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Effects of Tariffs on U.S. Economy Pile Up
269 sats \ 9 comments \ @0xbitcoiner 12 Mar econ
I don’t really get much of these macroeconomic dynamics, so I gotta ask—will the $229B–263B in tariffs by 2025 really make up for all the negatives? Besides the expected revenue, what other positives come from implementing the Trump tariffs?
Tariff actions currently in effect and announced by the Trump administration could lower U.S. GDP by up to 0.65 percent, a report by The Tax Foundation has found. This includes new tariffs on China, currently (partly) paused tariffs on Canada and Mexico and tariffs on global imports of steel and aluminium that went into effect today. Also part of the calculation are tariffs on EU goods of 25 percent, announced February 26, and those of the same percentage share on motor vehicles and their parts, scheduled for April 2. All these tariff actions combined could also lower U.S. full-time employment by 370,000.
For comparison, The Tax Foundation estimates that 2018-2019 trade war tariffs, mostly with China, lowered U.S. GDP by just 0.25 percent and cost around 170,000 full-time jobs (including retaliatory action). The report estimates that tariffs would also lower U.S. after-tax incomes by 1.7-2.2 percent as well as increase costs for consumers. The Chinese trade war tariffs raised in 2018-2019 and those that stayed in place in the following years under the two countries' agreement already equaled an additional tax on the average American household by $300-$600 in 2023 depending on the calculation, the report says.
On the other side of the equation stands an increase of government income of between $229-263 billion from tariffs in 2025 (and slightly more each year after that if they stayed in place). However, compared to all of government revenue, this number would still be in the single digit percent share of the budget. Tax Foundation researchers also point out that historically
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100 sats \ 4 replies \ @Undisciplined 12 Mar
Will they? Who knows
How might they? The US is such a large consumer of global goods that tariffs drive down the global price of imported goods. That means foreign countries end up paying a significant share of the tariff revenue, rather than US consumers. The reduced foreign competition then makes US producers more profitable, which leads to greater economic growth.
The big assumption buried in there is that the revenue isn't put to counterproductive uses by the government, which it likely will be.
The other way they might help is if other, more destructive taxes, are reduced accordingly. Tariffs are bad, but they aren't as bad as most of the other taxes we pay.
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34 sats \ 3 replies \ @0xbitcoiner OP 12 Mar
The US is such a large consumer of global goods that tariffs drive down the global price of imported goods. That means foreign countries end up paying a significant share of the tariff revenue, rather than US consumers.
Can you explain this part better? I’m not getting it. Thanks!
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110 sats \ 2 replies \ @Undisciplined 12 Mar
This is just a couple of generic tax incidence graphs
Tariffs introduce a spread between what the consumer pays and what the producer receives. That spread reduces the amount consumers are willing to buy and the amount producers are willing to sell. Fewer units sold means lower prices received for producers.
Small countries are more like the graph on the right. They don't consume enough for the reduced quantity to have much effect on global prices, which means most of the tariff will be paid by the consumers.
The US is more like the graph on the left. It's such a large share of global consumption that the reduction in sales significantly reduces the global price that producers can sell at.
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28 sats \ 1 reply \ @0xbitcoiner OP 12 Mar
Looks like the big question mark is how supply and demand are gonna shake out!
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32 sats \ 0 replies \ @Undisciplined 12 Mar
Yes, we'll learn a lot about the shapes of these curves.
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36 sats \ 0 replies \ @kepford 12 Mar
The more I learn about tariffs the less confident I know what will happen. Its both theft and bad as well as not equally bad for everyone involved. My sense is that MOST of the people talking about tariffs don't know what they are talking about. This includes me. Its rather complex. I don't think the tariffs action is as bad as some think it is... but its likely much worse than others think it is.
Trump isn't coming up with all this, I don't believe that at least. I believe he has some sharp econ guys (I probably don't agree with their views) working for him. I'm not saying they are right but I don't think they are dumb.
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30 sats \ 2 replies \ @justin_shocknet 12 Mar
Every globalist financial engineer has all media assets deployed to FUD the tariffs, so you know they're a good thing for the US.
First men are women, war is peace, and now countries actually producing things they consume where they consume is bad for... GDP? the d p literally is domestic product.
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0 sats \ 1 reply \ @0xbitcoiner OP 12 Mar
A contrarian is often correct! I don't fully understand these macroeconomic dynamics, and there's a lot of contradictory information, so I'm asking. Perhaps it will help increase domestic production, but this takes years to take effect. In the meantime, I think the consumer is the one who pays the bill!
@remindme in 2 years
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17 sats \ 0 replies \ @justin_shocknet 12 Mar
In the meantime, I think the consumer is the one who pays the bill!
No because even if the US never starts producing more of the thing that was tariff'd then the exporting countries currency gets hurt. Domestic producers can charge higher prices and those dollars stay within the domestic economy as opposed to subsidizing a foreign currency. Americans purchasing power gets increased overall and demand for the dollar brings down interest expenses.
The Canadian peso is first in the kill box, they will become a state after losing the currency war.
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