Comment by danmaz74
7 days ago
By the way, what I find most baffling in these discussions is that these calculations are always based only on physical goods, ignoring services, where the US usually has a positive balance - eg, with the EU, the US has a 109B positive balance. In our economies, which are more and more service based, why are services ignored?
Services are ignored by Trump for precisely the reason you mention. The big question is: What will other countries do, like Germany, who tend to export goods to the U.S. but import services. Right now, those are the countries who would rather prevent this thing from escalating, but if escalation it must be and they run out of ammunition within the scope of tariffs on goods, where will they go next?
Tariffs on services may also be less popular with the citizens. It's not obvious that the locally produced fridge is only cheaper because of tariffs. It will be more obvious that everyone non-EU based pays more. It will also be harder to control (how will EU extract tariffs for payments I do to companies with no EU presence?)
But I don't how much about it, maybe these are already solved problems. After all VAT already exists and faces similar challenges.
There are two kinds of "services". You have jobs that are in finance and software, which make good money, and you have jobs in cosmetology and fast food, which have terrible pay. The services that we export are the former.
Your high school grad (or high school dropout) isn't going to get one of those finance or software jobs. But they could get a factory job, if we can get those back.
So the best spin I could put on this is that the emphasis is on physical goods because that's where the people who are hurting in the current economy could find real work.
(Of course, if that were the case, the reasonable thing to do would be to explain that, instead of just acting like services didn't exist as something that is traded.)
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