Comment by phillipseamore
8 days ago
A blanket 10% minimum tariff is a great excuse for any local US manufacturing to increase their prices.
I used to live in a country with heavy tariffs, every time tariffs were raised the local producers increased prices to be just below the imports. Even after the tariffs were abolished the prices (on local and imports) never really lowered in any significant way.
That always seems to happen with this sort of protections. It's like when the government tries to incentivize people to buy electric cars by paying 25% of it (example from the climate bonus in Sweden, which was given for years), but what happens is that buyers actually end up paying just maybe 5% less as the car companies now can increase their prices and still sell the cars they produce while making more money.
That happened in New Zealand, where the govt. paid $5,000 for electric cars. When this subsidy expired, prices decreased by a few thousand.
If a consumer was willing to pay $20,000 for a car why would they sell it to them for less than $25,000 when the final bill to the consumer will be $20,000, with the govt. paying an extra $5,000.
That's why the better policy is not to subsidize the purchase price of the car, but the various taxes associated with owning one, as well as offering certain perks like being able to drive in the bus lane. This was a huge success in Norway. Though now the percentage of new car purchases that are electric is so large that the subsidies are being rolled back because they've gotten too expensive(and the bus lane thing no longer makes sense because if the majority of cars can drive in it, it's not really a bus lane anymore). But I think that's fine. You can make an argument that when subsidies were introduced, electric cars were still struggling to compete with combustion cars in numerous ways, like range, capacity, access to chargers and repair services, etc. Subsidies/perks acted as compensation for those downsides for early adopters. The playing field is obviously a lot more even now. Chargers(including home chargers) are generally widely available, range is improved via better battery tech, there's a lot more players in the market, meaning more choice, etc. Not really a car guy, but I assume the repair situation is also improved, though it may not be on par yet.
In principle, that still injects cash into those companies though; it's just that the popular conception is that these subsidies are intended to make the product cheaper for consumers, instead of encouraging companies to produce them because they're more profitable due to the subsidy.
(This should not be taken as a blanket endorsement, god knows that companies follow the incentives, which is rarely perfectly aligned with the intent)
This is basically what everyone said would happen with Yang's proposed UBI in 2020.
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The electric car does illustrate what happens to prices well.. but I just want to point out that those incentives are not necessarily meant to decrease prices. The incentives are as much for EV car companies as it is for the consumer. Giving them better margins makes them motivated to keep investing in EVs and coming out with new models. It encourages them to do marketing for those EVs since they can actually get some profit from selling them.
One of the reason why EVs was going nowhere for so long was there was no incentives for the car companies since there were no prospects of increasing profits by selling EVs.
This also happens when a certain price range gets different benefits.
For example lower mortgage rates if the house costs below $X. Now houses that could sell for far lower than $X actually list close to $X.
That this would happen is evident to everybody with a minimum knowledge of economics. It’s the same reason UBI won’t work because it would make prices skyrocket.
It certainly could. Depends a lot on the specifics of how the UBI is implemented, and how UBI affects salary levels. If everything remained the same and everyone just got x more income each year, then yes, inflation is very likely. On the other hand, something more like no questions asked/no demands made social security, where the only requirement is being unemployed, could improve conditions for people who are unable to work while paying for itself in eliminating heaps of red tape, and also freeing up a lots of manpower towards helping people sort out their lives instead of pouring over disability pension applications, without paying out a bunch of money to people who don't need it because they earn plenty from work already.
One could also pay out ubi universally, but have a one time down-adjustment of salaries the first year.
Right and wrong. Right if it increases aggregate demand more than available economic production thus leading to inflation.
But if we overall had capacity to tame in the added UBI, then no. Unlike targeted subsidies like EVs, UBI is do much better. Each industry is still competing with other industries
Well yeah, that's the point. Its so factories paying local wages can now compete with factories overseas where wages are much lower.
A laborer in a subsidized, low-productivity industry is one less worker available for a high-tech, high-productivity sector. With a finite workforce, misallocating labor like this inevitably hampers innovation and economic growth. The U.S. should focus on being a powerhouse of technology and innovation, not divert resources to low-value tasks like picking olives from trees.
1. Not all workers are fungible. Your average 30th percentile individual =/= the person progressing your biotech industry. Would they be more beneficial to the economy working in a customer service job, or in a factory?
2. It's very hard to be a powerhouse of innovation if you don't vertically integrate. China has taught us this. You can't split out the gritty part (manufacturing) from the fun part (invention) of technological innovation and win in the long run.
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> every time tariffs were raised the local producers increased prices to be just below the imports.
That's literally how tariffs are supposed to work. I'm confused about what you thought should happen?
Local producers are supposed to raise prices so there is more money for worker pay or business reinvestment or both.
Or, you know, profits.
Capitalists only care about profits.
I live in a country where we have many protectionist tariffs and the locally produced goods are expensive and lower quality compared to imported goods which guarantees profits at the expense of consumers.
I don't understand why people still believe in this day and age that wages will ever increase despite data showing the opposite for literal decades.
If you frequent an American form as a non-American, you'll have noticed by now that for most Americans it's as if the rest of the world doesn't really exist. You can talk all you want about how the thing they're proposing has been done in other countries with terrible results. Or the thing they're saying it's inviable exists in many other countries and it just works. You'll be ignored either way
No, the foreigners pay the tariffs. Then that foreign money gets spent on childcare and other things Americans need and want.
How many times does Trump need to explain this to you?
No, you as an American consumer are paying the tariffs.
This was not immediately clear as sarcasm, I was worried about my name-sibling
Maybe that's how Trump believes tariffs work, but they are actually a tax on imports, that the importer pays. The importer passes that along to the American consumer.
Other countries are angry about this because it discourages importing from them, and their US exports may go down, or they may have to lower their US export prices. Not because they have to pay a fee or a tax to the US.
I also don't think it's enough to justify moving manufacturing to the US. The investments are to high, especially for something that might only last for four years. The US also doesn't have enough workers, so wages would increase.
This is expected and normal? Demand for locally sourced goods will skyrocket which means prices should as well. What you are leaving out is that the US is well capitalized and those sky high prices will be a strong incentive for more competitors to join the market. With competition in place prices will eventually fall. Prices will likely never go back as low but at least our fellow countrymen will be employed, housed and hopeful instead of on the streets doing fentanyl.
People will starting fighting against more houses being built to protect their wealth even more than now. You'll be earning like $25/hr at the factory and all the single-family houses are 300k+ with significant interest. Assuming they never have a huge healthcare bill which also shows no signs of becoming affordable, if the factory jobs even offer decent benefits but my guess is they will all be high deductible plans.
Count on it. Especially after Trump (AKA we the taxpayers) gave the oligopolies and monopolies huge corporate tax handouts, for which they thanked us with massive price hikes and the current "inflation."
Oh, and of course there were Trump's tax hikes on middle-class Americans to boot.
What a mind-blowing betrayal and mess.
Yes that will invariably happen, barring price controls.