It's one thing to use a few tariffs as a way to moderate trade in certain industries -- but as a plain and simple "gee, let's make someone else pay for our stuff!!!" approach? How marvelously Trumpian.
I find this to be a very important post. I have friends who do not like Trump as a person, but will most likely vote for him because of “the economy.” This shows that his economic policy will only worsen things - and it is very much a “build a wall, and make Mexico pay for it” logic.
I haven’t been blown away by Harris’ economic plans, but at least she is aware of how our economic plans don’t exist in a vacuum and we can’t just say we will make others pay for it and expect it to work.
1) Tariffs are not just on consumer goods. We import intermediate goods too. Tariffs on steel and aluminum, for example raise the cost of production for all industries that use these inputs. The jobs lost by the importers offset the few jobs protected by the tariffs.
2) To the extent that tariffs cause expenditure switching from foreign to domestic production they cause an excess demand for dollars, and the dollar appreciates in value. The competitive advantage from the tariff is offset by the higher value of the dollar. This has to follow since net exports is equal to the excess of domestic savings over investment. Tariffs do not raise domestic savings and they do not cut domestic investment, so net exports cannot change.
It's one thing to use a few tariffs as a way to moderate trade in certain industries -- but as a plain and simple "gee, let's make someone else pay for our stuff!!!" approach? How marvelously Trumpian.
I find this to be a very important post. I have friends who do not like Trump as a person, but will most likely vote for him because of “the economy.” This shows that his economic policy will only worsen things - and it is very much a “build a wall, and make Mexico pay for it” logic.
I haven’t been blown away by Harris’ economic plans, but at least she is aware of how our economic plans don’t exist in a vacuum and we can’t just say we will make others pay for it and expect it to work.
Thanks Dan
1) Tariffs are not just on consumer goods. We import intermediate goods too. Tariffs on steel and aluminum, for example raise the cost of production for all industries that use these inputs. The jobs lost by the importers offset the few jobs protected by the tariffs.
2) To the extent that tariffs cause expenditure switching from foreign to domestic production they cause an excess demand for dollars, and the dollar appreciates in value. The competitive advantage from the tariff is offset by the higher value of the dollar. This has to follow since net exports is equal to the excess of domestic savings over investment. Tariffs do not raise domestic savings and they do not cut domestic investment, so net exports cannot change.