Tariffs in American History
imprimis.hillsdale.edu
imprimis.hillsdale.edu
Tariffs can work, but only if they are targeted towards certain industries/sectors. They can't just be slapped across the board and be expected to work properly. Furthermore, they must be attached to certain KPIs such as exports (i.e., the ability to effectively compete on the international market). Joe Studwell's "How Asia Works" argues that Japan, Korea, and Taiwan all used tariffs and subsidies to promote their own "national champions". In turn, they forced those companies export their products rather than just sell domestically in order to compete. If they didn't meet those export targets, those companies were cut off from state support. Ha Joon Chang, a Korean developmental economist, likens this to raising a child: you spend their initial formative years supporting them until they are able to support themselves without your help.
Sadly there has been zero discussion of doing targeted industrial policy (like China's) in the US. The irony is that Trump's approach benefits China tremendously.
But, yeah, the current American approach is anything but sober.
The methods used 30 years ago won't work.
If American production was optimal, or even economically feasible, it would already be in place. Take, for example, textiles.
Why would an American business go through the hassle of getting a foreign company to make textile products, get them shipped across vast oceans, taking weeks if not months to do so, only to have them in stores in relatively close proximity?
We all wear clothes and purchase them regularly. So why are they not now largely made in the US?
Probably.
Sometimes exploring the implications of an ill thought position leads to an unpopular conclusion. If the worst result is a few people hit a down arrow and others contemplate the exploration, so be it.
There are many worse things in life.
Factories are bad for the environment and provide shitty jobs.
The comment isn't wrong about factories. Factories are far less productive than providing services (e.g. software), and per comparative advantage the US should be importing manufactured stuff and exporting highly labor-efficient services.
If the US expands its manufacturing without it being profitable to do so (profitable without state subsidies, I mean), that will be bad for the economy , because it will drive up the cost of labor for other stuff without an accompanying flow of profit into the economy to stimulate the demand to match said higher costs.
A large part of why you're seeing the Trump insanity is because there's increasingly little connection between reality (ie CHIPS, IRA) and people's perception (ie your comment)
Now that Trump has blown the Overton window open, someone should offer the alternative of smarter tariffs.
The Biden administration had already taken several targeted measures to defend local industry from China.
One can argue whether this was good policy or not, but it’s hilariously wrong to argue that Trump was the first person to recognize the threat of China.
In fact, Trump has been extraordinarily useful to China. One of the first steps he took in his first term was to withdraw from the TPP.
Again, one can legitimately argue whether the TPP was good or not, but the entire purpose of the TPP was to reduce dependence on and create alternatives to China, which is why the trans Pacific partnership did not include the second largest world economy despite it lying on the Pacific Ocean.
Clearly insufficient to prevent the destruction of major sectors and industries over decades. The neoliberals argued this was a normal and good thing for the country. The voters appear to disagree.
Republican voters did not cared about any of that. They wanted to own the libs, they wanted the destruction of project 2025 and wanted to harm the people they look down at. They did not wanted to work in factories, they did not want industrial policy and they do not want USA to be a tech leader anymore. Conservatives are not making economical choice, they are just throwing concerns around when they want to bear democrats. They dont care a put putcomes when Republicans rule.
You complaining that legislature from 2022 did not traveled back in time to change something in 2010 is quite on point here. This is not about strategy, law nor economics.
A sledgehammer sounds almost like an instrument of precision relative to the Trump administration tariffs. If they're applied and reversed on a whim, US companies would be fools to invest in building fabrication capability domestically only for the rug to be pulled out from under them tomorrow.
And apparently Trump doesn't want the prices on imports to rise [1]? So, if importers and retailers eat the costs of the new tariffs, how can domestic production compete any easier than it could with the baseline conditions?
It's not jingoism or victimhood, it's just ineptitude writ large. Trump can't achieve his own policy goals because he's standing in his own way.
[1] https://truthsocial.com/@realDonaldTrump/posts/1145236386231...
The alternative would be to negotiate quietly in back rooms before announcing, which is what is usually done. Would that be less chaotic? Definitely. Would it result in equally good or better trade deals as the shock method? Unclear, it’s not obvious that it would.
He also likes dramatic optics.
I don’t agree with the guy on most things, but I really think many people mischaracterize him pretty severely.
It is easy to argue normal negotiations work better.
bias talking, it's impossible to know what he got since he's actively negotiating behind the scenes
A sizable "retooling" already took place with Canadian oil. As of last month, Canada is now exporting more oil to China than to the US. US oil exports to China have stopped.[1] This is not projected. This has already happened.
This is a win for China. Getting oil from Canada reduces China's dependence on the Middle East. Getting tankers across the Pacific is a straight run in open water. No bottlenecks at the Straits of Hormutz, no Suez Canal, no war zones.
Expect West Coast gasoline prices to go up.
(Much of this is related to where pipeline are. Pipeline connections to the Western US from Texas barely exist. Meanwhile, in 2024, a major pipeline between the Alberta oil fields and the Vancouver region ports was completed and is in operation.)
[1] https://www.reuters.com/markets/commodities/canadas-crude-oi...
How? What do you think people think of him that’s untrue?
Since he first got seriously involved into politics I haven’t seen any evidence that he has a sophisticated understanding of anything, except two things: how to negotiate when he’s in a strong position to bully his counterparty, and pandering to his base.
Like a sibling comment points out, you refer to The Art of the Deal, but that was written entirely by his ghostwriter Tony Schwartz (according to both the author and the publisher). Schwartz has even said he thinks it should be recategorized as fiction.
https://youtu.be/hBMoPUAeLnY?si=IJxxRE-RuL9FHKpE
What we normally see is a stage persona. He also speaks differently when dealing with hostiles vs people acting like he's a human being. Rogan's style brings out people's real personalities better.
Those are the biggest weasel words anyone has ever seen before
I'm not so sure you're right about that. He's dishonest, corrupt, and vain. So a lot of the disgust that is directed his way seems well-deserved.
I would believe it if you told me that if he somehow proposed a policy that was for the genuine benefit of all of his constituents that some would knee-jerk oppose it. But -- due to his vanity and corruption - we'll never see that come to pass.
1) Is "The Art of the Deal" respected among actual business leaders and negotiators as a substantive contribution to negotiation tactics?
2) If what Trump is doing is in fact a highly effective tactic, how is it possible that so many people who are skilled at negotiation, skilled a business, far more wealthy and successful than Trump, etc., etc., fail to see the genius of it? I'm pretty sure that if there were actually something to it, at least some of those types of people would "come around" to supporting it and they would explain what he's doing to the American people (if it's right out of "The Art of the Deal" then clearly any negotiating adversary would be familiar with the tactic since the book is a short, quick read).
3) How would the negotiation tactics Trump is using be described/framed by traditional game theorists and tacticians? Suppose Trump is actually highly disciplined in the execution of a grand strategy, what would there be to object to, the tactic of acting unpredictably? Or would there be criticism of the downside risk of the strategy being unacceptable?
4) What has Trump or the US gained in the past from these kind of tactics? I'm serious when I say that I don't think Trump has improved the US negotiated position in any of the domains he's promised to. His revisions to NAFTA were trivial, his revisions to the Iran deal resulted in the US having a far weaker hand, his negotiations with N. Korea were inconsequential, and his negotiations (so far) with Mexico and Canada have seemingly harmed all parties and reduced trust, thus reducing the chances for a better outcome in the future. on Ukraine/Russia there is not really any negotiating to be done, it's more of a question of whether the US wants to keep spending money on an expensive and risky war that we are losing while pretending we are not actually in one.
5) In trade negotiations, what is the "back room"? I realize the US is opaque domestically and internationally about what is US "national interest", but typically with trade the incentives are extremely clear -- there are always domestic factions on both sides who are the relative winners or losers of any change to tariffs or trade policy, etc.
The CHIPS act is exactly this.
Of course Trump is killing the CHIPS act.
So Apple setup production in India starting with old model iPhones. Then expanded to today…
This jump is not a reasonable one to make. Car imports and exports are vastly more complicated than this. At best, the tariff situation is one small part of a multi-factor explanation for observed phenomenon, such as how US carmakers do not appear to care about european market demands for cars at all (they do not make many cars that are clearly targeted at the needs of european car buyers), whereas european carmakers make quite a few models specifically engineered for the US market, or at least, there is a real demand for them in the US. But I'm just guessing here - possibly the situation is explained much more simply:
US carmakers make cars that US consumers want to buy and which US culture wants to make. These cars so happen to be designs that almost nobody in the EU wants.
EU carmakers make cars that EU consumers want to buy and which EU culture wants to make. These cars so happen to be designs that a significant fraction of the US also wants to buy.
'fix' the tariff imbalance and I bet almost nothing happens to the relative amount of 'flow' of cars across the atlantic.
The fact that America has a bunch of German cars, and Germany doesn't have anywhere near as many American cars, may be influenced somewhat by tariffs, but is in no way explained by or the result of those tariffs. The issue is ultimately just that German cars are, in general, of far higher-quality, compared to American cars.
As someone who drives a Japanese car, I don't disagree with the premise - but its worth double clicking on whether there is a motivation for American automakers to abandon the value/reliability category.
Article is lying.
Automotive EE here. This is so misleading it might as well be labeled as fiction.
The German MODELS that you are familiar with are higher tier vehicles. Notice I did not say the brand was high quality.
The truth is 30 plus years ago, ok, fair statement with that note above. But now… almost all brands are using the same suppliers and the same processes. Your seats come from Johnson Controls or Recaro or a mfg you have never heard of but makes Ferrari seats on the same lines as their Toyota seats. There are three ABS / brake system / traction-stability module makers worldwide plus some trash ones in China. The X module in a Fiat is the same part number as that same module in the La Ferrari. The McClaren 500s and 600s use an Android based screen made by the same people that make the one of Polaris.
Not to be too general here, but it’s all the same shit.
Yes, specs matter. But your programming is coming out of India whether you drive a G Wagon or a Ford.
The disparity in your post, is not only about tarrifs, but also the size of the most popular Ford GM Stellatis vehicles. That the above three lose money on their cars and basically only push them as hard as they do in order to tilt CAFE scales.
No offense meant, it’s just that when people talk about cars, 99% of the time they have no idea what they’re talking about and myths become reality.
You could say that they were all made the same way — they were all moulded from tiny little plastic balls that are melted down — but the reality is that there was a huge difference in the products produced for each vehicle.
The vent for an A/C is one example. To produce that piece for a Ford might be one piece of plastic, which falls off the conveyor at about 1 every 20 seconds. The same piece for an Audi would take 3 different types of plastic, and some rubbery material, and would take about two minutes per unit - as well as some assembly, by a human, before it is done.
I can promise you at Diamler, they’re designing the shape of the vent, and sending it to the supplier just like GM is doing. Same suppliers, and the details are being offloaded for like ten reason but among them is that it doesn’t make sense to have the mold experts in house, and every supplier knows their machines and abilities, the customer doesn’t.
You can have your opinion, unobstructed by my career experience.
Same suppliers, same processes, sometimes the engineering is a little better or worse. I can promise you the Volkswagen has made absolute goddamn bonehead fucking mistake mistakes, where Chrysler has solved that X problem since the 80s. And that a high-end Mercedes AMG has some worse Y than any Hyundai on the road.
The truth is the suppliers built vehicles. There are good and bad decisions by vendors and suppliers everywhere.
But it’s all coming out of the same shops. CARpocalypse 2008 was not about bailing out GM Chrysler. But knowing if either of them went down, the entire automotive industry was going to knock on and tumble over.
Jesus man, stop. What industry are you in?
Because if it isn’t automotive, just stop. And if it is automotive, have your managers send you to a plant.
It’s like you think someone is turning wrenches to assemble your car :D short version… wrenches are not allowed in major production lines of any brand.
It in the 30 years I’ve been in the industry. I’ve never seen that at any plant, and if I had, I wouldnt be the least bit shocked because things that seem strange to you might make sense on the 1-vehicle per minute scale.
Please help me out… mallet into what? All Chrsyler, DCX, Fiat, and now Stellantis vehicles I’ve worked on have exactly the same windshield attachment method that almost all vehicles have.
It’s all sheet metal or a frame trim that the windshield is glued to. No exceptions that I can think but maybe Tesla or Rivian does something dumb.
From McClaren to Chrysler 200, all vehicles on the road attach their windshields exactly the same way.
How do you think someone would repair it otherwise? Aside from being ignorant about the industry, you don’t even know how you local windshield repair shop works?
I want to know what magic attachment mechanism holds the glass!
Again, you’re allowed to be wrong, you just aren’t allowed to be this dumb without being corrected for the next person that knows nothing to come along and not realize you are making up claims left and right.
If what you say is true, Germany should lower tariffs as part of negotiations to get a better deal on exporting to the US. It would be a win-win for them then.
Oh ... and America has outright ban on Japanese cars. They are reliable and popular pretty much anywhere else.
tl;dr this is a problem with hillsdale and heretage foundation - they simply lie.
That is separate from the 19% VAT.
Japanese cars are very popular in the US.
You can just look at the roads of any country that has the same tariffs for U.S. and European cars and you will still not see all that many American cars there.
Germany's, and all other countries', VAT is a tax on purchases by consumers in that country. It wouldn't make sense to levy it on exported cars. It works just as I assume it does with American car manufacturers who don't charge Ohio sales tax on cars they make in Ohio and export to the EU, or indeed California, right?
> As a result, while the logos of Mercedes-Benz, BMW, and Volkswagen are seen all over American roads, those of Ford and General Motors are a rare sight in Germany.
Ford manufactures cars in Europe, and was historically quite successful in Europe (though it seems to really be struggling in the past decade or so; other than Transit vans it'd be unusual to see a new Ford today). The cars that it made in Europe were, generally, aimed at the market, and many were never made available in the US at all.
GM also used to manufacture cars in Europe, again, aimed at local preferences. Their European division ended up part of Stellantis, the great conglomerate of car brands that you can't quite believe still exist.
The concentration on _Germany_, which doesn't have an independent trade policy, seems odd.
With global trade falling apart, this respect for IP is in grave danger. Robust IP protections contributed significantly to America's wealth.
The short-sighted focus on tariffs and re-shoring manufacturing completely neglects the whole balance and will damage America's position long-term.
Quite the opposite, the US didn't enforce IP protections during the first few years of industrialization, exactly because they were stealing IP from England.
https://penntoday.upenn.edu/2012-05-10/research/bumpy-histor...
It was more akin to intellectual property secrets.
When the US is ahead on IP, it's respect for IP is incredibly relevant to the US's economy because respecting IP mostly benefits the US.
We’ve all heard of IP theft from China but if Meta doesn’t face domestic punishment for its wholesale theft I really see no legs left to stand on.
I hope not, at least not in it's present form. As far as copyright goes a return to the Statute of Anne or something similar would provide time for authors to profit from their labours while putting them in the public domain within a reasonable time.
Is this in reference to AI training data and Meta torrenting stuff? Or did Meta do some other theft?
To put it kindly a lot them are chaos apologists.
“Wealth-class parasites” as you call them did that for decades under the guise of stability.
Why are none of the new protectionist policies implemented with a modicum of stability? Why must everything be done with flip-flipping gusto? Why do we have to become the laughing stock of the world?
For some reason, every sensible person arguing for protectionism (e.g. Oren Cass) at no point argues that how it’s being implemented is detrimental to the cause.
Do you really think tarrifs or any other policy experiments will survive if congress flips? The implementation of these ideas is a farce that will only encourage their elimination. This is not how policy persists for decades.
If it won't persist because democracy will flip it around schizophrenically, then you're just speaking ill of democracy at that point. Can't have that.
Because this is a weird talk where only extremes are talked about, that is popular when you have only two established parties and no system that enables more nuanced ideas.
> and they'll correct their strategic stances for the newer unstable order: Onshored supply chains,
In a decade or so... maybe.
But why touch that stable state? Maybe lets bring back slavery? Or how about mandatory service and some land invasion? Or split out the states as independent countries? What else would you like to flip to check if it maybe works better, since stable state is not great?
Because it's not working for a majority of people? In a democracy, those are the rules.
How exactly do you think instability encourages long-term investment in manufacturing? Not the dynamic of being in a better position if factories simply popped into existence, but actually plunking down money hoping for a return in the face of economic slowdown and political instability.
The actual response I expect is even more goods shipped directly from China, with tariff taxes built right into the sale price (Aliexpress didn't miss a beat on that one), and with the general uncertainty raising Chinese sellers' profit margins.
Rather there are many sticky intrinsic factors like network effects, path dependency, and economies of scale that would need to be overcome to make the scales tip the other way. This is why once manufacturing started going to China, it then continued accelerating. To start bringing it back, we would need to clear a high activation energy.
Then there are the additional issues with the current approach. For starters, building new factories requires a bunch of industrial equipment. But with the blanket import taxes that has all shot up in price as well.
There is also the uncertainty of trying to plan on the long term scales of capital payback in the presence of an administration that flip flops on policies by the month, has seemingly no clue what they're doing, carves exceptions for the politically connected who bribe at McDonalds-al-Lago, and continues escalating the attacks against our traditionally stable-for-capital rule of law. From the investment perspective, it feels we're moving in the direction of a South American dictatorship where it only makes sense to run economically-colonizing "suitcase operations" rather than broad-base industrialization.
It is not talking about a stable government and the benefits/drawbacks of that.
You just need to tax them.
Also the government is incompetent, bloated, and also evil. The only truly good government is god and his appointed ~grifters~ [messengers].
I wish I was joking. That's what I was taught at home for like 30y.
So far it seems to be doing a good job at keeping cheap EU-made food out of our grocery stores.
Of course implementation matters a lot. We have no farmers growing corn in Norway, so we don't have any tariffs on corn. We do have farmers growing apples, but there's no harvesting those during our snowy winters so our tariffs on apples are just active when local apples are in season. We do produce beef all year, but not always enough so they hand out limited quotas allowing for massive reduction in duties to compensate and meet demand.
I'm curious: apples are fairly easy to store in bulk. That's a large part of why we have them year round.
So what's stopping someone from importing apples outside the season and then sorting them to circumvent those tariffs?
Though a lot of local apples goes to production of other goods.
For example various apple juices made from local apples have become popular, especially as an alternative to wine. The price of a 1L bottle of quality, loc apple juice can be the same as a 0.7L bottle of Riesling wine, around $7. And you need a lot of apples to make juice.
[1]: https://www.nettavisen.no/okonomi/provosert-av-kiwi-rema-og-...
It's like I'm reading the words of a political prisoner. Everything in the first ~80% of it sets up for a conclusion of 'one-sidedly slapping a ton of tariffs on all the things and expecting this to lead to prosperity and the closing of deficits is sheer lunacy', and then ends with: "Well, what an interesting and possibly smart move, lets see how it works out!".
* https://www.noahpinion.blog/p/when-are-tariffs-good
It's just that generally speaking, most of why they're being implemented by the US now are not valid.
Tarifs are a powerful tool to product specific industries. When implemented properly (focused on specific industries) they can change behavior, support local jobs, increase national objectives.
Applied consistently, in a predictable way, across decades, they allow rational players to predict the future, and invest accordingly. If I can see that washing machines have a floor price I can invest in a washing machine factory.
When implemented broadly (like across all industries, globally, at random percentages) they achieve none of the above. All they achieve are higher prices. Tariffs on coffee serve no domestic goals since the US has no coffee industry.
The problem is not that Trumps ideas are bad. Voters love his policies. But he's lazy. It's easiest to just slap "10% on the world" than say 10% on lumber to protect the local lumber industry. Worse, there's no stability. The here-today-gone-tomorrow approach defeats the point. I'm not investing in a new lumber mill if those 50% tarifs will be gone by July.
So to answer the post higher up, Trump takes good ideas, but executes them badly. It's not a double-standard, it's just that he's good at talking but really, really bad at doing things. Doing hard things is hard, and he's lazy.
On the other hand he's a good grifter. No one grifts like he does. If his goal in getting elected was to enrich himself, then he's doing a great job.
It could be a good idea for the right reasons and with a good implementation. Is Trump doing it for the right reasons and in with a good implementation?
Is a house fire good because a campfire is good?
Is a flood good because droughts are bad?
Your comment seems to indicate an incredible lack of curiosity.
If you import more from the US than you export, you're still seeing a 10% tariff. These things are being used by a bully to bully, nothing more, the way he ran things as a landlord. They lack coherence and strategy, and are often portrayed in conflicting terms (the are to reshore vs they are temporary negotiation tactics... hint, they are actually for extorting praise and bribes)
The only way out so far is to pay tribute, largely by American companies who don't want to pay tariffs on their imports.
More recently it seems TFG is once again dialing back the tariffs because the economic fallout is being voiced by more parties.
It's not bad just because TFG does it, but because he doesn't understand economics and many other things the leader of America ought to have some basic understanding of. It's clear he's too old for the job
What does that part about VAT have to do with this? VAT is essentially a sales tax with a more involved collection process.
The big difference in collections is that VAT is collected at each step of the chain of manufacture and distribution but refunded if the next step is not to a consumer, whereas in sales tax it is only collected on the final sale to a consumer.
As for why VAT is remitted on exports, it is the same reason why if GM builds a Tahoe in their factory in Arlington, Texas and sells it to a dealer or consumer that is not in Texas they do not pay Texas sales tax. Sales tax and VAT are both destination based. Exports, whether from Texas or Germany, are not to the final consumer and so VAT and sales tax are not owed.
Saying that VAT has anything to do with why BMW is more common than GM in Germany makes as much sense as saying that sales tax is why GM is more common than BMW in Texas.
Another important difference has to do with the size of the VAT tax compared to single-stage taxes. For example, in the US if you taxed 19% on inputs every step of the way, no one would be able to afford the final sticker price. Instead, the US taxes a much smaller amount but does not refund this like the VAT system, and the end consumer tax is the same small percentage. VAT can be much higher because it avoids the cascading tax effect. In the end maybe 19% tax was collected on the manufacture and sale in both the US and Germany, and all you changed was one having a higher tax versus cost but the sticker price evened out in the end.
Because of this difference in the two tax systems, VAT can be, and is, much higher than US state/local tax. But then, this means that differences in tariffs creates a compounding effect. A German manufacturer can sell to a US end consumer on average about: 100% cost + 2.5% tariff + 102.5% * (8.5% consumption tax) = 111% after tax cost. On the other hand, if Ford builds in the US and sells to a German end consumer, then the calculation goes: 100% cost + 10% tariff +110% * (19% VAT) = 131% after tax cost. So while Germany's VAT is 10.5% higher than the average US sales tax, and equal to the VAT any German would pay in Germany, its actually almost double that amount when you take into account the compounding affect of Germany's higher tariffs.
In short, the differences in the two tax systems result in systemically higher tax rates for VAT. And this means that EU car manufacturers do see a trade advantage in terms of selling to EU end consumers compared to US manufacturers selling to EU end consumers (when compared to either selling in the US) since the final after-tax cost calculation is multiplicative.
I actually dislike all consumption taxes, but I find myself defending VAT way too much on this platform :/
> And this means that EU car manufacturers do see a trade advantage in terms of selling to EU...
What is never mentioned in these discussions is that high VAT means higher prices as a whole and that has a chilling effect on consumer spending. German (and all other EU) manufacturers have a disadvantage of a smaller home market. This is then compounded by having other taxes on gas (+VAT too of course), which is much more expensive than in the US. So it's simply less affordable to have a car in the EU. And as a result, a high VAT and other taxes are not a competitive advantage for any local industry. This is different to tariffs or direct support, which are an advantage.
I agree the 10% tariff on US cars that is problematic, but that has nothing to do with the VAT
To illustrate my second point, let's imagine both countries have a 10% tariff, and it takes $50,000 to build a car (ignoring point #1). In Germany, the German car's after tax cost is 50000*1.19=59500 and the US car's is 50000*1.1*1.19. The difference between the two cars in the German market is 5950.
In the US market, taking the average sales tax, the German car's after tax cost is 50000*1.1*1.085=59675 and the US built car is 54250, a difference of 5425. The difference between the cars is $525 tighter in the US market compared to the EU market. The German car makers get an advantage by virtue of how VAT is systemically higher and the resulting multiplicative effect, even when the tariffs are the same. When the EU tariffs are relatively higher, as they are now, the effect is even greater.
To add some further context that helped me understand VAT:
Sales taxes are great, with minimal dead weight loss and distortion, but have the downside of encouraging black markets since it's easy to avoid reporting final sale transactions.
VATs are designed to be mathematically the same as sales taxes, but robust to black markets. The sales tax is captured on the manufacturing end, which is much harder to avoid reporting for a variety of reasons.
That's not context for VAT. Or a fact. As far as deadweight loss and distortion go, a uniform VAT is the same thing as an income tax.
If you want a tax with minimal deadweight loss, you're pretty much stuck with a capitation tax.
For example, if a distiller buys a tank, income tax is immediately paid. But VAT only generates revenue many years later for the country when the beverage leaves the store. So it's really a consumption tax.
The effect of the VAT is to make all money less valuable. This means that people will seek to earn less of it.
> For example, if a distiller buys a tank, income tax is immediately paid. But VAT only generates revenue many years later for the country
VAT is paid on all transactions; that's the whole point of VAT. You're thinking of a sales tax that exempts business purchases. As soon as the tank is purchased, its seller must pay the appropriate VAT.
On its face, it directly contradicts you:
> Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates the amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax). The difference between output tax and input tax is the amount paid to the government (or refunded, in the case of a negative amount).
Though of course a distiller isn't reselling its still; it is the final consumer of the tank.
> [example of] 10% VAT:
> At each stage of production, the seller collects a tax and the buyer pays that tax. The buyer can then be reimbursed for paying the tax, but only by successfully selling the value-added product to the buyer at the next stage.
That reimbursement comes from the customer, not the taxing authority.
https://taxation-customs.ec.europa.eu/taxation/vat/vat-direc...
But the example goes:
1. A vertically integrated helmet producer produces helmets out of nothing and sells a batch of them to a mine for a total price of €240. This producer has added "€200" of value, despite the sale price of €240, and owes VAT of €40 at a "20%" rate, which it pays out of the revenue from the sale of helmets.
2. The mine has purchased €240 euros of helmets and converts that purchase into €1200 of ore. This might look like adding €960 of value, but it isn't. It sells the ore for €1200, and since it has added "€800" of value, it owes VAT of €160, 20% of €800, which it pays out of the revenue from the sale of ore.
3. Because the ore sold for €1200, the government is owed "20%" of that, or €200, which it receives in one payment of €40 (when the helmets are sold) and another payment of €160 (when the ore is sold).
So far the terminology here is deeply stupid but logically coherent.
The question mark I mentioned before is what happens if the helmets fail to be consumed in the production of this batch of ore. Presumably they'll be reused to produce more ore. It would be odd if they still counted against the mine's "value added" for the second batch of ore.
I tend to suspect that the mine is considered to have added more value to the second batch of ore, but the page doesn't address the issue. This would mean that capital goods depreciate in full immediately.
Now, your original comment:
>> For example, if a distiller buys a tank, income tax is immediately paid. But VAT only generates revenue many years later for the country when the beverage leaves the store.
This is clearly false. Both of your links say it's false. The taxing authority receives revenue on exactly the same schedule that it would if the VAT were an income tax. Try running all the same transactions again with a VAT of zero and an income tax of 17%.
An interesting concept to alleviate this problem has been pioneered in Melbourne local politics is citizen councils.
No one has infinite time or attention.
The conclusion is: "We'll see".
One might argue that the sight in question tends toward the Trumpian side of things in general, I suppose.
Every flavour of economics enjoys some level of widespread support, there are still a bunch of people who profess a commitment to Marxism. Nobody listens to them (hurrah!) but they're still there. If we had Marxists in charge their articles would probably get a lot more traction though because people want to know what is going to happen next. Ditto things like the gold standard, fiat currency, ultra-low taxes, ultra-high taxes, globalism and economic independence strategies.
TLDR; there is probably a strong selection bias here.
(Though I wonder how much they contribute? 30-40%? Or more? How does one find this out?)
Anyway, I am sure there are other factors like colonialism and what not. But even if you manage to rob someone else and then by the end of next week your money is gone in the various waterholes of your neighbourhood then you are right where you started ready to rob again until you can’t rob anymore. Are there other, from past, “robber” nations that squandered their loot in watering holes?
I wonder how “meteoric” the decline would be if those same academic institutes are undermined and are stifled, the ones that contributed to the rise.
PS. When I was applying to unis in mainland Europe (because US/UK was too costly) any place below at least a hundred year old was “too nuvo” for my academic taste ;-)
Hillsdale is a college founded expressly to be a conservative alternative to the Ivies/older liberal arts schools. And its graduates have been very influential in the recent American conservative movement.
"An introduction to the vast diversity of life from prokaryotic forms to the eukaryotic vertebrate mammals. This course introduces the beginning biology student to all the major groups of organisms and to their fundamental taxonomic relationships."
"This vast diversity exists because that's the way God made them" is perfectly compatible with that description.
Also, from the description of an event held April 11, 2025:
"Are the special creation of Adam and Eve and the evolution of humans over millions of years compatible? 100 years after the Scopes Trial, the debate continues."
So "they actually teach a course on evolution" seems to fall well short of a full description of exactly what they teach there.
"Emphasizes the fundamental evolutionary concepts that provide explanations for the diversification of life on Earth. Specific topics include the evidence for evolution, adaptation by natural selection, speciation, systematics, molecular and genome evolution, and macroevolutionary patterns and processes."
"Fundamentalism" was getting a lot of buzz during that time, and I remember my fellow freshmen debating whether their sect was "fundamentalist" or not. On the other hand, the biology department taught straight-up evolution with no religious disclaimers, and no objections from the college administration. If there were any objections, it was from a handful of students.
What it suggests to me is that the actual character of an officially Christian college can defy expectations, conflict with the technicalities of official doctrine, and change over time. My own rule, which I think is fair to everybody, is to avoid speculating about anybody's religious beliefs unless they actually say what they are, and then, it's whatever they want.
This is not correct. Hillsdale was founded in 1844 at a time when the contemporary so-called "conservative" movement in the US didn't even exist.
Oops this is my mistake. I shouldn't have said founded when I didn't actually know. These days it is at the very least marketed as such. A conservative alternative to...
Should modern Mexicans start their speeches with land acknowledgments to the Maya, Inca, and other Mestizo Indians? Indians and Mayans committed genocide at a big scale. Should their descendants be responsible for land acknowledgments?
I don't really understand this comment. Are you saying that there are not many colleges or universities in the US founded in the twentieth century? That's not really true. I haven't done this exhaustively, but I took the lists of US colleges and universities for just three US states (CT, ME, MA) from wikipedia. 101 of the 167 listed were founded after 1900.
I don't know exactly how this would work out for all 50 states but I am sure that we'd find many more, likely a large majority, founded after 1900.
There are around 4,000 or so postsecondary degree-granting institutions in the US. I think what's going on here is that you never hear of the vast majority of them.
Or are you saying that you rarely find US academic institutions founded before the 1800s? In that case, well, yeah, the vast majority were not.
The US does have prestigious organizations from early in its history, but that history is still pretty recent in comparison to Europe. All things considered, the US has a pretty good amount of prestigious history and accomplishments compared to classical European history. It's just hard to compare 18th century America to 5th century Italy. For as long as the USA has been a country, it's not significantly less accomplished than any historic European nation of the same age.
Volkswagen Tiguan ~$28,880 ~$39,500
BMW 3 Series (330i) ~$44,500 ~$66,200
Mercedes-Benz GLC ~$47,100 ~$64,500
Audi Q8 e-tron ~$74,400 ~$82,000
Volvo XC90 ~$56,000 ~$87,900
Land Rover Defender 110 ~$60,600 ~$73,500
Porsche Macan ~$62,550 ~$88,000
BMW i4 eDrive40 ~$57,300 ~$66,000
Aren't the end-consumer prices all that matters in the end? Plus its mostly what most people would describe as luxury vehicles - so few percent here/there is just a smoke screen.
The other way around its also just Mustangs, Corvettes, Jeeps, Cadillacs, Teslas - again much cheaper in the US than the EU.
A part of this is VAT of course but some prices are still much lower in US even when you discount the VAT amount.
Some claims are just out and out misleading, like:
> One of the provisions agreed to by the U.S. in the early GATT negotiations following World War II was differential tariffs: the U.S. lowered its tariffs more than its trading partners did. Again, the purpose of this was to speed the economic rebuilding of allies and former enemies who had suffered devastation during the war.
Perhaps that was a purpose of those tariffs, but this ignores the more general purpose of US policy which was, at the time, to reduce trade barriers, by more closely integrating all these economies (see European Coal and Steel Community), and creating a customs union (see the Paris and Rome Treaties), all in service of preventing another world war.
> The U.S., for instance, has a 2.5 percent tariff on cars imported from Germany, while Germany has a ten percent tariff on American cars.
Hard to believe, in the age of Trump, but tariff rates are generally negotiated for provisions, as part of a broader trade agreement. TTIP, a new EU-US agreement, was dropped by the US without a deal in 2016. Guess why.
> As a result, while the logos of Mercedes-Benz, BMW, and Volkswagen are seen all over American roads, those of Ford and General Motors are a rare sight in Germany.
MB and BMW have a long history making cars, longer in many cases than the American companies. That is -- this is a mature industry, and, in general, Ford and GM are not regarded as making cars of the same quality both in the US or in Germany. So -- the reason you don't see many Cadillacs in Germany is because MB and BMW and Porsche make a better alternative, and the consumers know it.
Japan for instance has a 0% tariff rate on US cars and the Japanese still don't buy them.
It's not even true that Ford is a rare sight. Ford outsells Toyota in Germany, employs 28 000 people in Germany, and has been incorporated there since 1925.
US Fords are of course a rare sight but that has nothing to do with tariffs, it is simply that most buyers don't want them.
This 25% tariff in 1964 was technically written to address an entire category in order to comply with GATT rules against retaliatory tariffs, but was specifically targeting the VW bus, because the EU had implemented a tariff against all foreign chicken. Because the EU taxed Europeans on foreign chicken to protect its domestic chicken production, the US taxed Americans on foreign made trucks to protect its domestic automakers, and these tariffs have been referred to as the “Chicken Tax” ever since.
The end result of chicken tax was the transformation of American roads, where the F-150 is the highest selling vehicle in most states. Rather than improving a product class, American automakers over time switched away from making cars and improving their offering, and toward making trucks where they would not need to compete.
The weakness of domestic trucks as a product might even contradict an argument for protective tariffs. Protection was not important for allowing a fledgling industry to flourish; instead it largely lead to abandoning one product class, and shifting development toward a class that was artificially protected from competitive pressure. This was especially problematic because these trucks were not marketable overseas. Partially, that is because American roads were always larger, but also because these were weak products that had been developed in an overprotected environment.
None of these arguments were presented in a reasonable way, with numbers, ahead of a policy decision that made a considered attempt to find an optimal balance.
No, we elected an administration that had been shouting "Tariffs!" during the campaign, then enacted "Tariffs!" once in office, then engaged in a quite frankly pathetic flurry of increases/decreases/suspensions/delays to try to fix the critical problems being introduced by the "Tariffs!". Most of which have been to other nations' benefit, even.
It's a bit much to look back after three months of this madness and try to pretend how reasonable it was all along. We're still in the madness (Q2/Q3 numbers haven't landed yet to show actual effects, it's going to be a rocky year, folks).
For instance, any time System76 is brought up for Europeans, VAT is immediately mentioned, along with why they don't have a European distribution center.
Why would opening a European distribution center be relevant if you have to pay the same VAT either way?
A few examples:
https://ubuntuforums.org/showthread.php?t=2204089
https://www.reddit.com/r/System76/comments/1c9djrj/taxes_on_...
BTW, it's not just the EU that wants you to pay the sales tax when bringing items across the border, but the US also. It just so happens that it's rarely if ever enforced.
EDIT I should add that the key difference of the VAT and tariff is that VAT is not made to advantage one product over another. It's simply a sales tax on nearly all products, just like the US sales taxes.
It seems to be the customers asking for one, not System76. They were planning to open one, though.
> VAT is not made to advantage one product over another.
Like sales tax, there are different (and often zero) rates depending on product (same link as before)
> Like sales tax, there are different (and often zero) rates depending on product (same link as before)
But those different rates depend on the product category, not the product manufacturer or place of origin. The whole point of tariffs is to base rates on place of origin.
They do, though:
- Staple food (rice, basically? Probably flour too) as well as healthcare: 0%.
Food and common, staple products (soap, condoms, probably other), some cultural products (books, theater tickets, probably other), electricity, water: reduced rate (5.5%)
'vacation' rate: camping bookings, alternative healthcare, zoo, movies, restaurants (10%).
Everything else is 20%, whatever the brand or the producer. I know because I actually checked my transaction tickets for a long time (and my first journey b was writing an OCR to automatically analyze those tickets to ask for VAT reimbursement)
So now I gotta be home 100% to receive the package, instead of it getting it dropped off at a neighbors if I happen to be out/at work/...? And I hope they picked a shipping company that takes card/allows online payments and not someone who expects me to pay in exact cash.
And that's the happy path where everything worked correctly, and not one where something in the paperwork is wrong or got messed up and now you get to try figure out what exact proof the shipping company wants to release your package/believe that they got the amount wrong/... Or it gets shipped in a way where it ends up stuck with actual customs and you get to deal with them. If a seller has their shit in order it's relatively unlikely to happen, but well, random small-ish companies not necessarily do, and if it goes wrong its really annoying.
+ of course if the seller has an actual legal presence here it makes it clear consumer rights as I expect them apply.
I'm not someone who absolutely won't order from abroad if I want something, but a local source or a known distributor just avoids a whole category of potential issues. And computers are the kind of high-value item where people really want to avoid them (and some of the simplifications aren't available, e.g. I think the most straight-forward pre-payment mechanism for sellers is restricted to low-value parcels).
We do not have any of these considerations in the US, which is perhaps part of why so much stuff comes directly from abroad.
But $800 (I think that was the value?) de-minimus indeed makes a lot of cases easy.
But again, that's not what's happening in US policymaking right now. They don't want tariffs, they want "Tarrifs!", and splitting hairs over the precise definition isn't going to change their mind.
Yes yes yes, complex rules are complicated. So what? You can do things with a VAT that you can with a tariff, and that you can not with an income tax or estate tax or usage fee or whatever.
They are closely related policy instruments.
TFA is the transcript of an historical overview lecture, not a formal economic thesis on the topic, much less, a journal article.
Your point, while valid, might be enhanced by some counter-linking.
No. It is an attempt to sanewash conservatives, because that is the whole reason for being for this university.
The part about Germany and cars is also crap.
So, could you suggest a link to a solid refutation?
People who work in these institutions lie, they are paid for lying and they do it to project their ideological agenda.
A legless assertion. Could you be more specific with the objection, please?
They have a framework and try to make everything they read/hear about go through that framework, even if it doesn't really fit. They don't really understand, but have strong opinions and held them at least as strongly, maybe more.
They aren't idiots in any case, but clearly, in this particular case, the author doesn't know what he is talking about.
VAT is paid regardless of who manufactured the car. It is something the final customer has to pay regardless of whether the product was made in EU or abroad. If you are buying BMW, you have to pay VAT. If you are buying Toyota, you have to pay VAT. If you are buying an American car, you have to pay exactly the same VAT. It is sales tax, basically, just managed differently to make tax fraud harder.
Also, Mercedes-Benz and BMW have great reputation and fit into European roads. Ford and General Motors do not have comparatively great reputation. Germans were buying Teslas tho, before those became associated with support to far right.
Article author is lying, plain and simple.
Merely asserting "lying" is unhelpful.
Given they lie about something so straightforward, I am not inclined to trust whatever they write about history. History is super easy to cherry pick and present in manipulative way.
... is somehow completely objective and obviously unrelated to the giant shitstorm of contemporary US tariff policy is just laughable, sorry.
We both know what this is.
[1] The presentation might have fooled you, but John Steel Gordon is absolutely not an "economist" or "historian" in any professional sense.
It's an historical overview. Was there a substantive rebuttal on offer, or just what sounds like innuendo?
The point isn't that he's wrong (though multiple people here are indeed pointing out things that are). It's that (1) his not being wrong doesn't remotely justify current policy and (2) who he is and where he spoke was very clearly intended to justify current policy. I mean, duh, as it were.
I mean, please. Link me another dry historical lecture hosted by Heritage. I dare you. Everything they do is political.
It’s an island right in the middle of the entrance to Charleston Harbor.
Then again they might not work there anymore.
For comparison, China applies the minimal amount of economic protectionism it deems necessary to achieve its industrial policy goals. The crucial fact about China's approach is that China's leaders do not make silly claims to sell the idea to a naive public, they cite specific, highly targeted industrial policy goals and interfere in the economy as little as possible. They acknowledge the sacrifice that tariffs require and assert that the industrial policy goals are worth it, they do not make false claims about who pays for tariffs.
On the contrary, protectionism in the US is a blunt and emotionally wielded instrument that is deployed haphazardly and then suddenly repealed, then deployed again amid rhetoric that the US is a victim and has been taken advantage of, and the emotionally reassuring and politically priceless falsehood that foreign companies pay the cost of tariffs.
The costs of recent tariff antics in the US is clear as the economy must now price in the risk of unpredictable and haphazard tariffs along with other systemic risks. Absent from the discussion of tariffs in the US is any coherent idea of industrial policy, any forward-looking or coherent perspective on what should be done to prepare for the future, etc.
US tariffs are a purely emotional ploy meant to build up nostalgia for bygone days of US heavy manufacturing. The "us against them" rhetoric and the victimhood rhetoric is just a bonus that (sadly) sells well politically in the US these days.
It is not only counter-productive and directly harmful to the US economy, it is also deeply embarrassing that the world has to witness the US self-immolating in this way, hitting our own knee-caps with a hammer, destroying wealth and trust that many people worked so hard to create.
Economists don't favor tariffs for one simple reason: Economics is a science and there is overwhelming evidence telling us what will happen. Better policy ideas exist such as targeted industrial policy (such as that done by China) but the US ignores them in favor of the most emotional and reactive posturing imaginable.
It should already be clear what happened. Trump made a lot of claims about "deal making" and tariffs. Many of the claims were contradictory from the beginning, meaning if one was true the other could not be true. Supporters are not bothered by that because the appeal is emotional rather than logical. Now we've seen many tariffs get deployed, we've seen markets tank, companies cancel orders, reverse course, hold back on investment decisions. Then we've seen the tariffs get walked back amid bluster and rhetoric. Some economic numbers improve in response to this but not all. It's like the last spasms of a dying creature -- is it an attack or a retreat? Neither or both?
All this stems from a deep misunderstanding of American power and American greatness. Misunderstandings like this are easy in a society so heavily influenced by just-so stories and propaganda, societies like ours in which the state religion, American Exceptionalism, is irresistable to so many.
This isn't remotely true. Currency manipulation, state run enterprises, local ownership requirements, tariffs. They do it all across the entire economy.
Garbage in, garbage out.
The article correctly points out the disaster of Smoot Hawley and the effectiveness of GATT. It attributes much of the world-wide reduction of poverty on free trade.
I think it's written from the view of traditional free-market conservatives unwilling to criticize trump directly.
This used to just be called a patriotic American.
> In 1950, according to the World Bank, 62.12 percent of the world’s population was living in extreme poverty. In 2017, the percentage had fallen to 9.18 percent.
How did that happen, exactly? Let's do some math. In 1950 the world population was ~2.5B [1]. In 2017 it as ~7.6B. 62% of 2.5B is 1.5B. 9.18% of 7.6B is 700M. What happened in that time? Oh that's right, China lifted 800M people out of extreme poverty [2]. The author's numbers may be off because I've seen other studies that show the number of people in extreme poverty went up if you remove China from the equation entirely.
Best case for the author is that China is solely responsible for the decrease in global extreme poverty. But there's no mention of that because the success of a pluralistic yet authoritarian regime with a command economy is not something neoliberals ever want to acknowledge let alone talk about.
Oh, as an aside, the author is a climate change denialist [3].
Another choice quote:
> The U.S., for instance, has a 2.5 percent tariff on cars imported from Germany, while Germany has a ten percent tariff on American cars. In addition, Germany’s value-added tax is remitted on exports but charged on imports. As a result, while the logos of Mercedes-Benz, BMW, and Volkswagen are seen all over American roads, those of Ford and General Motors are a rare sight in Germany. And China, as already noted, is far worse, a world outlier, in terms of its nefarious trade policies.
For an economist who cannot possibly not know better, this is just dishonest. Germany charges VAT on all cars sold in Germany, whether they're domestic or foreign, just like US states charge sales tax in exactly the same way.
Also, where are those cars produced? A lot of foreign brands are produced in the US eg BMW's plant in South Carolina [4].
Lastly, this whole "they don't buy our cars" talking point comes straight from the administration when a lot of American cars are simply not suitable for use in Europe. A Ford F150 requires a commercial driving license in much of Europe. Also, try and imagine such a beast navigating the narrow, winding strets of a French village.
There's also no mention of how the US outright bans Japanese auto imports where the Japanese produce some of the most reliably and commercially successful trucks on the planet eg the Toyota Hilux.
[1]: https://www.worldometers.info/world-population/world-populat...
[2]: https://www.worldbank.org/en/news/press-release/2022/04/01/l...
[3]: https://www.commentary.org/john-steele-gordon/climate-global...