Tariffs Catch-All

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Trump contradicts aides, talking points on purpose of global tariffs​

Investors and global leaders have been trying to understand the purpose of sprawling new import duties.


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President Donald Trump on Thursday contradicted his top aides on the purpose of his sprawling new global tariff regime, adding to the uncertainty over the trade war that has sent markets reeling.

Earlier in the day, top Trump aide Peter Navarro and Commerce Secretary Howard Lutnick said the president was not looking to strike deals over the tariffs. “This is not a negotiation,” Navarro told CNBC.

White House officials also circulated internal talking points telling surrogates that the tariffs should not be characterized as a starting point for negotiations, according to three people with knowledge of the matter who spoke on the condition of anonymity to describe internal matters.

But after markets closed down sharply, Trump told reporters on Air Force One that he would be open to striking deals with individual countries.

“Every country is calling us. That’s the beauty of what we do,” Trump said. “We put ourselves in the driver’s seat. If we would have asked these countries to do us a favor, they would have said no. Now they will do anything for us.”

Trump added: “The tariffs give us great power to negotiate. They always have.” …”
 
BlueSmoke said:
Ah.........a sign that Trump is rattled a bit by changing his tune and affecting tomorrow's stock market. Now who would have seen that one coming?
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Exactly. He got through today, but Trump can’t stand strong for long if the stock market is declining and rich people are unhappy.

If I was a foreign nation, I’d hold the line, Trump will cave and be willing to announce a bogus deal that allows him to claim victory even though nothing changes.
 
1moretimeagain said:
Exactly. He got through today, but Trump can’t stand strong for long if the stock market is declining and rich people are unhappy.

If I was a foreign nation, I’d hold the line, Trump will cave and be willing to announce a bogus deal that allows him to claim victory even though nothing changes.
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That’s pretty much the best we can hope for now.
 
superrific said:
Well, Suro is wrong in the specifics, so I'm hoping that he's ready to back down a little bit. In the main, he's correct -- the tariff calculations are ridiculous for a number of reasons in theory and at least one specific way empirically (i.e. the data does not exist). But that formula is not actually Trade Balance/Exports. It's more complicated. The formula also contained two greek letters, call them e and p, and those represent elasticity and pass-through of implemented tariffs. When you include those, it's actually a plausible model for the concept.

1. If you're trying to compute "what tariff is necessary to zero out the trade balance," and you are going to completely ignore exports, then you could get the job done without too much complexity by multiplying a) volume of imports, b) the amount that prices will go up in response to the tariff, c) the amount that imports will decline in response to the tariffs. And that's exactly the denominator in that silly equation, although they messed up in a couple of ways. The elasticity is itself a function of price level (and not just tariff), and pass through has to be a function of market concentration, but anyway.

Now, why did they divide that into the trade balance? I have no idea. I suspect it was a fudge to get the numbers higher. Trade balance/exports should always be less than 1 (I think) under realistic conditions, so it must have been used to get the numbers down. Like, the model probably spit out numbers in excess of 100%, and even Trump realizes that strains credulity.

2. The bigger problem is that it's conceptual nonsense. First, the US doesn't know what e or p is (in the equation above) so it's just making shit up. Second, there's no attempt to model the effects of doing all the tariffs at once (because it will produce way different results if you're tariffing everyone or only one). Third, zeroing the trade balance is not a desirable goal and doesn't even make sense. Fourth, there's no attempt to inquire what would happen to exports (which can't be held constant because they are specifically dependent on imports). So it's a load of bullshit.

3. But just FYI to avoid misinformation, I think Suro is wrong in his description of that formula. He's right that the numbers make no sense at all. The conservatives are going to jump on him about the technicality. If you discuss this with someone, you can now say that you've had the formula explained and it doesn't make any sense even if it's not technically what Suro described.
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Apparently Kevin from the Office is in charge of the economy.
 
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