy? Why, it’s almost as if – It’s Not About The Tariffs. Fancy that . . . .
Dave Mason – there’s a name. From about 2000 to about 2015, he played our local performing arts center, 400 seats, every year. What a great show, and it never got old. I don’t think he tours anymore 🙁
llater,
llamas
Aren’t these 2 sides of the same coin?
Cheaper exports and more expensive imports
–> more exports and less imports
–> less foreign investment in the US and more US investment abroad.
Isn’t that the basics of international trade?
Mind you, i take no position on tariffs right now.
I have a wait+see attitude.
I’ll never say: I told you so; because i am not telling you so.
I remain a rabid Traffic fanboi. I’ll catch all of those old guys whenever I can until they or I die. 😉
https://www.google.com/amp/s/www.ndtv.com/world-news/extremely-turbulent-russian-oil-market-rattled-by-trump-tariff-fallout-8109931/amp/1
I can’t wait for the talking heads at CNN to patiently explain to a ignoramus like me how ‘real’ economic theory teaches us that lower oil prices which impoverish the warmonger Putin are actually a bad thing.
llater,
llamas
If I have a trade deficit with the local grocery store, it means nothing.
If I have a trade deficit with everybody – if my total expenses are more than my total income – I am going into debt, and will eventually be in serious trouble.
Paul Marks has it right. The dollars we spend on foreign goods return to us in exchange, not for real goods or services we produce, but for US Treasury bonds, adding to our liabilities and wasting our substance. And this can’t continue much longer – we’re very near the point at which the US economy flat out can’t pay the federal government’s debts. Tariffs may not be the best instrument to correct the real problem, but they’re a lot better than the US defaulting on its bonds, or hyperinflating the dollar to make them worthless.
llamas:
I can’t wait for the talking heads at CNN to patiently explain to a ignoramus like me how ‘real’ economic theory teaches us that lower oil prices which impoverish the warmonger Putin are actually a bad thing.
Falling oil prices are a consequence not of increased output via fracking (which I support) but because of a perceived fall in demand if or when the world, thanks to the tariffs, enters recession. It is a demand shock story, not one to do with superior supply coming along. There may be silver linings to the tariff shitshow, but they is not the main event.
So I am afraid there’s no cigar on offer for you on that one.
@ PdH, and for that matter @ Johnathan Pearce – you are both parroting what one might call ‘the yearbook answer’. You hear the word ‘tariff’, and you thumb to the tab marked ‘tariff’ in the classical economics text, and you read off the yearbook answer. Tariffs are Bad!
This is just argument from intimidation, or, to be blunter, just your being rude. I read the AER article, considered its reasoning, and I agreed with it. I am not “parroting” anything. Just knock it off with this approach.
The long term goal is low tariffs or no tariffs
That is what you may hope to be the case, but consider that Trump has argued for tariffs for decades. I think he likes them as ends in themselves, and he yearns for the post-Civil War era when they were the main revenue-raiser. As I have said several times, the US federal government was far smaller then, so tariffs did not need to be very onerous; there was no domestic federal income tax, other taxes were low, the economy was far less regulated, and there was no Fed. https://www.pbs.org/newshour/politics/trump-has-touted-gilded-age-tariffs-an-era-which-saw-industrial-growth-together-with-poverty
But a lot of Trump defenders seem to hope, in my view, that he does not mean what he says and that he will, all of a sudden like Superman, come out of the phone booth dressed and looking like Adam Smith or Milton Friedman, and all that has happened will be a bad dream.
People are weary of this circus.
Incisively put by Catherine Thorbecke, a columnist for Bloomberg who considers that China, given how it protects certain sectors, will win as the US commits self-harm over across-the-board protectionism:
The thinking that blanket tariffs, broadly implemented on allies and foes, will spur an advanced US manufacturing ecosystem are misguided. Trade levies won’t fill America’s gaping engineer or STEM talent shortages. They will eat revenue that could be used for research and development, and innovation. As prominent analyst Dan Ives wrote, “It would set the US tech world back a decade.”
It’s impossible for Silicon Valley to fight a trade war and a win a tech war at the same time. The stock market has just hammered Chinese tech firms. But as the dust settles, Washington should worry that the tariffs don’t hit Silicon Valley with a wrecking ball.
As someone with real respect for all the contributors above, it seems to me that there’s a certain amount of talking past each other (which may go some way to explaining llamas’ uncharacteristic tetchiness).
Maybe delineating the precise “war aims” might help?
Clovis, there is a level of tetchiness, from me as well.
Part of the problem is that I don’t see trade as a war. My inner Adam Smith recoils at it.
Another problem is that Trump quite clearly doesn’t understand trade, and takes a zero-sum view of commerce more generally. It is about winning and losing, not about expanding a pie. Yes, there are difficult problems in the US (nearly all of them home-built, such as very low savings rates that mean the country sucks in vast amounts of capital; poor K-12 education standards and a dearth of STEM graduates, technical and vocational-based people; a growing sense of learned helplessness in parts of the public). But they aren’t going to be fixed by crushing the Vietnamese textile trade, or makers of sneakers in Malaysia, or electronics workers in Tokyo. I cannot see folks from West Virginia, Ohio and the Upper Midwest sitting in front of sewing machines making shoes, somehow. More and more of these roles are going to be automated anyway, tariffs or not.
It is a pity that Trump is teetotal, because if he liked a drink he’d notice that single malt whisky is going to get a lot more expensive.
I think if I was American (I’m not, I’m from the UK) I’d be incredibly p*ssed off at being told that the US tariffs are bad, by people living in countries that impose significant tariff barriers themselves.
Basically if you live in a country that imposes tariffs you don’t get to criticise the US’s actions here. You should be criticising your own government’s actions over many decades. And if you can’t get your own government to change, you don’t get to criticise the US’s action either.
Protectionism has a poor history.
Indeed it does. Take, for example, the Smoot-Hawley Tariff Act of 1930. Its aim was wholly protectionist, aiming to protect American farmers and industries from foreign competition during the early stages of the Great Depression. Unfortunately but predictably, other countries responded by imposing their own tariffs on U.S. goods. Global trade dropped by roughly two-thirds between 1929 and 1934. That reduction hurt American exporters severely, especially in agriculture, as foreign markets shrank.
I’ve heard many commentators comparing Trump’s tariffs to Smoot-Hawley. I don’t think that comparison is just. The reason is that not all tariffs are the same. Or rather, they don’t all have the same reasoning behind them.
The tariffs on China, for example, aren’t so much protectionist as they are punitive, another rationale for tariffs. China has not been a good faith actor in trade relations, so we give them a great kick in the pants until they see the error of their ways.
A third reason for imposing a tariff is not economic, really, but political. It’s a form of retrophrenology. I could be the most ardent of free-traders. But if another country has imposed tariffs against me, it would not be inconsistent for me to impose swingeing tariffs on that country until they remove their tariffs on me. When they do I would happily remove my tariffs on them. My goal has been achieved; we now have free trade between us.
For instance, the Canadian tariff policy on US dairy imports has largely been captured by the Quebecoise dairy industry, an industry that’s nearly indistinguishable from the Mafia in its practices. Hence the nearly 350% import tariff. It is certainly protectionist on the Canadians’ part. If our goal is to convince PM Carney to stare down his own dairy producers and remove their tariff then we can apply a bit of persuasion in the form of our own tariffs on Canadian products and squeeze the Canucks until the pips squeak.
I suspect that the awareness, or the lack thereof, of the different motives may be behind the differences of opinion here.
@Jonathan Pearce
No, me neither. It is, or should be, a positive sum game.
But sometimes it is a war. To take one example (and risk being accused of historical illiteracy) China viewed the opium trade as war. It could be suggested that it (as well as the USA) views the fentanyl trade similarly.
From comments read elsewhere, it seems the UK’s ban on chlorine-washed chicken is viewed in much the same light by many in America (whereas most Brits regard it as a public health issue, rather like the USA’s ban of haggis).
What seems clear to me is that the current US administration regard the US’s budget as in crisis.
I think most readers here would agree.
This is why I suggested a consideration of war aims might be helpful.
If I was American, I would not be pissed off by people saying “don’t punch yourself in the face just because we punch ourselves in the face”… but that’s just me.
I’m an American and I’m not pissed off by that either. So it’s not just you.
“If I was American, I would not be pissed off by people saying “don’t punch yourself in the face just because we punch ourselves in the face”… but that’s just me.”
OK, so the EU imposing a tariff barrier around itself is punching itself in the face. But they’ve done it for decades, so they obviously think it has a value, otherwise they wouldn’t do it. Ergo Trump is right, the EU is gaining an advantage in trade by protecting its own producers while having free access to the US market. Their own actions prove his contention.
Those tariff-ing nations are in pretty bad shape economically, with low per-capita incomes. Even the ‘first world’ nations have low per-capita incomes compared to the US – somehow ‘despite’ tariffs being so good economically (according to the tariff supporters) and ‘despite’ the US having been a patsy with regard to not (until now) imposing high tariffs of its own.
So that tariff-ing hasn’t wrecked the world economy (yet) but it has done a number on the economies of those nations who indulged.
I refer you to the linked article which explains rather well that tariffs are a product of capture by vested interests, so yes, I am sure certain lobbyists in Brussels see great value in the EU imposing tariffs.
Well, that’s a relief. I thought for a minute I was actually going to have to go to CNN to hear why the fall in Russian oil prices was happening for the ‘wrong’ economic reasons, and is therefore not really important. But fortunately, I have Johnathan Pearce to do it for me, right here. Aren’t I the lucky one?
Tetchy? You betcha.
Look, just-about every single commenter here – including me – has, at one time or another, been completely, entirely, 100%-wrong about President Trump in the past – about domestic policy, about foreign policy, about economic policy. I’ve learned the hard way to sit back, shut up, and watch what he does – not what he says – and not to be surprised when the eventual outcome turms out to be a) not what I expected, or b) just like he predicted, or both. But here we go again, a 50/50 mixture of doctrinal purity and a sort of visceral dislike of Trump qua Trump, and all the same tired tropes come trotting out – oh, he’s an idiot, he’s ignorant, he doesn’t understand economics or foreign trade, he’s doesn’t know what he’s doing – But I Do! I’d suggest that anyone who thinks that a man who’s been President, or running for President, for a decade, is any of these things – well, draw your own conclusions.
I get the economic theory. As a simple student at the most-basic level of economics, I tend to agree that, on balance, in the long run, if all other things are equal, tariffs are, more often than not, a bad choice. I don’t like ’em.
But guess what? I don’t like shooting wars, or getting my teeth drilled, or the music of Gary Glitter, either. It’s just that I can understand and accept that, much as I dislike these things, sometimes, they are either a) necessary or b) the least-worst means to a desirable end, or both. And that’s how I see Trump’s tariff approach. Time will tell whether he is right or wrong. So far, it’s looking pretty good. I read this morning where his tariffs may be the death knell for Net Zero in Europe and beyond, so another check in the pkus column.
But one thing’s for sure. Clonel Blimp-like harrumphing about how he’s not doing the ‘right’ thing, according to ivory-tower economists who have never tried actual trade policy in their lives, doesn’t help a bit. And I console myself with the rwalization that at least we don’t have the senile idiot, or the congenital idiot, along with a Democrat Congress, driving the US even further into the poorhouse while studiously following the advice of all the ‘best’ economists. Think yourselves lucky that all you have to deal with is Trump.
Tetchily,
llamas
@llamas
In a decidedly Colonel Blimpish fashion, I really have to take issue with you on this one. It was never necessary and I challenge you to name the desirable end (unless it was the prison sentence, which I don’t think was imposed for the music).
And I was trying to be emollient when I used the t-word.
Ivory tower? The demonstrable historical impact of tariffs indicates it is the advocates of tariffs who are in their own special ivory tower divorced from reality. But hey, I’m sure it will be different this time because Trump & anyone a tad cynical on that score must have TDS, right?
The Biden idiots being wrong doesn’t therefore make Trump right. I actually think Trump is doing much that needs doing, but I fear his idiocies will discredit the manifestly good things.
Rich countries ( the US, Europe) import so much goods from poor countries (China, India, Vietnam, Laos etc.) not because of the “relative advantage” of the poor countries but because of their poverty. Rich countries have high taxes, a high level of social benefits (unemployment, retirement, high (minimum) wages), high environmental regulation, which result in a relative clean environment. The poor countries don’t have all these, therefore their production costs are much lower, therefore they export so much of their cheap products and import little of the expensive products from the rich countries.
These circumstances (high taxation, high regulation, high social spending) are not “natural” — not a product or part of a free economy.
These imbalances *and free trade* cannot continue infinitely.
The same with immigration. We are in favor of free movement of people, correct? But you can’t have free immigration and high social benefits at the same time.
Trump’s tariffs may be too disruptive. I would have adopted the approach of Pinochet (or his economic advisers) in Chile, adopted in the 1980’s and still in use: a uniform tariff of 10% on all imports, from all countries with no exceptions.
I think tariffs must be considered in the context of the very regulated and unfree economy, as it actually exists. Not only in the context of “pure” economic theory.
I have another probably-ignorant question about this.
If the dollar falls, then all USA assets get cheaper for foreign buyers.
Taking the long view – all this must pass, and the US will come back – isn’t this the optimal time for foreign investment in the USA?
You will never get a cheaper price on a factory or a build project than you will get when our currency is down.
FWIW, I am currently cursing @llamas’ name. I cannot get Gary Glitter’s “I’m the leader of the gang.” out of my head. Click the link at your own peril.
FWIW, I do not AT ALL agree with llamas on either Gary Glitter or his hostility to economists. I have often said that economists along with weathermen and climate scientists are an elite group of prognosticators that are almost always wrong and somehow never seem to lose their jobs.
However, I agree with Jonathan and Perry that on the matter of tariffs, economists have been proven correct many times. Tariffs are a bad thing, just as taxes are a bad thing. But I don’t think tariffs are worse than taxes. I suppose the justification for business taxes is that they fund the government which provides the economy in which those businesses flourish. So, in many respects I think foreign companies who also flourish due to the economy that same government provides are just as obliged to pay for it as domestic businesses. Of course, I think we should get rid of both, but it seems just asymmetric to yell about one and not the other. Except, I suppose, insofar as the tariffs are new.
But the breathtaking hypocrisy of the left screaming bloody murder that “tariffs are just taxes”, while at the same time demanding at every opportunity that we raise some tax or other, is hard to stomach. Of course I should say, this is not at all a sin of which Perry or Jonathan are guilty.
But I think that there is a lot of talking past each other here. These tariffs can be looked at in three ways: either their purpose is to fund the government in the same way corporate taxes do, second they can be looked at as a negotiation to reduce foreign tariffs and “level the playing field” — a phrase the left just loves in every case except Trumpian cases, or third as a deliberate punitive measure to offer some level of competitive advantage to local manufacturers especially with regards to national security. These are all very different things both in terms of how long they should last and how justifiable they are. So I think it is futile to argue about tariffs as a whole without distinguishing what they are being used for. If short term tariffs bring about a world of lower tariffs then that is surely a very good thing. As to what is going to happen? I really don’t know.
But I do know a lot of whiny lefties made a killing in the market today. I usually trade triple leveraged QQQ, which is up 35% in one day FFS. Unfortunately I was too scared to jump in yesterday, otherwise I wouldn’t be posting here, I’d be sitting on a tropical island, drinking margaritas listening to my Gary Glitter collection.
Fraser Orr: That was parody, right? Like Weird Al?
llamas: Well, that’s a relief. I thought for a minute I was actually going to have to go to CNN to hear why the fall in Russian oil prices was happening for the ‘wrong’ economic reasons, and is therefore not really important. But fortunately, I have Johnathan Pearce to do it for me, right here. Aren’t I the lucky one?
No need to be petulant as well as tetchy. You were rude about PDH and yours truly quoting a think tank’s arguments and saying that we were “parroting” received wisdom. Just show some class and accept that that was out of line. Move on.
As for oil, sure, if you are using emergency powers to impose tariffs by fiat, rather than via legislation (which is bad in itself), and it has the impact of reducing the prices of commodities such as oil, then sure, that is a collateral effect, just as if you drop bombs on a place it reduces the value of real estate prices in the area, and who knows, it might benefit someone eventually. I suppose that massively reducing commercial interactions can benefit someone, and that in turn might have an impact down the line you like.
There really is no end to the claims that folk are making that Donald Trump is a 4-D chess genius, cleverly engineering positive outcomes that the rest of us were too dullwitted to understand. Okaaaay. But today, I wake up to see that he’s paused tariffs and gone for a blanket 10% rate on everyone apart from China, and everyone knows that what’s caused yet another turn is the fear in the markets. The damage that these tariffs are doing is immense. Already, it is interrupting investment decisions and imposing costs. I suppose we can all look for silver linings here and there.
There will be other effects. For instance, such has been the belligerence of Trump and his cohorts, such as Vance, towards Europe etc that you can kiss goodbye to many European tourists taking their vacations in the US this year, or after that. So that means the beaches at Florida might be less crowded, and you wont have to queue so long to see Mickey Mouse. So much winning!
If llamas was rude – he wasn’t for standards here, but anyway – he was no more rude than that to which he was replying. As an argumentative technique, the Appeal to Pity is weak.
Bobby, give me a break. How would you appreciate it if I said you just “parroted” a line every time you left a comment here? I think you might start to get a bit, you know, tetchy.
And there is, I detect, a general sense from Trump defenders that his critics are just falling for conventional wisdom, or just not bright enough to “get” his cleverness, or shills, or whatever. I see it all the time.
You do see the irony in the tension between your two paragraphs, right?
We’re all being tetchy. But I still say, not rude.
Fraser, when the received wisdom re. Trump’s tariffs was “a negotiating tactic to eliminate tariffs”, I was not moved to say overmuch as there is at least some logic to that, albeit I was not convinced Trump’s approach was laser focused on “free trade” being the deliverable. Frankly, I was hoping to be proved wrong about Trump economically & re. Ukraine as I am very supportive of other things he is doing (DOGE).
But when those bizarre formulae were being waved around & he started talking about trade deficits as if they were a self-evidently bad thing, and then slapped tariffs on islands inhabited by penguins, safe to say I do fear the worst 😉
Once I’d stopped laughing I saw that ludicrously OTT graphic as yet another temporary distraction tactic while he applied much-needed pressure to the real economic target or targets as the EU also needs a sharp prod.
Maybe as an unashamed Trump (and Musk) fanboy I lap it all up too much and certainly it won’t always work but who else in the world is trying to turn the ship around? More to the point who else has even the faintest possibility of actually achieving it.
P.s. According to export data from the World Bank, the US imported $1.4m (£1m) of mainly “machinery and electrical” products from Heard Island and McDonald Islands in 2022.
They’re good those penguins
But I did not speak out, for I am not a penguin.
The penguins are the game-changer for me. I don’t even think the calamitous Smoot-Hawley tariffs of 1930 put the creatures in the cross-hairs.
Anyone familiar with Skipper, Rico, Private and Kowalski from the film Madagascar will be under no illusions as to their technical capabilities and resourcefulness.
@John
I can hear them saying “well this sucks”.
And so, here were are.
The biggest one-day percentage rise in all the major US indices for 25 years. Sure, from an artificially-created low. But still a true statement.
US tariffs paused on about-all major economies, with a 90-day grace period and the stated goal of an across-the-board 10% tariff regime.
Except China. A nation with a 6-to-1 trade imbalance with the US has now gotten itself into a tit-for-tat tariff war with the US, with a great part of their exports being things the US can perfectly-well get along without. Amazon and Temu and AliBaba hardest hit. Oh dear, how sad, never mind.
Yeah, that Trump, he’s an idiot, doesn’t know anything about ‘proper’ economics or trade, he’s a fool, he’s ignorant, it’ll all end in worldwide recession and people starving in the streets.
I have to admit that I was – once again – very wrong about Trump. I didn’t think for a minute that things would move this quickly – I thought it woukd take weeks to distill down to what Trump has been saying all along – it’s China we’re after. And yet – here we are. I was wrong. Again. Oh, well . . .
llater,
llamas
I watched the odious Chris Matthews last night, crying into his latte about how the tariffs would be the end of lumber imports from Canada, and where would we get our 2×4’s from now? What are we going to do – make more wood in America?
And even from where I sit, I could hear the vast chorus of laid-off forest workers and lumber-mill workers and log-truck drivers and all the other million-and-one people put back on their heels by ridiculous, useless Federal regulation that killed the US forest-products industry, all in unison – Yes! The US has more forested land today than in all of human memory. Why not, FGS?
Stupid, ignorant, elitist pricks like that just make more Trump voters. I think that some enterprising PAC should play that quip on a loop on every TV station in the Pacific Northwest for a week or two.
llater,
llamas
@llamas
What are we going to do – make more wood in America?
Yeah, I heard about that, it really is a perfect illustration of how stupid some of these people are. However, it is not going to be easy to take them down. After all, we no doubt hear about the apocalypse of dead greater spotted owls. Much better to export that sort of owl genocide to foreign countries than have it happen in our country.
In northern Los Angeles after the devastating fire that destroyed tens of thousands of homes they have allowed something in the order of a dozen permits to rebuild. These people are so self loathing that can’t even bring themselves to rebuild their homes. I did wonder where all the lumber would come from for that, but apparently they just aren’t going to build. (Though I did read a story about how they have to cut down vast amounts of Brazilian rain forest to build a road to the latest COP30 global warming conference. So maybe we can get our lumber there?)
FWIW, for our British viewers it might be worth pointing out that American homes are built out of wood frames rather than bricks as the Brits tend to do. Which makes sense given that we are plagued by wild fires, tornadoes, hurricanes and earthquakes, whereas your British houses have to suffer the horrors of “a light rain”. It is something I never fully understood about American building codes.
Oh no, that isn’t self-loathing. The property owners want to rebuild their homes, but the municipal government of LA is staffed by misanthropes who want the land to return to wilderness, as a sacrifice to Shub-Niggurath.
Well, fell more wood. Which would generally be a very good thing for forestry management. Currently you have far too little management which causes massive fires and doesn’t help most of the wildlife either.
LA / California’s aim will be expropriate that land to build “low income housing” which is a fantastic source for graft. Particularly the land around Pacific Palisades. Anything that burnt down on the coast, unless you’re a truly heroic Democrat donor, won’t see anything built on it for years, if at all, because it will be perma-blocked by the coastal commission.
Clovis Sangrail wrote;
‘ . . far too little management which causes massive fires . . .’
Well, yes – and no. Fire in lumber plantations and managed forests scheduled for harvest and replanting is very bad. Fire in forests not intended for lumber production is often an essential requirement for sustaining and growing the forest. Many coniferous species, especially in the Rockies and the Pacific Northwest, absolutely require regular fires to spread seeds and clear brush for efficient propagation of new seedlings. This lesson was learned the hard way in the 50s and 60s, when USFS policies of rigid and immediate fire suppression led to huge degradations in undeveloped forest lands. Unfortunately, the same ecology does not apply to the Congress.
llater,
llamas
llater,
llamas
@llamas Yes. My comment was insufficiently focused. Indeed, in Australia, some eucalyptus species cannot germinate without being exposed to fire.
It’s that Australian situation which I understand better. You need management, including controlled burns to stop the build-up of dangerous levels of fallen wood which produce devastating and uncontrollable fires. Have a cousin there, who’s a fireman in a rural setting, who tells me the greenies, who object to clearance and controlled burns, are the ones who kill.
If a trade deficit is “paid for” by creating “money” from nothing – then it is causing harm. Violating the old rule that imports should, at least eventually, be paid for by exports.
If people use Real Savings – the actual sacrifice of consumption (of cash money – some commodity, gold-silver-or-some-other-commodity that people choose to value before-and-apart-from its use as money) to import raw materials and capital goods – then a temporary trade deficit may be a GOOD thing.
But if people are funding CONSUMPTION imports and are doing so by the regime (the government and the banks) creating “money” from nothing – then a trade deficit is a BAD thing – and towns and cities (indeed the whole nation) will, eventually, get “hollowed out” and will collapse.
The post, article, and much of the comment discussion, ignores the above facts – and is, therefore, useless.
Pretending that the present situation is the “Free Trade” that Adam Smith or A.L. Perry or Ludwig Von Mises (and the other great economists) supported is dishonest – incredibly dishonest.
None of the great Free Trade economists supported creating endless “money” from NOTHING – and using it to try and finance endless Consumption imports.
@llamas
Indeed. My comment was overbroad. Some eucalypts in Oz, for example, have seeds which do not germinate unless exposed to fire.
Controlled burns are often the only way to deal with a build-up of fallen timber which will otherwise lead to catastrophic fires later (as happened in Oz).
One thing that perhaps the tariff advocates haven’t thought about much is smuggling. It’s going to be a massive problem. Let’s assume there is, for example, a significant difference in the price paid for a new iPhone or Android in Canada and Mexico and one in the US? What does the Trump administration think is going to happen? Presumably, they will need to hire tens of thousands of customs officials to search trucks, aircraft, cars and individuals who might be guilty of smuggling such gizmos into the US.
And who is going to benefit? Criminal gangs, and bent public officials. Sounds familiar?
Paul Marks: If a trade deficit is “paid for” by creating “money” from nothing – then it is causing harm. Violating the old rule that imports should, at least eventually, be paid for by exports.
If Trump and his circle had consistent understandings of economics, that would encourage them to support hard money, and an end to the Cantillon Effect machine. But Trump has never met an interest rate cut he does not like. I have no idea of what influences him, but is he aware of the sort of ideas that affect your thinking, Paul? Because I very much doubt it. But this is a crucial aspect of the topic.