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Comment by snowwrestler | Hacker News Reader

Very few and here is why. Making structural changes to an economy requires a lot of investment. But tariffs reduce investment in two ways:

1. Tariffs directly take money out of the coffers of private companies and move it into the government. Private companies therefore have less money to invest.

2. Tariffs are a tax on economic activity and therefore suppress it. This causes companies to want to hold more cash and invest more conservatively. Major changes take appetite for risk, which tariffs reduce.

In addition, the arbitrary, legally questionable way in which this particular set of tariffs has been imposed means they are not affecting long-term corporate planning. Instead most companies are seeking to just “wait them out” while issuing hollow press releases with big numbers they think the president wants to see.

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There is also the fact that tariffs are protectionist and reduce competition in the market. It allows lesser products to succeed due to where they're made, rather than on the merit of the product. This inherently makes companies less competitive and less required to respond to consumer demand. That means long-term weakness and even less ability to compete.

It's important to be careful with value judgements like this.

Tariffs allow otherwise more expensive domestic products to compete against cheaper products from abroad.

In and of itself, that says nothing about quality one way or another. In practice, it often means the opposite of what you suggest: domestic goods are often of higher quality, and/or are made by workers in better conditions, because of stricter laws here than in the places manufacturing has moved to. (And not by coincidence—the cheaper labor and looser laws are exactly why manufacturing moved to those places.)

Of course, all of this only applies when tariffs are carefully considered, strategically applied, and left in place for a long and predictable length of time.

This is the theory behind tariffs when applied to specific industries or products because the tariff amount can be adjusted to suit the dynamics of that market. When applied broadly I can't see how it won't just increase costs and create incentives to not compete on quality when you now are "the cheap option".

Agreed, and tariffs are an impediment to specialization, which is the basis for innovation that drives long-term economic growth.

Surgeons can push the limits of better and better surgery if they can spend their entire career focused on just that. If they’re required to farm or sew clothes half of every day, they will not be able to advance surgery as far.

The same specialization-driven innovation happens between companies who can trade freely, and between countries who can trade freely. Paul Krugman won a Nobel prize for exploring this idea.

You should probably tell the Soviet Union that who used to give graduate students at Tashkent State University a cotton picking quota albeit one much more lenient than the undergraduates

3. The net of trade and capital flows is zero. In other words, foreigners who export to America in exchange for dollars have to get rid of those dollars somehow. If they aren’t buying American goods and services, their only option is to save/invest in America. Tariffs cut off this investment stream into America.

America’s trade surplus in services rose to $293 billion in 2024, up 5% from 2023 and up 25% from 2022, according to Commerce Department data.

Yes, factories do not teleport.

Skilled and willing workers (except, ahem, Mexicans) don't grow on trees in a couple months.

Motivation for companies to pay real wages to Americans doesn't exist

Tariffs are a consumption tax that will probably be highly regressive.

Honestly, it seems like the Trump administration thinks he's they're just playing a game of civilization or some other 4x game and just needs to adjust the slider for a couple cities in order to enact broad-scale production changes.

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