Sunday, 2 February 2025

Tariffs And Trade Wars

'To me, the most beautiful word in the dictionary is tariff' so said Donald Trump although personally i would go with the word Autumnal as i love the way that sounds but for him it is tariff which don't really mean much to me except i know he did them last time and is doing them again this time so how did it work out last time?   
Not great appears to be the answer to that if the U.S. Director of the National Economic Council Larry Kudlow is to be believed as he said the previous tariffs either had a moderately negative impact on the economy and reduced real GDP by 1% as many companies just passed the costs of the tariffs on to consumers in the form of higher prices with some goods rising by 10% to 30% so maybe the Tangerine twit should get a new dictionary.
I did ask a Economic experts for an idiot's guide to tariffs and here is what he came up with:
'A tariff is a type of tax imposed on goods when they cross national borders and is often used by governments against trading partners to protect local industries as it makes imports more expensive
and giving a price advantage to locally made goods.'

Do they work? 'They are a pretty inefficient tool that typically leaves consumers in the country imposing them bearing the brunt of higher costs for example, if a house builder imports materials that are used in its constructions, then tariffs on those goods will add to production costs and the final price the buyer pays.'
Will they just buy locally sourced material? 'They can but they may be of inferior quality which is why they imported them in the first place or the local supplier will ratchet up the price as their materials are in demand.'
So what happens to the country that has had the tariffs imposed upon them? 'They almost always retaliate by putting tariffs on the other countries imports and the cycle repeats there also and we can get into a full blown trade war'.
Which is? 'Well the last big one was in the 1930's which preceded the Great Depression so trade wars create more losers than winners but that is for another day'.
That's clearer then, still don't understand why anyone would want to do it but as Trump and his cabinet colleagues are not short of a few dollars, making Americans pay a bit more won't directly affect them. The rest of America and at the moment Canadians and Mexicans it will but not them, so that's ok then. 

2 comments:

Not really a blog said...

the economist seems to know what they are talking about. though it sounds more like chatgpt. it is an incomplete explanation in that it doesn't consider is the innovation capabilities of the nation applying the tariffs, or the quality of the products/services. also, before using income taxes, the US government was funded by tariffs... a major argument motivation for the left to dislike tariffs is that the left likes to tax people... especially people it considers to be rich... go get those oppressors!!

Not really a blog said...

mexico's economy is almost totally dependent on the US and they have screwed the US by not managing immigration thru their country and by not controlling the drug cartels. trump is about to change that with tariffs.

canada's economy is also highly dependent on the US for economic success. under biden, trade advantage swung toward canada. trump is about to correct that as well.

point, the tariffs are temporary to make a point...