Comment by fauigerzigerk
16 days ago
>They won't absorb the new costs.
If you mean that importers will not absorb costs then I agree. They will pass on most of the costs, if not immediately (to avoid sticker shock) then over a period of time.
But the question is what happens to demand for imported goods and demand for everything else. At constant money supply, prices of some goods going up could put pressure on the price of other goods and services, although this seems less likely as the tariffs are so extremely broad.
A lot depends on how people respond. Will they reduce saving to pay higher prices? Will they take out loans to maintain living standards (creating new money in the process)? Or will they cut back on spending causing a recession?
And what will companies do? Will projects be put on hold because the return on investment is too unpredictable? What happens to the dollar? Will Trump cut other taxes to offset his tax hikes on imports? What about the massive budget deficit?
I think this is all highly uncertain.
Consumers will pull back, if not right away it will show up with 18 months, though early indications suggest they already are to brace for the price increases as most were already trying to simply get ahead of the last few years of inflation to begin with.
Businesses are already cutting back. My employer has already talked about the impact, I know other people who are saying the same thing. Lots of things going into freeze or slowing down. It will take a minute for this to get through the economy but it absolutely will.
I don’t think this is highly uncertain territory, history has clear examples of what will happen if in doubt. Generally, it’s not good for most, especially consumers or those who have any reliance on foreign material or goods, which nowadays is most businesses and consumers, and the US won’t be able to magically fill that in.
This will result in a recession