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PaperclipPerfector  2d ago (text post)   1478 thread views

Small-Scale Question Sunday for February 2, 2025

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What do you think of the tariffs? Just kinda curious to get people’s general vibes.

I’m more excited than anything to see what happens as a U.S. citizen. I am not like in a super precarious place financially but I’d imagine it is scary for those who are.

What do you think of the tariffs?

Mostly, I'm surprised previous US presidents haven't used the immense economic and geopolitical advantage of their country more.
If you're asking for a moral judgment, history only remembers good victors and evil losers. So if Trump wins, he will be remembered as a good president and vice-versa.
He already forced his will on Panama and Mexico and he'll probably keep 'winning' the same way. There are scant few nations on the planet who can afford to say 'no' when threatened with 25% US tariffs.

I’m more excited than anything to see what happens as a U.S. citizen.

You're excited about prices going up?

Not entirely sure yet, given my naturally pessimistic and "wait-and-see" attitude, but probably more positively-inclined toward them than most here, despite my "super precarious place financially."

As some alternative viewpoints most here probably aren't exposed to, I'll first link this from Conservative Treehouse, "The Secret Tariff Code is Buried in ‘Section 2, Item (h)’ of the Executive Order":

So, Canada and Mexico get 25% tariffs, but China only 10%. Why? The secret is in that subsection “(h)” when it talks about de minimis treatment. Essentially, what President Trump is doing is levying a much more massive import tax, and possible confiscation impact on the core source of fentanyl (and other illegal) substances.

Approximately a billion packages are estimated to enter the USA under the cover of the de minimis exemption. This is where the enforcement mechanism of the “External Revenue Service” combines with the tariff approach and the “state of emergency.” President Trump imposed the tariffs under the International Emergency Economic Powers Act, a nearly 50-year law that gives the president sweeping power to impose sanctions after declaring an emergency.

Now the billion packages, mostly from China, Mexico and Canada are going to be subjected to review and interception.

The de minimis loophole comes from back in the 1930s. The idea back then was, say you went on a vacation to Paris, you shouldn’t have to file customs paperwork or pay taxes if you decided to ship some little Eiffel Tower statues to your friends back home.

Congress in 2015 then raised the de minimis threshold from $200 to $800. However, the e-commerce world exploded, and Chinese companies began using the de minimis loophole to ship cheap goods (ex. Temu and Shein) into the USA direct to consumers without paying any customs duty.

It was reported last year that the U.S. was on track to receive a billion packages through the de minimis loophole that aren’t taxed and don’t have customs slips saying what they are. Making matters worse, illegal items are slipping through the cracks, including, knockoffs, unsafe items and even chemicals used to make fentanyl. The worst abuser that exploits this de minimis loophole is, by far, China.

President Trump can require a customs and duty declaration stating what is in every package and subsequently collect tariffs and duties.

Put it all together and President Trump is executing an Emergency Act executive order, plus the imposition of a tariff review, and simultaneous interception of de minimis packages previously unchecked as the enforcement mechanism. All executed by the External Revenue Service.

(Emphasis in original)

And for something a bit more out there (even for me), there's Vox Day's "Testing the Free Trade Hypothesis"

It has long been a mantra of the free trade crowd that both sides lose from a trade war. President Trump has called that mantra into question by launching a trade war with Canada, and likely Mexico and China as well:

…

Conclusion: the USA will handily win a trade war with all three countries, which is presumably why President Trump singled them out. The US economy will observably benefit from removing foreign competitors taking sales away from domestic businesses; the GDP cost to the foreign countries is an order of magnitude greater to them because their interaction with the USA is more parasitical than symbiotic.

…

Remember, the theoretical justifications for free trade have always been false and incorrect, as first demonstrated by Ian Fletcher and then conclusively disproved by me. Free trade is absolutely and inherently detrimental to a nation, because its logic of efficiency and optimally pairing labor with capital absolutely requires the complete destruction of families, local communities, and the demographics of the nation itself.

The fact that decades of even partially free trade within and without the US borders has significantly fostered these three negative societal trends isn’t an accident, it is specifically predicted by my theoretical observations and argument in my 2016 book ON THE QUESTION OF FREE TRADE.

Here is the relevant Presidential order. It’s informative to see that instead of cracking down on its illegal fentanyl production and exports, the Canadian government has elected to embrace trade war. The irony here is that the USA is simply attempting to do what China tried, and failed, to do in the Opium Wars.

As an experiment I opened my first ever position in S&P 500 futures last week and I’m amazed by how quickly it’s gone against me.

Don't feel bad, I bought a hundred shares of NVDA on the dip last week. Can't wait to see how it opens tomorrow

I think it’s pretty stupid to impose protectionary tariffs by executive order without a broad bipartisan consensus. Nobody is going to invest in building a brand new steel mill or whatever if the most-likely outcome is being made obsolete in four years.

This is a great observation. Many of Trump’s goals are dubious because companies cannot handle the policy whiplash between administrations (see: Keystone Pipeline), and ideological opponents will attempt to weather the hostility for 4 shorts years.

Why gut your DEI department when in 4 years we’ll have Mr. Turbo DEI in office, and it’ll be illegal not to have one? Better to rename it for now and keep your head down.

Same for oil and gas companies. No way they build new refineries or whatever when we’ll soon have another Biden who wakes up and decides that gas stoves should he outlawed.

I would say we'll only have Turbo DEI if anti-DEI has proven to be unsuccessful for 4 years. Same for oil and gas - if Trump's next 4 years are largely successful then what's the probability of a President Vance instead of president... probably Cortez with the way the Democrats are heading.

I have yet to see a good justification for how they're supposed to be compatible with fighting inflation. Instead, they look like more of the same "make it so" Trump policymaking that I've been complaining about since 2016, and I expect to see a good dose of leopards eating faces. But maybe that's just me.

I know inflation is just what it’s called when prices get higher, but I don’t understand how all prices get higher just because of a tax. Intuitively there must be someone printing money, or else an increase in dollars spent here would mean fewer dollars spent somewhere else.

In fact I think this is why the Austrian school actually defines inflation as an increase in the money supply. Transfer payments, i.e. taxes, e.g. tariffs, are not inflation.

Right. Not just the Austrians, I think; my high school Econ class was very Keynesian, but I’m pretty sure it used the same definition.

Regardless:

Next, I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices.

The inflation crisis was caused by massive overspending and escalating energy prices, and that is why today I will also declare a national energy emergency. We will drill, baby, drill.

I think tariffs stand in opposition to this layman’s understanding of inflation because they suppress the supply of consumer goods. If there’s a mechanism by which they do boost supply, or if they actually help the Austrian money-supply definition, I want to hear about it!

The amount of goods and serviced provided can decrease, too. Producers can't lower prices very much without losing money (there's a reason prices are sticky downwards) while consumers can't pay more to maintain consumption (with a stable money supply). So you have less economic activity for the money supply, with inflation as the proportion between them changes for the worst (just on the other side of the equation).

This was one of the reasons that I insist that policy decisions were the major drivers of Covid-era inflation. Not only were massive supplies of money printed and distributed, but governments banned or severely restricted major sectors of the economy for a long period of time. That money is going to go somewhere.

Expect luxuries like lumber and vegetables to get more expensive.

Genius. Reduce the lower and middle income burden with tariffs, especially for luxury goods, and you can redistribute resources from the wasteful wealthy to Americans who need it. Even if it doesn’t revitalize American industry, it improves QoL at the expense of no utilitarian harm.

How does this help lower and middle? Everyone I’ve read says the opposite

It helps producers of the tariffed good and harm's consumers if it. So did you tarrif something like imported liquor over 200/bottle, that would shift margin into US manufacturers which would benefit the company and potentially supply chain.

Liquor isnt the best example because of the long lead time to produce it (for aging).

Beer is a pretty good example that's adjacent to that. Right now, Modelo is one of the most consumed mass market lagers. If you increase the price by 25%, many people will elect to consume fundamentally similar American substitute goods (e.g. Budweiser). Supply lines and distributorships complicate this somewhat, but demand shift would certainly be expected under standard models.

Tariffs are a cost on every consumer, but the revenue of the costs can (hypothetically) go only toward reducing the lower and middle class tax burden. So the cost is compensated only for the < rich. Also, wealthier people are the biggest consumers, and the things they buy cost more, like Canada Goose.

How do increased costs for heating bills, gas, and groceries - something even Trump conceded will likely happen - reduce the burden on the middle class?

I don't even think it's meant to be a special punitive measure. I mean, it's phrased that way since basically everything in the new US admin is phrased as someone getting punished, but really, Trump's mindset just seems to be that tariffs are a positive good in themselves and the normal status of how things are that US has tariffs against here, there and everywhere, to protect US industry and to collect money (in lieu of using income taxes), as he has said many times.

We're so used to a free trade world where tariffs are a punitive expection (not an infrequent expection to be sure, but still, something that by definition has to be conceived as an expection) that this sort of a mindset starts to seem quite alien to us, even though the world being riddled with tariffs and duties used to be the standard setting to be cleared away by the free trade revolution. The free trade revolution was mostly good and this is bad, but it's also not a special form of bad but rather a very traditional sort of bad.

Braindead stuff. Retaliation is inevitable. He's starting a trade war, and to what end? It will hurt everyone involved. I alternate between thinking of him as a Putin puppet, or a deeply narcissistic grown-up baby. Both go some way of explaining his actions. He seems to want to jerk the US' allies around just because he has the power to do it. In the next round, it of course benefits Russia (and China) when the US alienates the world and isolates from it.

They're widely condemned among economists for good reason. Most econ grad students can cite 7-8 exceptions but these aren't outweighed by the economic costs or don't apply to already developed nations. Best case scenario is that they're just used as threats to receive other concessions.

Best case scenario is that they're just used as threats to receive other concessions

Mexico capitulating this morning suggests your analysis is close to the money. My follow-up is: What do we want from Canada that's equivalent to 10,000 troops at the border?

Tariffs on Canada are incredibly stupid and I haven't heard a coherent defense of them.

Tariffs on Mexico, I'm agnostic about. There are demands to make of Mexico that I support making. Whether tariffs are the best way to get there or not, I don't know.

Tariffs on China are good. Full stop. We should buy less from China.

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