The Economic and Fiscal Effects of the Trump Administration's Proposed Tariffs
budgetlab.yale.edu
budgetlab.yale.edu
More pipelines could eliminate this. Texas flares off unwanted natural gas.[2] Tariffs will provide an incentive to collect that. But they won't be built if the tariffs aren't long-term.
That's a more general problem. Manufacturing and extraction won't come back to the US unless businesses are convinced this is a long term change, not a bargaining point. This action was taken under the International Emergency Economic Powers Act.[3] That's temporary, at least in theory. It's the most expansive use of the IEEPA ever. There will probably be court challenges. The challenges probably won't succeed.[4]
[1] https://www.eia.gov/naturalgas/archive/analysis_publications...
[2] https://today.tamu.edu/2020/08/03/the-problem-with-natural-g...
[3] https://en.wikipedia.org/wiki/International_Emergency_Econom...
I wrote that yesterday. Today, "Trump pauses Mexico tariffs."[1] The Wall Street Journal is covering this heavily. Businesses have no idea what to do yet. WSJ article: "Trump’s Tariffs Usher In New Trade Wars. The Ultimate Goal Remains Unclear."
For now, you can't go to a bank and borrow to expand your US plant that needs some tariff protection to be profitable. Too risky if policy changes. Can you insure against "Trump risk"? Hedge with futures?
[1] https://www.cnn.com/politics/live-news/trump-tariffs-preside...
> he proposes truly radical policy recommendations to delink the United States and China. He would hike tariffs to towering levels, end the benefits China has received from the United States for joining the World Trade Organization (WTO), cut off investment between the nations, block Chinese social media companies, halt cooperation on technology—and keep the measures in place until China’s trade surplus, now nearly $400 billion, disappears. In other words, for decades if not forever.
Seems bad form to kill a good faith comment made with effort, at least disagree or counter, etc.
EDIT: @defrost one of those links caused your comment to become [dead], I think it was the tamu one but I'm not certain. I did mail the mod about it though and Animats comment is live again.
EDIT AGAIN: dang responded. It was the tamu.edu link, somehow that domain had ended up as a spam domain. Animats' comment had been restored by vouches.
.. and none of the links appear to trigger a dead status.
aaaannnd it's back. Odd.
@Jtsummers - Interesting, I believe you, I didn't see it, it probably triggered a "shadow dead" condition.
If there were multiple fictional social media lobbying teams, which did not have continuous hourly coverage, then downvoting bots could be used during short intervals between time zone work hours.
Huh? Trump's not engaging in some conspiracy to protect Elon. He's always liked tariffs, and this is him doing what he believes.
Cut it out with the weird conspiracy theories. They're not helpful.
https://www.marketwatch.com/story/kaboom-elon-musk-predicts-...
https://www.msnbc.com/rachel-maddow-show/maddowblog/trump-ad...
Do you know who the vice president is and what ideology he subscribes to? One of his muses had an interview recently:
https://www.nytimes.com/2025/01/18/magazine/curtis-yarvin-in...
Then there's this faction, who have been blasting their ideas for decades but now have the trifecta of US government power: https://static.project2025.org/2025_MandateForLeadership_FUL...
Yes, I have. You didn't understand my comment, which was the motives for the tariffs (hint: they're not there to distract from Elon).
This maybe so, but he still doesn't understand who pays them or why his cronies like them so much. Tariffs transfer wealth from consumers to the government while simultaneously raising inflation. DOGE and friends want to privatize as much government as possible to extract money from it as a grift. Tariffs also hurt SMB sellers who cannot strategically front-load inventory like megacorps can. Furthermore, inflationary policies help out the 0.001% who can financialize weakening currencies while simultaneously making everything more expensive for ordinary people, effectively reducing average and unlivable wages to be even more unequal compared to the soon-to-be trillionaires. It's an ostensible nationalist/protectionist move that's cynically all about $$$$. The average American should anticipate paying $2000 more per year by the time 2026 rolls around for all of their expenditures... for absolutely nothing of value while not receiving a raise to account for it.
He repeatedly implies that these are fees that other countries will shoulder to “bring them into compliance.”
The truth is (as I’m sure you all know) these are fees that we pay to the federal government separately when we import goods from these countries. Other countries don’t pay a dime.
On top of that, supply chains don’t (or can’t) change at the drop of a hat. Large scale onshoring takes time and investment.
So the reality for the average American is that the crippling inflation we’ve endured for the last 3 years is not going away, and we’re going to pay an extra 25% on top of it for the vast majority of our imported goods (which is basically everything nowadays).
The thing I can’t figure out is if he really doesn’t know how tariffs work, or if he’s just a liar. Either way it doesn’t make him look good.
And from any reasonable analysis I’ve seen, I just don’t understand how this is going to bring anything back home. It’s just going to raise prices and cause more suffering for those who can least afford it.
But I think most people understand that it’s not actually about accomplishing any goal in particular or about solving any problem, it’s just a bro flex.
Awesome. Your guy can flex. Congratulations. All your shit just went up 25%, so now you’re paying too. Elections have consequences, as they like to say.
The second proposition has already been proven many times over. The first is very likely also true.
> And from any reasonable analysis I’ve seen, I just don’t understand how this is going to bring anything back home. It’s just going to raise prices and cause more suffering for those who can least afford it.
It won't. I think the best thing we can hope for is that it brings economic frustrations to an untenable boiling point and either forces the administration to correct course (ultimately still costing us significantly in terms of global trade positioning) or it spurs the idiots who voted for this administration into action agains the administration.
For now at least.
There’s a lot more Cleetuses than Elons though. And Cleetus is the one who’s going to suffer.
The mistake you're making is only considering first order effects (gov collecting tariff taxes), and ignoring second and greater order effects (how people respond to those taxes).
The truth about tariffs is actually more complicated: https://www.nytimes.com/2025/01/20/opinion/trump-tariffs-tra...:
> A good place to start disentangling things is the argument ad nauseam over who pays for tariffs — the consumer or the foreign producer? Contrary to what both sides sometimes assert, the question has no simple answer. “Despite over a century of theoretical debate on the incidence of tariffs, sound empirical evidence on who bears the burden of trade tariffs is sparse,” according to a 2015 article in the University of Chicago’s Chicago Policy Review.
> ...It’s true that up front, a U.S. tariff is levied on Americans, not foreign producers. But what really matters is who bears the ultimate cost. If the foreign producer continues to charge the same amount at the border, then the final price goes up by the amount of the tariff, and the American bears the full cost. But if the foreign producer cuts its price at the border by the amount of the tariff so that the final price paid by the American is unchanged, then the foreign producer bears the full cost of the tariff.
> Typically, the cost will be split. Americans won’t have to bear much of the cost of the tariff if the foreign producer is willing to accept a smaller profit to hang on to its share of the U.S. market. That calculation will vary product by product.
I will just pose a simple question- how many industries that trade in real goods have margins in excess of 25%?
How many industries do you know of that would keep going in the face of a 50% haircut to their profit?
Those quotes say nothing and are pure conjecture.
I will tell you exactly who will pay the increase (and then some, because there's always juice on top of juice): we will; you and I, and every person and family we know. That's who.
The fentanyl industry maybe?
It’s not like fentanyl goes through customs (legally) now. Not sure how tariffs will help.
Also not sure why we’re being punished because our government can’t or won’t stop fentanyl smuggling across the southern border. I don’t see how that’s my fault. Or yours for that matter.
Are we going to slap tariffs on Colombia too for all the coke that also doesn’t clear customs?
Key point here is "real goods". Services in general, digital or financial especially, i could see it, but i guess those aren't concerned.
Apparently not: https://www.nytimes.com/2025/02/02/world/us-tariffs-canada-c...:
> When Mr. Trump imposed tariffs on China during his first term in the White House, some studies found that part of the cost was passed on to American consumers. Suppliers in China also cut their prices in many cases to offset part of the cost of the tariffs. [emphasis mine]
> I will tell you exactly who will pay the increase (and then some, because there's always juice on top of juice): we will; you and I, and every person and family we know. That's who.
It's worth noting that you're basically quoting a line of political attack. From the same article I linked above:
> Democrats spent the weekend hammering the message that Mr. Trump was responsible for making life in America more expensive.
> “In one reckless move,” said Representative Gabe Vasquez, Democrat of New Mexico, “the president just raised the price you pay for gas, the truck you drive to work, a computer for your small business and everything at the grocery store, from avocados to tequila.”
Underneath all that noise, I'm sure things are far less simple than any side's attacks claim. Unfortunately, all almost anyone hears on any issue are political attacks, which are blasted from the rooftops.
With computing equipment from China, there wasn't enough margin for them to lower prices (or they just refused).
So we paid for all of it.
Read their wording carefully: some studies found...many cases to offset part of the cost...
This is weasel language that purports to convey a lot of meaning, but is (I feel intentionally) light on actual facts.
You can't just strong arm people into giving you a better deal. Logic would dictate that any company who is competetive in the market is already giving you their best price.
These tariffs are punitive and not even protectionist (which I could at least respect), because we don't, can't and/or won't manufacture the vast majority of the items we import from these countries.
P.S. citing easily observable facts are not a political attack. You have no idea what my political persuasion is, and frankly, just because I have a strong distaste for DJT doesn't mean I'm a Democrat. Some people know what a spade looks like, no matter who they pretend to be.
P.P.S. additionally, had this administration annonuced a comprehensive plan to make capital available to American industry to step up and onshore the manufacture of these goods, I would be singing a very different tone.
But your experience with IT equipment does not generalize to all trade between the US and China, which includes more than just IT equipment.
> This is weasel language that purports to convey a lot of meaning, but is (I feel intentionally) light on actual facts.
I don't think it's weaselly, rather it's one of those areas that's not black and white and there is a lot of variation, which does not lend itself to a crisp, succinct summary. One of the cases in the original article I linked was the supplier gives a little on margin, and the importer overall pays more due to the tariff, but not the full amount, and that's what the second article seemed to be describing.
> P.S. citing easily observable facts are not a political attack.
That kind of thing can totally can be part of an attack: the most effective attacks usually start with easily observable facts (and then omit others to fit the desired narrative), because that gives them more credibility. And I didn't mean to imply that you were making an attack, I was just noting that rhetoric is in the air due to the frequent political attacks, which often leads to it getting repeated.
> P.P.S. additionally, had this administration annonuced a comprehensive plan to make capital available to American industry to step up and onshore the manufacture of these goods, I would be singing a very different tone.
And we can agree that would be a good thing.
Now, that's all fine and good, but construction materials like steel, wood, and aluminum are about to go up due to the tariffs not to mention supply chain disruption and stockpiling, making prices even worse.
Construction is going to contract. The publicly traded companies all went down as soon as this was announced. Noone is going to want to build this stuff while materials prices are going up.
There are other ways to encourage onshoring. 25% tariffs and a tariff war with our main trading partners ain't it.
We will indirectly pay in reduction of demand, which will reduce the price or production. Maybe not 25%, but probably not 0%?
If we didn't pay for it, I wouldn't see our prime minister be worried about our industry and scared of trump.
Everyone is worried about it. The global supply chain is a well oiled machine after the last 40 years. Problem is, Trump’s enablers and the media are too scared of retribution to tell people just how bad this will be.
It’s a solution looking for a problem.
You should have seen my frustration during Trump I explaining to my die hard Trumper why he kept getting customs bills from DHL, FedEx and UPS for his equipment and supply orders. I was literally exacerbated trying to tell him he was paying the tariffs that Trump enacted. It’s like he was incapable of understanding plain English because it conflicted with his Fox induced worldview.
The only type of business relationship his feeble little mind understands is quid pro quo.
He is incapable of nuance and is unfit to lead.
This is a man who went broke more than once in the casino industry. He’s either stupid or corrupt, take your pick.
"any reasonable analysis"-- I will help you out, right now you can ask deepseek how tariffs helped power the asian economic miracle.
You'll also note that good trade relations with the US, not pissing off your trading partners, were a key element to that success.
I'm sure deepseek will also let you know that tariffs are by and large considered a terrible strategy in the vast majority of circumstances.
The asian economic miracle as you put it took place in countries with cheap land, essentially free labor (by Western standards), zero environmental protections, and cheap global shipping.
News flash Einstein, they weren’t buying our expensive shit to begin with. So they didn’t really need tariffs. Why? Because they lived in huts with no electricity or running water and ate rice and vegetables for every meal.
Neoliberal takes. I’ve been reading the Wall Street Journal daily since before you were born, back when it wasn’t just another mouthpiece for some rich asshole with an axe to grind.
Latin american countries made the mistake of trying to build an economy by reducing imports through tariffs, as we can see it did not work.
The state is already involved with imports, it just adds another item to the import tax bill. Even the price is already set, as import tax is determined by a percentage too.
Tons of new accounts <1mo throwing the discourse out with the bath water and no one stopping them.
HN has become the LA of websites. Y'all think everyone thinks like you and anyone who doesn't is just wrong. But when it all burns down and people are cheering you will be left wondering why.
It has devolved and only gotten worse. I feel those of us who are more center have slowly but surely gone AFK and now all thats left are the two extremes.
Comments flagged for absolutely no reason, the attacks- it even feels like dang has gone hands-off lately.
Since Trump's election I've seen nothing but rule-breaking everywhere, and it has become absolutely rampant.
I dont even come here for the comments anymore. yall can have the burning garbage heap this has become- it was a good run while it lasted.
HN needs a better way to protect against people who try to suppress stories about inconvenient truths.
But maybe that's the point, so the tech-bros can continue to support the fascist government?
> In the medium-to-long run, the size of the US economy is persistently 0.2% smaller in real terms under the package
> The average effective tariff rate would rise by approximately 6.1-6.3 percentage points under the proposal, once consumers and businesses substituted towards domestic or non-tariffed imported goods.
> The individual commodity with the largest price increase is natural gas. The average price rises 8.4%
> Crude oil prices rise 1.1% in the long run.
> Auto prices rise 3.9% on average,
True, but it's exemplary Q2-term thinking. Whatever goals US is about to achieve, is it worth it to backstab allies over them? US proves itself as an unreliable partner, so long-term, other countries will work on decoupling from the US, minimizing its soft power. Over the next few years, Canada and Mexico will for sure pivot more towards EU.