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161 sats \ 18 replies \ @Undisciplined OP 15 Mar \ parent \ on: Trump’s False Tariff “Fairness” Argument econ
Fair, but also Trump isn't the one making them manage their currencies so stupidly that no one wants to use it.
With the dollar currently being the world's reference currency, Americans never lose the game. In fact, it looks like a debt pit is filling up and everyone is in it. This government only seems to want to free Americans from responsibility before the shit overflows.
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We never lose the game, until the end when all the chickens come home to roost.
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Wrong. China has won the trade war.
China is already and will increasingly denominate trade in Yuan, not USD.
Iran and Russia already sell their oil and gas to China outside of the USD SWIFT hegemony.
USD/USA has maybe 5 years, before collapse and Trump knows it.
Tariffs are a crude but effective but effective means of staving off US insolvency/collapse.
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How do Tariffs solve US collapse?
They don't increase revenue to the treasury (not really) or not much
They increase costs on US consumers
They result in 'reciprocal tariffs' on the United States from other countries
They encourage other countries to 'sidestep' the dollar and US completely... employing alternatives that can't be 'turned off'
Tariffs encourage other countries to trade with each other more and the United States less. Resulting in fewer dollars held by the "trading partners"
And most importantly, the US 'exports' dollars through a trade surplus, maintaining the dollar as the 'reserve currency.'
Other countries take the dollars and 'buy our bonds' keeping interest rates low.
If the US stops 'exporting dollars' (which the tariffs are designed to do) all of that stops.
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Did I say they solve US collapse? No I did not.
They do however probably stave it off- ie delay the day of reckoning.
They do provide significant short term revenue- tariffs of 20-25% on imports from your three largest trade partners is a substantial revenue grab.
Yes they increase cost to consumers thus reducing consumption especially of imported goods thus reducing the trade deficit and thus the need to increase debt.
They prop up uncompetitive US businesses in the short term increasing or preserving domestic production.
They recognise that for too long the US has consumed more than it produces and that has resulted in unsustainable debt.
They stave off insolvency.
China and other major buyers of US Treasuries like Saudi Arabia are moving away from them and instead investing in gold and productive infrastructure.
China already conducts major trade in oil and gas with Iran and Russia with its own alternative trade payment settlement protocols outside of USD/SWIFT so yes Trumps tariffs will probably counter productively accelerate this trend away from USD denominated trade.
Trumps tariffs attempt to address the woeful state of US competitiveness and decades of chronic trade deficits- but it is unlikely what he is doing will reverse the decline- just perhaps delay the consequences- collapse of the USD/empire.
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"They do provide significant short term revenue- tariffs of 20-25% on imports from your three largest trade partners is a substantial revenue grab."
This is what I found:
"Two separate tariffs – a 25 percent tariff on imports from Canada (except for some Canadian energy and resource imports that will be tariffed at 10 percent) and a 25 percent tariff on imports from Mexico – have been put on hold until March. We estimate these additional tariffs on imports from Canada and Mexico would increase revenue by about $110 billion over the rest of Calendar Year (CY) 2025 if they are allowed to go into effect. If made permanent, we estimate they would raise $1.3 trillion through Fiscal Year (FY) 2035 on a conventional basis. Accounting for economic effects, we estimate the combined tariffs (both the enacted and delayed) would raise $1.3 trillion through 2035.
So in other words, 130 billion per year on average... for 1.3 trillion over 10 years.
https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/
"In fiscal year (FY) 2024, the government spent $6.75 trillion, which was more than it collected (revenue), resulting in a deficit."
130 billion / 6.75 trillion is .019 or... 1.9%. So it offsets less than 2% of federal spending.
"Yes they increase cost to consumers thus reducing consumption especially of imported goods thus reducing the trade deficit and thus the need to increase debt."
My understanding is that tariffs... have a 'negative' effect on US debt namely because they reduce foreign investment in the United States and number of 'overseas' bond holders.
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"The $918.4 billion deficit reflects an equal $918.4 billion capital surplus. In other words, foreigners are buying $918.4 billion more in U.S. assets—such as stocks, bonds and real estate—than U.S. citizens are buying in foreign assets. This demand for U.S. assets boosted the value of American stocks and bonds and helped fund the country’s growing budget deficit.
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"A simple example shows the relationship between trade and capital flows. Suppose an American buys a $40,000 Toyota made in Japan. Toyota has three options for what to do with these dollars. It can buy $40,000 worth of U.S. goods or services, in which case there would be no trade deficit. Or, because it expects the American economy to grow, it can invest $40,000 in U.S. capital—say, the S&P 500 index, U.S. government bonds or American real estate. It can also temporarily invest the funds in short-term, interest-bearing assets such as Treasury bills, commercial paper or bank deposits that enhance the lending capabilities of American financial institutions and fund short-term corporate borrowing needs."
In other words, a trade deficit is a 'capital surplus' and the US can export capital around the world and sell it... increasing the demand for US bonds stocks and real estate.
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For the most part, they are allowed to try that, right? And, most large economies are able to transact in whatever currency they want.
It does seem different, since America has no mechanism for setting other nations' tax and regulatory policies.
That said, I think fairness is pretty dumb in situations like this. The relevant criteria is what's best for people. Just because other countries are doing dumb stuff to their economies, doesn't mean we should follow suit.
America overall pays more for imports and this pushes the allocation of capital to inherently inefficient US based manufacturing.
America loses overall with increased costs and mis-allocation of capital on a massive scale.
The US government enjoys a windfall of revenue, paid for by consumers and businesses who pay more for the goods and services they want or need.
USA becomes less competitive as other nations are not hit by these additional costs and large scale mis-allocation of capital.
This is Trump admitting that USA has lost the trade war and so he wants to rig the game.
It might buy time but its not going to fix the underlying problem.
US economy and empire is corrupt, inefficient, obese, burdened by too many rentseeking clingons and so in structural decline.
Global fiat monetary hegemony created an addict that is beyond recovery.
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