Donald Trump the Megathread part II - mod warnings in OP, Updated 18/03/25

The video dates from 1988.

Japan's economic performance for the following 30 years was terrible — asset price collapse, massive budget deficits, stagnant nominal and declining real GDP per capita, falling real wages, falling investment. The period is known as the Lost Decades. Literally nobody looking for examples of tried and tested successful economic strategies would ask themselves "Let's see — what was Japan doing in the 1980s? Let's try that!"

So, what the video shows is that Trump's economic analysis in 1988 was very bit as as bone-headed as it is today. Was that the point you were trying to make?

No, the difference of opinion here is not about where to draw the line (if by that you mean, what is the right level of tariffs to charge). There is a fundamental disagreement about when and why tariffs should be charged at all.

It's widely recognised that tariffs are, in themselves, a cost. If Ireland imposes a tariff on widgets, this means that Irish consumers must pay more for their widgets. This in turn means that they must buy fewer widgets, or they must buy less of something else so that they can afford the same number of widgets as they did before. Either way, they're worse off.

Yet nearly all countries impose some level of tariffs. If that costs them money, why do they do this?

The answer is that they impose specific tariffs, and bear the associated costs, in order to acheive some other goal that they think is desirable and that they think justifies the cost. The orthodox wisdom is that tariffs can, in specific circumstances, be rational or beneficial. E.g.

• For political rather than economic reasons. You want to sanction Russia for invading Ukraine; swingeing tariffs on imports from Russia can be a part of this. But note that this doesn't make you better off economically; there's an economic hit which you accept because it serves your political goals.
• As a selective, targetted tool to put pressure on other countries to address unfair trade practices. Broadside tariffs like the ones Trump has just announced can't be used for this purpose, precisely because they are not targetted on countries employing unfair trade practices
• For national security purposes, to maintain self-sufficiency in critical items. In this case, obviously, you only put the tariff on the critical items. And this only works, again obviously, if self-sufficiency in this items is possible for you. And, again, it's economically disadvantageous, but you put up with the pain for non-economic reasons.
• In an underdeveloped economy, to protect and foster domestic production and allow it to grown in size and efficiency to a point where it can compete on world markets. This obviously has no relevance to the US. And, even for countries where it is relevant, it's very hard to do well — the protected industries/sectors tend not to become as efficient as they might (they don't need to because they are protected from competition) and the political pressure for tariff protection to continue indefinitely is very strong.

Trump doesn't agree with any of this. He believes, or pretends to believe, that tariffs are paid by the exporting producer, not the importing consumer; he simply waves away any suggestion to the contrary. Because of this, he sees tariffs as a benefit to the US, not a cost. The higher the tariff, in his view, the more the US benefits.

Before Stupid Thursday, the US had average tariff rates of about 1.5% — many goods were exempt; some were tariffed for one or more of the reasons just given; across the US's international trade as a whole, the tariff cost averaged out at about 1.6%. That's not out of line; the EU's average tariff rate is about 1.4%. Japan, 1.8%; China, 2.3%; India, 5.9%. (You'll notice that developing economies tend to be a shade higher.) But, as of today, the US's average tariff rate is 27% (with the prospect that this will rise further in 90 days). That's off the chart. This isn't a difference of opinion about the optimal level of tariff to set; it's the result of a profound disagreement about the fundamental questions of what tariffs are, how they work and when it is wise to impose them at all.

Countries use targeted tariffs all the time to protect established industry. Trump has done it to areas where he has no home capacity.

This EV "gotcha" has been spun here plenty this week but it doesn't mean what people think it does.

In a rare turn of sanity, the supreme court has ruled 9-0 that picking up and deporting random people for the "crime" of existing while brown won't fly

I bet that's because she's a women rather than anything relevant

USD devalued at pace against the euro to $1.13 while main indexes continue to give up their rebound rally gains.

T bond heading for same territory as before Trump announced his three month pause.

It might be Friday but it's also just another "flip the table day" in the White House.

About the American public paying for the tariff. The head of a well known Irish crisp was on the radio during the week saying he could pay a percentage of the tariff to not to pass on the cost to the consumer and stay competitive in that market. So the suppliers do have have a choice to pay the tariff themselves or pass on all or some of it to the consumer.

He could reduce the export price but I doubt his diaspora buyers are what sustains his business and in the current environment that niche demand could diminish further.

A percentage.

Technically the manufacturer does not pay the tariff, it is the import company/business. The manufacturer could lower his price, which would allow the importer to sell at a cheaper price and still maintain their margin.

It was Keogh's crisps.

In his case he likely felt they would become uncompetitive in the US market if the price had to increase a considerable amount beyond it's current rate.

He said that the increase in the value of the dollar (relative to when they started trading in the US) meant they could keep a similar profit margin to what they had previously, even if the price dropped for their American purchasers.

The problem he has now, is the value of the dollar is dropping vs the Euro.

He did also say that in the event the tariffs got too high, they would just work on increasing their sales in other markets and abandon the US. The US is currently responsible for 15% of their sales I believe.

So where he stands now is hard to tell as things are fluctuating so much. But I imagine they're not prioritising any growth in the US going forward and will look to more stable markets for that.

This is going to get really awkward for Trump. At some point, the tariff raises have to stop when it's clear China will just continue to match.

American consumers will immediately and obviously be affected by these tariffs while Chinese consumers won't. It feels like China is doing this, not to protect itself, but to goad Trump into making what it sees as mistake after mistake.

The importer always pays the tariffs.

The difference is when it's a large multinational like VW, they don't sell direct to the US public. Is the EU branch selling to the US branch, so there's some scope to reduce the base price.

But for industries who import an item that they use for manufacturing, like fabric and then that enters the supply chain at a higher price (because they have to pay tariffs) then everyone starts adding their profit margins, the end price to the consumer goes up.

I'd love to hear how that trump supporter who was interviewed about tariffs, who runs a T-shirt printing business and imports from China is getting on.

Chinese ministers are admonishing the US, calling for reversals from the Trump administration and declaring the Beijing will not back down, according to comments reported by Reuters:

China’s commerce minister has said that that the country firmly opposes and condemns the US’ wanton unilateral tariff measures, and has taken resolute countermeasures to safeguard its own rights and interest.

They’ve also said that the US’ repeated imposition of abnormally high tariffs has become a “numbers game” and has no practical economic significance. The ministry has urged the US to take a big step in cancelling the so-called ‘reciprocal tariffs’ and completely correct its wrongful practices.

If Trump keeps going, we're going to get into comical numbers of thousands of percent, like the 1320% vs 1300%.

China should just come out and say "If Donald Trump plans to raise tariffs when we respond, both countries should raise it to one million percent today so the economic impact of tariff raises on the world's markets isn't drawn out over months and years."