Some Feedback Regarding Trump's Tax/Tariffs

First, The Financial Times:

Trade economists have poured scorn on the crude methodology used by Donald Trump to calculate the list of “reciprocal” global tariffs imposed by his administration. 

Under the US president’s plan set out on Wednesday night, a baseline tariff of 10 per cent will be levied on all imports from all countries excluding Canada and Mexico, while countries with larger trade deficits with the US were hit with much higher numbers. 

The formula used to calculate the tariffs, released by the US trade representative, took the US’s trade deficit in goods with each country as a proxy for alleged unfair practices, then divided it by the amount of goods imported into the US from that country.

That last part is what doesn't make sense to actual economist, the article goes on to say.

Then there's The Wall Street Journal:

Capital Economics estimated that the import taxes outlined by President Trump Wednesday afternoon are likely to annually generate about that much in customs duties.

The tariffs will raise a maximum of $835 billion, the firm's economists calculate. But “assuming such high tariffs lead to a marked decline in imports, the increase in revenues will probably end up closer to $700 billion,” they wrote in a note to clients. That is equivalent to 2.3% of the country's gross domestic product, they wrote.

Meanwhile, the economists say that since imports account for about 10% of consumption, the roughly 25% effective tariff rate that they calculate will add about 2.5% to consumer prices, lifting inflation to above 4% by the end of the year.

And remember, as we said yesterday, conservative economists have insisted for years that consumers pay the tariffs.  So we will be paying the $700 billion - and what will we gain from it?

Inflation above 4% by the end of the year.

"Liberation" Day

Yep - that's today:

President Trump is set to unveil his most expansive tariffs to date on Wednesday afternoon, when he will detail potentially punishing levies on countries around the globe, including America’s largest trading partners.

Mr. Trump has promised for months to impose what he calls “reciprocal” tariffs, which the president says will correct years of “unfair” trade in which other countries have been “ripping off” America.

“We helped everybody, and they don’t help us,” Mr. Trump said on Monday.

The details haven't been announced as of yet, but let's take a look at what our formerly economically conservative friends once had to say about the topic.

First, a definition from the Tax Foundation:

Tariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters.

And they work this way:

Tariffs are paid when a good or services is imported into a country. If a car manufacturer imports engines that are then used in vehicles, then tariffs on those imported engines will increase the production cost and the cost to the consumer. The costs of tariffs result in higher burdens on international trade which can harm production.

Many businesses have supply chains that cross multiple borders, and each border that is crossed could result in higher costs due to tariffs.

Huh. 

But let's delve deeper into the conservative hive mind.

What does the conservative Club for Growth have to say about tariffs?

Take a look. In 2019 they had this to say: 

Tariffs are taxes that hurt U.S. consumers and key pillars of our economy, including manufacturing and agriculture. Tariffs slow economic productivity and decrease the impact of the many other successes within your economic agenda, like tax cuts and deregulation. 

Huh.

How 'bout Heritage?

Well, back in 2019, this was posted at The Heritage Foundation: 

A tariff is a government-imposed tax on goods imported into a country. Imposing a tax on imports makes them more expensive. The government’s goal is to increase revenue—but another aim is to reduce the amount of goods people import.

Many people believe that when tariffs are imposed on a country, that country bears the costs. However, this is not the case. Tariffs are paid by an individual or business importing the subjected good. When a government collects revenue from tariffs, it is collecting it from its own citizens—not from the citizens of the country upon whose goods tariffs were imposed.

Huh.

And what are some economists saying about the oncoming Trump Tariffs?

Take a look:

One of the nation’s most prominent investment banks is warning its clients that the United States could soon be in the throes of a recession. CNN reports that Goldman Sachs has raised its internal probability metrics to reflect a growing possibility for a recession:

The Wall Street bank warned clients Sunday night that it now sees a 35% chance of a recession in the next 12 months, up from 20% previously. Goldman Sachs also increased its inflation estimate, slashed its 2025 GDP forecast to just 1% and bumped up its year-end unemployment rate outlook by 0.3 percentage points to 4.5%. The bank explained its reasoning in a report, citing, in part, “statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.”[Italics in original.]

 And at this:

J.P. Morgan Research has lowered its estimate for 2025 real GDP growth due to heightened trade policy uncertainty, the effect of existing tariffs and retaliatory measures by foreign trading partners. Real GDP growth is now expected to be 1.6% for the year, down 0.3% from previous estimates.

“Heightened trade policy uncertainty should weigh on activity growth, particularly for capital spending,” said Michael Feroli, chief U.S. Economist at J.P. Morgan. “Plus, tariffs that have already been imposed will create a bump to headline inflation, pushing up consumer prices by 0.2 percentage points. Retaliatory tariffs would also serve to drag on gross export growth.”

So when/if this all goes south, no one can say we haven't been warned.

 

 

 

20 Lessons - Snyder, By Way of Lithgow

Day 71

The text:

1. Do not obey in advance.  Most of the power of authoritarianism is freely given. In times like these, individuals think ahead about what a more repressive government will want, and then offer themselves without being asked.  A citizen who adapts in this way is teaching power what it can do. 

2.  Defend institutions.  It is institutions that help us to preserve decency.  They need our help as well.  Do not speak of "our institutions" unless you make them yours by acting on their behalf.  Institutions do not protect themselves.  They fall one after the other unless each is defended from the beginning.  So choose an institution you care about -- a court, a newspaper, a law, a labor union -- and take its side.

3. Beware the one-party state.  The parties that remade states and suppressed rivals were not omnipotent from the start.  They exploited a historic moment to make political life impossible for their opponents.  So support the multiple-party system and defend the rules of democratic elections.  Vote in local and state elections while you can.  Consider running for office.

4. Take responsibility for the face of the world.  The symbols of today enable the reality of tomorrow.  Notice the swastikas and the other signs of hate.  Do not look away, and do not get used to them.  Remove them yourself and set an example for others to do so.

5. Remember professional ethics.  When political leaders set a negative example, professional commitments to just practice become more important. It is hard to subvert a rule-of-law state without lawyers, or to hold show trials without judges.  Authoritarians need obedient civil servants, and concentration camp directors seek businessmen interested in cheap labor.

6. Be wary of paramilitaries.  When the men with guns who have always claimed to be against the system start wearing uniforms and marching with torches and pictures of a leader, the end is nigh.  When the pro-leader paramilitary and the official police and military intermingle, the end has come.

7. Be reflective if you must be armed.  If you carry a weapon in public service, may God bless you and keep you.  But know that evils of the past involved policemen and soldiers finding themselves, one day, doing irregular things.  Be ready to say no.

8. Stand out.  Someone has to.  It is easy to follow along.  It can feel strange to do or say something different.  But without that unease, there is no freedom.  Remember Rosa Parks.  The moment you set an example, the spell of the status quo is broken, and others will follow.

9. Be kind to our language.  Avoid pronouncing the phrases everyone else does.  Think up your own way of speaking, even if only to convey that thing you think everyone is saying.  Make an effort to separate yourself from the internet.  Read books.

10. Believe in truth.  To abandon facts is to abandon freedom.  If nothing is true, then no one can criticize power, because there is no basis upon which to do so.  If nothing is true, then all is spectacle.  The biggest wallet pays for the most blinding lights.

11. Investigate.  Figure things out for yourself.  Spend more time with long articles. Subsidize investigative journalism by subscribing to print media.  Realize that some of what is on the internet is there to harm you.  Learn about sites that investigate propaganda campaigns (some of which come from abroad).  Take responsibility for what you communicate with others.

12. Make eye contact and small talk.  This is not just polite.  It is part of being a citizen and a responsible member of society.  It is also a way to stay in touch with your surroundings, break down social barriers, and understand whom you should and should not trust.  If we enter a culture of denunciation, you will want to know the psychological landscape of your daily life.

13. Practice corporeal politics.  Power wants your body softening in your chair and your emotions dissipating on the screen.  Get outside.  Put your body in unfamiliar places with unfamiliar people.  Make new friends and march with them.

14. Establish a private life.  Nastier rulers will use what they know about you to push you around.  Scrub your computer of malware on a regular basis.  Remember that email is skywriting.  Consider using alternative forms of the internet, or simply using it less.  Have personal exchanges in person.  For the same reason, resolve any legal trouble.  Tyrants seek the hook on which to hang you.  Try not to have hooks.

15. Contribute to good causes.  Be active in organizations, political or not, that express your own view of life.  Pick a charity or two and set up autopay.  Then you will have made a free choice that supports civil society and helps others to do good.

16. Learn from peers in other countries.  Keep up your friendships abroad, or make new friends in other countries.  The present difficulties in the United States are an element of a larger trend.  And no country is going to find a solution by itself.  Make sure you and your family have passports.

17. Listen for dangerous words.  Be alert to use of the words "extremism" and "terrorism."  Be alive to the fatal notions of "emergency" and "exception."  Be angry about the treacherous use of patriotic vocabulary.

18. Be calm when the unthinkable arrives.  Modern tyranny is terror management.  When the terrorist attack comes, remember that authoritarians exploit such events in order to consolidate power.  The sudden disaster that requires the end of checks and balances, the dissolution of opposition parties, the suspension of freedom of expression, the right to a fair trial, and so on, is the oldest trick in the Hitlerian book.  Do not fall for it.

19. Be a patriot.  Set a good example of what America means for the generations to come.  They will need it.

20. Be as courageous as you can.  If none of us is prepared to die for freedom, then all of us will die under tyranny. [Bolding and italics in original]

Donald Trump is still a felon. He's still a criminal.