Trump still hasn't figured out tariffs are a tax on consumers — Announces blanket tariffs on Mexico, Canada and China

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nycfan said:
WSJ:

What Trump’s New Tariff Threats Mean for the U.S. Economy​

If president-elect follows through, consumers and businesses are likely to see prices rise on everything from fresh fruit to electronics​



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“… The tariff threat upends the forecasts of many economists who have been assuming that the duties Trump will impose wouldn’t be nearly as high as what he pledged on the campaign trail.

… On Tuesday, economists at the Budget Lab at Yale reworked their estimates of how tariffs under Trump might affect the economy.

Tariffs of 25% on Canada and Mexico, and 10 percentage points added to existing tariffs on China, with those countries imposing retaliatory tariffs, would raise U.S. consumer prices by 0.75% next year, according to the Budget Lab. That estimate drops to 0.65% if households substitute purchases toward domestically produced or lower-tariff imported options. That would amount to more than $1000 in lost purchasing power per household, in 2023 dollars.

If the tariffs against Chinese goods were layered on top of the 60% Trump has already threatened, versus existing tariffs, the estimated inflationary effect would be higher. Beyond raising the prices that Americans pay for goods, higher inflation could lead the Federal Reserve to cut interest rates less than expected in the year ahead. That would keep rates on credit card balances and other loans higher than they otherwise might have been. …”
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"Only Dem economists, legacy media and this board are freaking out about Trump’s tariffs."

Yes, that well-known left-wing Murdoch rag, The Wall Street Journal, is also deeply concerned about the impact of possible sharp hikes in tariff rates.
 
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“… Tariffs can create winners and losers. Domestic industries that compete with lower-cost foreign manufacturers can experience greater demand for their products, while the government takes in additional revenues.

But consumers and other purchasers of imported goods aren’t able to buy as much, and both economic theory and the historical record show that they tend to lose more than the winners gain. Moreover, when a country imposes tariffs against another country, the other country often responds with tariffs of its own. Mexican President Claudia Sheinbaum on Tuesday said that Mexico would retaliate if Trump carries out his threats.

That said, the economic benefits of trade don’t fall across the country equally, and Trump’s successful 2016 and 2024 campaigns tapped into the frustrations of Americans who felt they were at the losing end of trade with China, in particular. President Biden sharply raised tariffs on electric vehicles and an array of other products from China.

… American consumers will feel price increases not only after the tariffs are imposed but also in the run up, as stores and businesses rush to preorder nonperishable goods, said Kimberly Clausing, an economist at UCLA School of Law. Lumber from Canada is an example of how that would play out.

“If I were a lumber yard, I’d be placing big orders today. Those extra orders will drive up prices,” said Clausing. Among the ripple effects of lumber prices will be high bills for American households planning home renovations.

…
Precisely how tariffs affect consumer prices could vary, economists say. On the one hand, both U.S. businesses and the importers they purchase from might absorb some tariff costs. On the other, there could be a ripple effect, as competing suppliers outside of Canada, Mexico and China take advantage of the opportunity to raise prices.

The Peterson Institute for International Economics, a think tank in Washington, D.C., estimates that under Trump’s new possible tariffs, prices would rise by 1%. It additionally estimates that by 2026 gross domestic product would be 0.6% lower than it otherwise would have been, and that total U.S. employment would be 1% lower.

…
Border communities like Laredo, Texas, could see its unemployment rate soar to the double digits, says Marcus Noland, a senior fellow at the Peterson Institute. “That’s where the trucks cross the border. If the jobs are to intermediate trade and there’s no trade, they are going to be out of work,” he said.

Employment in agriculture would be hard hit, too, according to the analysis, coming in 3.1% below where it would have otherwise been. Employment in durable manufacturing—the building of cars and other long-lasting goods—would be 5.4% lower. …”
 
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“… Tariffs of 25% on imports from Mexico and Canada could add $3,000 on average to the price of a car, according to analysts at Wolfe Research.

The firm estimates that about $97 billion worth of auto parts are imported to the U.S. from the two countries each year, and four million vehicles are shipped in—about three million from Mexico and one million from Canada.

Added costs from the potential levies also would hammer the bottom lines of General Motors, Ford Motor and Jeep-maker Stellantis, which all produce vehicles south of the border and rely on parts shipments from there.

ISI estimates a 50% reduction in earnings per share for GM and Stellantis, and 25% for Ford. Shares of all three companies fell on Tuesday, with GM’s stock shedding about 9%.

The National Retail Federation said the timing of the proposed tariffs in January would have an outsize impact on fresh fruits and vegetables, of which the U.S. sources less at that time.

U.S. importers will pay 25% more on $10 billion worth of Mexican avocados, tomatoes, raspberries, strawberries and peppers alone; and a 25% tax on $10 billion worth of Mexican beer, tequila and mescal imports, said David French, senior vice president for government relations at the industry group….”
 
Ramrouser said:
Only Dem economists, legacy media and this board are freaking out about Trump’s tariffs. The market was up about 125 pts today.

Oh and Trudeau called our Leader today to pledge his country’s cooperation on a number of issues.
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I’m not freaking out. I am just giving facts.

The market went up because it believes Trump’s pick for Treasury Secretary will STOP TRUMP from implementing his stupid tariff ideas.
Hopefully that is correct.
So again, if everyone suspects (as you do) that these are just empty threats, then the stupid tariff talk will yield no benefits, while in the meantime homeowners pay more for mortgages while they wait (possibly for many more months), for rates to come down.

Like I said, so far all Trump has done is hurt Americans economically. The stock market went up after fears of Trump ruining an already good economy were abated (note: however, read nycfan’s post above about how Trump is hurting American car companies’ stock). And you think that is worthy of praise.

(Edit: also the market went up with news of a possible Israel/Hezbollah ceasefire).
 
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nycfan said:
Border communities like Laredo, Texas, could see its unemployment rate soar to the double digits, says Marcus Noland, a senior fellow at the Peterson Institute. “That’s where the trucks cross the border. If the jobs are to intermediate trade and there’s no trade, they are going to be out of work,” he said.
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If I remember correctly one of the Latino areas where Trump made big gains in this election was along the Texas/Mexico border. I wonder how those folks will feel when Trump's tariffs start causing them to lose their jobs.
 
nycfan said:
The Peterson Institute for International Economics, a think tank in Washington, D.C., estimates that under Trump’s new possible tariffs, prices would rise by 1%. It additionally estimates that by 2026 gross domestic product would be 0.6% lower than it otherwise would have been, and that total U.S. employment would be 1% lower.
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I don't like to second-guess models without having one myself (or being able to point to one), but I gotta say, that 1% estimate seems way too small. Maybe they were only modeling the 25% on Mexico and Canada, without the 10% across the board Trump has previously talked about?

Maybe they were just putting a surcharge on foreign goods and estimating how much total impact that would have on the economy as a whole, after making some adjustments for elasticity. Did they model what can often be the more pernicious effects of tariffs, which is to reduce competition in the domestic market and allow domestic producers to increase prices. There is absolutely no question that if LG and Bosch are subject to 10% tariffs, then American dishwasher makers would hike their prices by a fair amount. Maybe not the full 10% but more than 5%, I would guess.

Remember: the whole point of tariffs is to increase profits of domestic industry by insulating them from foreign competition. Maybe that is incorporated into the modeling, but I doubt it. Not if it only gets to 1%.
 
Trying to get the girlfriend in a new vehicle before Trump's stupid tariffs idea likely causes prices to increase significantly.

I was thinking (yeah, that's dangerous) the other day - What's going to stop companies from just jacking up prices for anything and everything and blaming it on tariffs? We've already seen what they've done the last few years with "needed" price hikes and tariffs gives them another excuse to raise prices, even if doesn't affect them.
 
milom98 said:
Trying to get the girlfriend in a new vehicle before Trump's stupid tariffs idea likely causes prices to increase significantly.

I was thinking (yeah, that's dangerous) the other day - What's going to stop companies from just jacking up prices for anything and everything and blaming it on tariffs? We've already seen what they've done the last few years with "needed" price hikes and tariffs gives them another excuse to raise prices, even if doesn't affect them.
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My thoughts as well. Just like the covid supply hiccups were and still are the rationale for price infltion. Handwringing in the age of record corporate profits.
 
milom98 said:
Trying to get the girlfriend in a new vehicle before Trump's stupid tariffs idea likely causes prices to increase significantly.

I was thinking (yeah, that's dangerous) the other day - What's going to stop companies from just jacking up prices for anything and everything and blaming it on tariffs? We've already seen what they've done the last few years with "needed" price hikes and tariffs gives them another excuse to raise prices, even if doesn't affect them.
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You're underselling the problem. It's not that we can't stop companies from raising prices. Rather, higher prices are the intended result of tariffs. If they aren't generating more profits for domestic industry, then they won't create higher wages or spur domestic investment (both of which are dubious results, but that's what the tariff folks claim will happen).

The evidence of the effects of tariffs -- which is extensive, as tariffs are one of the most empirically studied issues in all of economics -- unambiguously shows that tariffs lead to higher prices and lower quality from domestic manufacturers. Which is, again, what you'd expect. Maybe Trump thinks that he wants to go back to the 1970s auto industry, but then we'd all be driving shit cars. It was foreign competition that forced the Big Three to wake up.
 
nycfan said:
We’re talking about a guy who has developed an “economic policy” of tariffs on everything will eliminate the budget deficit and allow him to virtually eliminate income taxes, so, no, he doesn’t get it at all OR he gets it but doesn’t care because his supporters don’t get it.
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I'll take door #2, Monty.
Tariffs can be dangerous. They contributed to the Great Depression. They are a restraint on foreign trade and the free market system. IOW, they are anti-capitalist. Adam Smith is rolling in his grave right now.
 
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I’m pretty sure the reason for the tariffs is because Trump knows he has to do something dramatic.
He can’t claim he fixed everything and the economy is great because of him if he doesn’t do anything.
He’ll create some unhelpful tariffs (and tax cuts) like he did with the soybeans that will hurt Americans, but it will give his acolytes something to point to as the reason their lives are better, as we slink into the next recession (that is most likely coming regardless of what Trump does).
 
ChileG said:
I’m pretty sure the reason for the tariffs is because Trump knows he has to do something dramatic.
He can’t claim he fixed everything and the economy is great because of him if he doesn’t do anything.
He’ll create some unhelpful tariffs (and tax cuts) like he did with the soybeans that will hurt Americans, but it will give his acolytes something to point to as the reason their lives are better, as we slink into the next recession (that is most likely coming regardless of what Trump does).
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I'm not sure recessions exist any more, outside of exogenous shocks like financial crises, pandemics or . . . tariffs.

Like, if Trump does nothing, the economy will probably do just fine. But he wants to fuck it all up. I know it sucks and I don't like to wish hardship on anyone, but we also need MAGA to go down in flames. The tariffs will hopefully do that.

I don't think it's going to be such a light touch this time. China is already preparing "supply chain warfare." Just read an article about it. They aren't going to retaliate with tariffs. They are going to retaliate by withholding from us the things we need to make the products we sell.
 
superrific said:
I'm not sure recessions exist any more, outside of exogenous shocks like financial crises, pandemics or . . . tariffs.

Like, if Trump does nothing, the economy will probably do just fine. But he wants to fuck it all up. I know it sucks and I don't like to wish hardship on anyone, but we also need MAGA to go down in flames. The tariffs will hopefully do that.

I don't think it's going to be such a light touch this time. China is already preparing "supply chain warfare." Just read an article about it. They aren't going to retaliate with tariffs. They are going to retaliate by withholding from us the things we need to make the products we sell.
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You could be right about the recessions.
 
superrific said:
I'm not sure recessions exist any more, outside of exogenous shocks like financial crises, pandemics or . . . tariffs.

Like, if Trump does nothing, the economy will probably do just fine. But he wants to fuck it all up. I know it sucks and I don't like to wish hardship on anyone, but we also need MAGA to go down in flames. The tariffs will hopefully do that.

I don't think it's going to be such a light touch this time. China is already preparing "supply chain warfare." Just read an article about it. They aren't going to retaliate with tariffs. They are going to retaliate by withholding from us the things we need to make the products we sell.
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How could that hurt? They only control about 85% of rare earth production along with a few other things like that that we would scarcely miss.
 
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