Rationale to Trump's Tariffs

[Gadianton]

The big news today was Walmart explaining that it will be raising prices and the toddler in chief having a meltdown and threating Walmart not to raise prices. In a related matter, my right-wing frenemy broke his silence on tariffs, celebrating the huge win. Well, he had complained about certain items being made in Asia, and I couldn't resist but ask him if the tariffs were fixing that. He piped up real defensively and explained that Trump has made some great deals and everything is back to normal -- it's working out just fine, were his words.

What does this delusional individual and the toddler have in common?

Before I answer this, allow me to point out that, with the exception of one person, nobody who voted for Trump knows what a tariff is. fact. Certainly, nobody on this board who voted for Trump has the slightest clue what a tariff is, not even close. And that's interesting, considering one of these folks uses and A.I., and you'd think the A.I. would at least know the definition.

The toddler initiating the tariffs certainly has no clue what a tariff is.

Allow me to quote the "User's Guide" paper by the Chairman of Council of Economic Advisors to the toddler, not that his words matter more than Investopedia, but the handful of MAGA capable of reading above a fifth grade level wouldn't trust a source that isn't licking the toddler's booties.

By contrast, if currency offset does not occur, American consumers will suffer higher prices, and the tariff will be
borne by them. Higher prices will, over time, incentivize a reconfiguration of supply chains. American producers
will have improved competitiveness selling into the American market, and importers will be incentivized to find
alternatives to the tariffed imports. As trade flows adjust, the trade balance can decline, but then the tariffs will
no longer collect much revenue

There are two broad choices, China pays the tariff, or the US pays the tariff. China pays it if they devalue their currency or if they lower their prices. They would do that to maintain their position as exporter. In that situation, we'd have an "ERS" because the world is paying our taxes for us, but there is no shifting manufacturing back to the US. It's a tradeoff. You either get the ERS or you get jobs back, or a little of both, but one works at the expense of the other.

So when my frenemy and the toddler either boast that there's been no price increases or demand there be no price increases, what they are really saying is there will be no jobs coming back to America. If price increases don't hit home, then American producers are stuck in square one competing with cheap products. Tariffs are "protectionist" when they raise prices such that domestic offerings are competitive, not when the trading partner eats the tariff. Trading partners eat tariffs specifically to prevent trade from rebalancing. That's their defense against it.

In the case of 30% tariffs, it's so high, that in conjunction with a falling dollar and slipping credit rating, it wouldn't be possible for China to eat the tariff even if they wanted to. Prices will go up -- that's the entire point of re-shoring manufacturing to America. (note that prices going up does not guarantee re-shoring, reshoring is the policy goal, but the reality may simply be mass shortages and going without)

[Dr. Shades]

In that situation, we'd have an "ERS" because the world is paying our taxes for us, but there is no shifting manufacturing back to the US.

"ERS" = "Export Restoration Situation?"

[canpakes]

The big news today was Walmart explaining that it will be raising prices and the toddler in chief having a meltdown and threating Walmart not to raise prices.

This raises two questions:

What happened to ‘China pays the tariffs’?

Is Trump now basically asking for price controls?

[Gadianton]

External Revenue Service; an agency established by the toddler for the collection of the tariffs that he says will make us "rich as hell." He believes it will replace the IRS.

Every comment he ever makes on this proves he doesn't know what a tariff is, just like Ceeboo and Hound don't. Don't forget Howard Lutnick, the supreme dunce who is most likely behind the "thinking" so far, he definitely doesn't know what a tariff is.

An ERS that replaces the IRS would mean no jobs created by tariffs. Perhaps worse than that, for the ERS to work, those exporting to us would need to devalue their currency by enough to cover all that revenue. See Miran's paper that no conservative has ever read (save Miran). To me, more interesting than the fact such a situation wouldn't create jobs, is that such a situation is a more extreme example of the problem we already have (allegedly) with a strong dollar. If the ERS makes us rich, then exporter currencies are devalued, the dollar is even stronger, and our trading partners will buy even fewer exports from us than they do now. Meaning, the balance of trade "worsens" significantly in the case that an ERS makes us rich. By the toddler's own terms, we're screwed even more.

First off, it will never happen. But suppose it did. A theoretical situation where other countries devalue their currencies such that they "pay the tariff" to the degree that the US becomes richer in exact proportion to the tariff revenues sounds fantastic -- if you could achieve that, why not? I would agree. It would destroy our export industry completely but why not be rich on the dimes of the world? If a person can come to understand that, then they will come to understand that we're already three-quarters of the way there, due to the strong dollar and trade imbalance in the first place! We're not in a situation where we're getting screwed at all, but where we're supremely screwing everyone else.

In other words, once you understand how good an ERS situation would be, you will naturally understand that our present situation is the envy of the world already, and it is NOT a situation where we are "getting screwed".

[canpakes]

In that situation, we'd have an "ERS" because the world is paying our taxes for us, but there is no shifting manufacturing back to the US.

"ERS" = "Export Restoration Situation?"

‘External Revenue Service’, the imagined future wonderland where a continually diminishing influx of tariffs fail to adequately support the revenue needs of the US Government, leading to dysfunction, bankruptcy, some degree of chaos, and a return to an even more punitive resurrection of the current system.

[Gadianton]

great questions as always, Canpakes, it would be literally impossible for a mind like yours to fill in a circle next to Trump's name on a ballot.

What happened to ‘China pays the tariffs’?

Indeed, if Walmart is 'paying the tariff' then China isn't. It's a corporate tax. hurray. If we're super lucky, it will click that they ought to try just taxing the rich instead of Rube-Goldberg tariffs that may get there in a roundabout way. It would be really funny if they submit to Trump, pay the tariff, and then the upcoming corporate tax cuts reimburse them exactly in kind such that the tariff does nothing. lol.

Let's be clear that we can talk about who pays the tariff in an economic sense, but even if the person paying the tariff ends up being the person you want to pay the tariff, there is a resulting inefficiency where price goes up and quantity goes down. No matter who pays the tariff, the tariff results in the same waste that price controls do.

Is Trump now basically asking for price controls?

Yes. Specifically the kind of price controls that existed in the Soviet Union, if Hound would like some material to train his A.I. on to learn about Marxism.

[Chap]

External Revenue Service; an agency established by the toddler for the collection of the tariffs that he says will make us "rich as hell." He believes it will replace the IRS.

Every comment he ever makes on this proves he doesn't know what a tariff is, just like Ceeboo and Hound don't. Don't forget Howard Lutnick, the supreme dunce who is most likely behind the "thinking" so far, he definitely doesn't know what a tariff is.

I am not necessarily very disturbed when I find that somebody doesn't know something that I might reasonably have expected them to know - as, for instance, that a tariff is a tax imposed by a government on those of its citizens who purchase certain products imported from another country.

I suppose I might be very surprised when it becomes clear that the head of state of a major country (in this case Donald J. Trump) does not know what a tariff is.

But what absolutely horrifies me (as in the present case) is when it becomes clear that either nobody in Trump's entourage dares to explain to him that he has got it all wrong about tariffs, or if somebody has explained it to him he has simply refused to listen.

And this guy could command the launch of nuclear weapons?

Lord help us all!