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Comment by SlipperySlope | Hacker News Reader

Nailed it.

Plus tariffs are voluntary taxes drawing from funds from importers. The economy will slow down as it adjusts to re-industrialization with higher prices paid out as wages to USA workers.

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I disagree. Tariffs are the culprit here, rate hikes were needed and long announced. Really, the 2018Q4 expenditure, mostly unfunded due to the tax changes, hit at the same time as the full Fed rate impact landed.

Fiscal hamfist refuses to acknowledge the monetary hand.

Tariffs are paid by the consumers of imported goods, not by the importers themselves. Costs are simply passed down as higher prices. The idea that an importer would absorb the tariffs doesn’t hold water.

No, the cost of a tax on trade is always split. The way it is split is determined by elasticity of demand and elasticity of supply. In this particular case, Chinese suppliers have been paying about 83% of the tariff.

If I recall correctly from an economics class yay days ago, it doesn't matter if the seller pays the tax or the buyer -- the effective cost is shared (fewer buyers too).

Incorrect. There was a recent study done on tariffs effects. The study found negligible effects on consumer good prices. Turns out most tariff costs were eaten by manufacturers in China. (The importers forced them to eat the costs) Which prompted them to either shut down or move overseas

Can you share a link to this study?

I recall seeing it, but I can't seem to track it down at the moment. It was a study done by Europeans, concluding that China was eating about 83% of the tariff cost. The remaining 17% hits the US consumers.

Of course, that 17% can sort of be returned to the American consumers via reduced taxes or increased federal spending. The jobs are nice too.

This study reached a different conclusion: http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf

That might be true for US tariffs, but what about retaliatory tariffs enacted by China?

That can only ork in the short term though. If they go bust prices will go up for consumers due to constrained supply. If they move abroad to avoid the tariffs, we’ll presumably the reason they didn’t already do that was higher manufacturing costs abroad, so again increased costs for consumers, even if less than the tariffs.

You can put it off for a while, but not indefinitely. After all the justification given for the tariffs was to make less efficient local production more viable. Higher consumer prices are an explicit part of that calculation.

It could also mean the demand for these items is very elastic, so manufacturers will have to eat the tax or higher manufacturing costs.

That assumes that manufacturers can reduce their margins without going out of business. That will not generally be true in a competitive market, however, since economic profit (which includes opportunity costs) tends toward zero.

Steel tariffs (for example) are great for US steel producing jobs but terrible for US steel consuming jobs (auto makers, etc). From a jobs perspective (ignoring any retaliation) it would make more sense to have tariffs on consumer goods instead of intermediate goods, but that's more politically difficult since obviously consumers are going to notice tariffs on consumer goods more.

I'm very skeptical that even without retaliation, tariffs on China will lead to much USA manufacturing jobs (as opposed to automated US manufacturing, or manufacturing shifting from China to Vietnam, Thailand etc.

Of course certain industries will be big winners or losers though.

Actually, tariffs seem to me to just another consumer tax.

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