Comment by rayiner
17 days ago
I'm objecting to his characterization that "they're barely even thinking about this." He makes it seem like they picked this formula out of a hat. But there is an ideological rationale to scaling tariffs up with the size of the trade deficit, as described in the article I linked.
Why do you think the White House aren’t simply saying that, then, rather than claiming it’s about reciprocal tariffs and trade barriers?
The "idealogical rationale" is not coherent or even consistent with the papers that the administration cited:
From one economist who was cited in the rationale:
> It is not clear what the government note is referencing or not from our work ... But I believe our work suggests a much higher value should be used for the elasticity of import prices to tariffs than what the government note uses. ... The government note uses a value of 0.25 for ‘the elasticity of import prices with respect to tariffs’, denoted with the Greek letter phi. But our estimates found a value of 0.943 — very close to 1 — for this elasticity.
From another:
> this is where the discrepancies between our work and the table that President Trump showed arises ... our results suggest that the EU should not be tariffed, and yet they set high tariffs against them. Finally, our range of optimal tariffs is substantially lower than the ones the Administration just announced.
But it does provide a convenient fig-leaf rationalization for the class of over-confident economically illiterate folks to cling to, so it seems to have succeeded.
see: https://www.ft.com/content/bbaa8daf-b7b0-4dca-bc23-c2e8eee68...
non-paywall: https://archive.ph/wip/JMgcP