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Comment by swat535

11 days ago

What's the actual strategy behind the current US administration slapping tariffs on everything? Feels like they're handing them out like Halloween candy. Is there a long game here, or is it just managed chaos and alienating trade partners for short term optics?

31 comments

swat535

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dragonwriter  11 days ago

They claim that they are "reciprocal" tariffs, and their chart shows them at exactly half the tariffs they claim are imposed by the target or 10%, whichever is higher. But it is suspicious that the column on their infographic showing the foreign tariffs has fine print indicating that includes other non-tariff things that you can't easily calculated as a neat rate the way tariffs are. And, some people running the numbers have determined that the quoted foreign "tariff" amounts are consistently the US trade deficit in goods with the target country divided by that country's exports to the US, with a minimum of 10%.

So, despite being labelled "tariffs", the actual basis for calculating the "reciprocal tariffs" has nothing to do with tariffs.

sydbarrett74  10 days ago

A rebirth of mercantilism. Peter Navarro is a huge fan of it, and in his heterodox fever dreams, laments that most of the world abandoned it several centuries ago. In his mind, a net surplus of currency is every bit as important as having a strong military. People like Lighthizer have drunk the coloured sugar-water.

ironyman  11 days ago

People like Navarro believes a non-trivial amount of manufacturing can be coaxed back to the US from China and Vietnam.

  • sitkack  10 days ago

    Only if we tank our currency and create a huge population of people willing to work for a buck oh five.

    • cmurf  10 days ago

      Kill people's savings, might happen. Discretionary spending is about to get clobbered. Restaurants may be at the top of that list, and travel.

      I rather doubt Walmart is going to increase the price of only Chinese made goods 25%. I think everything goes up 25% and they pocket the margin as long as they can get away with it.

      7 replies →

s1artibartfast  11 days ago

I'm on the side of free trade and dont think there is a single policy. The strongest arguments I can think of are:

1) raise tax revenue in a way that partially falls on foreign nationals

2) reduce trade deficits and foreign purchasing of treasuries.

3) Increase relative power if other economies are damaged more than the US. There are situations where zero and negative sum strategies are optimal, like war, where it is better to have a larger % of a smaller overall pie.

4) stimulate demand for us labor

  • JumpCrisscross  11 days ago

    > 2) reduce trade deficits and foreign purchasing of treasuries

    None of the GOP budgets reduce the deficit. Trump’s blew them out even further.

    • s1artibartfast  11 days ago

      Im talking about trade deficits, not budget deficits. Im not convinced trade deficits are a bad thing to begin with, but that is a whole sperate can of worms.

      My understanding is that yes, the national debt is still increasing, although the administration is counting on tariff funds to supplement revenue. Would you agree?

      3 replies →

maxglute  11 days ago

https://www.ft.com/content/fba87dd3-514a-41c2-b2b9-ea597ffbd...

https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...

The TLDR is Miran sold to Trump US can Plaza Accord everyone, devalue USD to reindustrialize US, draw down US debt/commitments, keep exorbitant privelege... all by slapping tariffs (Trump's fav hammer) to scare countries into signing (converting) existing US commitments to "century bonds" in US favour while tying them to US orbit for foreseeable future. Is US strong enough to coerce others to sign on? IMO doesn't matter, this seems like plan specifically tailered to Trump preferences and ego, so as long as Trump thinks so Miran gets the job.

E: there is logic to the plan, logic that appeals to Trump -> US strength and monetary manipulation skills can force others to fall in line. And TBH countries have fallen in line in the past.

  • danny_codes  10 days ago

    Yeah that’s not going to work. America is about to find out that the era of bully pulpit is over. Why work with a recalcitrant and quite frankly obnoxious US when you can cut bilateral EU/Asian deals?

xfp  11 days ago

Trump is using century-old misinformation about tariffs to raise tax revenue to pay for tax cuts on the wealthy. In reality, it's an added tax on all spending that accelerates inflation.

Tariffs are theoretically supposed to encourage domestic production, but rely on the false premise that all raw and intermediate materials can be sourced domestically at a cost below the import price. That has generally proven to not work unless tariffs are in the hundreds of percent. But at that level, import taxes tend to poison entire sectors due to supply lag instead of drive domestic economies.

  • jonifico  10 days ago

    Interesting, do you have a source to get more information about this?

    • xfp  10 days ago

      It's a bit difficult to nail down direct citations for what is basic knowledge of how tariffs work in reality. It's covered in AP/college macroecon and U.S. history classes.

      Wikipedia's articles on Smoot–Hawley and the Tariff of Abominations both have sections on their effects.

      In short, we'll see a brief rise in the domestic economy, then a sharp recession. One of the reasons SE Asia, BRICS, and the EU have been so active to disconnect themselves from the U.S. is they don't want to get caught up in the U.S. economic failure like they did in the 1930s.

mcfunley  11 days ago

Category error to think there's a strategy. Trump doesn't even know what a tariff is. People try to project a strategy because it's probably too discomfiting to believe that the greatest superpower the world has ever known elected a complete nimrod king.