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PaperclipPerfector  1mo ago (text post)   33625 thread views

Culture War Roundup for the week of March 31, 2025

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This will be a dry post: I'm laying out my thoughts over the tariff discussions of the last few days as succinctly as I can.

Dangers to tariffs:

  • Tariffs that are higher than other countries can incentivize domestic companies to move abroad to gain access to cheaper inputs. It has similar negative incentives to a high corporate income tax (the latter of which was reduced in 45's term to be more in line with the rest of the world).
  • Danger of a trade war loss. If you don't have market power (attractive consumer base or exports) then a trade war is likely to end in a loss. Costs will be passed to citizens. The US is rather unique in having outsized market power.
  • Protectionism can lead to complacency in the citizenry. Lack of competition breeds inefficiency and lethargy. The workforce and economy needs to be sufficiently diverse to maintain competition.
  • Less efficient global distribution of resources.
  • Tariffs are distortionary in a way that (flat) income tax and universal sales tax are not.
  • Less foreign investment (assuming trade deficit shrinks). A trade deficit means US dollars go abroad: those dollars have to come back somehow, usually in the form of investment. Losing this foreign injection of capital is a double edged sword: a benefit is that it will make investments cheaper for domestic savers (cheaper stocks, cheaper housing). This will benefit younger generations who are buying the cheaper stocks and housing at the expense of retirees.

Economic/Political Benefits to tariffs:

  • If you are in a position of strength, it can distort the global economy in your favor. Companies may wish to domicile in your country (especially if you have low corporate income tax rates) in order to access your consumers and/or workforce.
  • Supply chains will become more intra-national, improving national security.
  • If you are in a position of strength, it is a useful foreign policy tool.
  • If everyone else is doing tariffs except you, then the economy is already distorted; and implementing reciprocal tariffs may "un-distort" the global economy.
  • If you want to raise revenue and you don't fear a trade war, tariffs may have less of an impact on GDP as other methods of taxation (eg, income tax).

Ideological benefits to tariffs:

  • Less interconnected global economy leads to less systemic risk (anti-fragile). The revealed fragility of supply chains during Covid shocked me, and made me realize we have traded efficiency for instability. I wrestle with this on a more local level here: https://pyotrverkhovensky.substack.com/p/texas-roadhouse.
  • Destruction of the Bretton-Woods post-war hegemony.
  • Reciprocal tariffs punishes other nations for constantly hitting "defect" in an iterative "trade" game. It could force the world towards a better equilibrium.
  • Tariffs are explicitly allowed in the Constitution, income tax had to have an amendment.

Other thoughts:

If you are going to do protectionism, tariffs are better than subsidies.

Tariffs will change the relative cost of goods, but being a tax they should be net deflationary rather than inflationary.

Sanctions are like extreme "reverse" tariffs; if Russia and Iran are any example energy-rich countries seem to weather sanctions well.

If you want to raise revenue

In the world of the modern scale of government the revenue raised by tariffs is pretty meagre in comparison to the scale of the economic disruption. Even Iran, which is one of the most protectionist nations in the world, receives something like 5% of total revenues from tariffs.

Universal tariffs are words that fail the antagonism rule not a good policy fit for any reasonable goal. If you want a muscular government to intervene in the economy, actually do that. if you want to encourage manufacturing and defense production, if you want to downsize the parasitic financial economy, if you want good jobs for poor white Americans, if you want America to produce steel and ships (for shipping or the navy) and toasters and drones and nuclear power plants ... then actually do that. Subsidize specific industries. Do huge advance market commitments. Partner with a red state, eminent domain some land, rubber-stamp all the regulatory hurdles, and build those nuclear plants. Pick some startup CEO and replace the slow defense procurement process with "that guy decides". Ban imported Chinese products that infringe on domestic IP. Implement a 50% tax on hedge fund profits. Do the Yarvin where you just ban mass-produced shoes and clothing. Whatever. Those are the kind of policies that could, in principle, do the thing you want them to. One of them might even actually be a good idea. But there's an actual connection between the goal and the action, unlike with universal tariffs.

The fundamental principle behind universal tariffs is "We need to do something. This is something [we can do]. Therefore, we need do this". Way in the past, when we didn't have computers or even telegraphs and governments were less powerful, tax collection was just a lot harder, and trade with foreign countries necessarily occurred at borders and especially ports, so tariffs were the government's biggest source of revenue, so the concept of tariffs got a lot of mindshare. Later, US Congress delegated tariff power to the President as a way to negotiate trade agreements after they passed the Smoot-Hawley Tariff Act and caused a trade war. So the right's thinking about it because we did it in the based old days, and Trump's thinking about it because it's a thing he can do without needing Congress. And, if you think about it a little, there are arguments for why it'd bring manufacturing back and increase lower class wages and such, it doesn't sound that implausible. (There are arguments for a lot of things.) So, in an intellectual environment where ideas aren't exactly rigorously scrutinized, "tariff everything" does very well.

(Or, Trump got a big beautiful red button that makes everyone, especially the libs, mad when he presses it. Of course he'll press it. Why reach for a more complicated explanation?)

The thing is, the 100 year old rusty tool you found in your grandfather's toolbox isn't the best choice to fix your Tesla, or your modern economy. If you're hoping the 50% tariffs on Vietnam will bring back those jobs for working class Americans, wages and gdp per capita there are less than a tenth of America's, and 1.5 is a lot less than 10. It'll make a difference on the margin, but it won't make Americans start buying clothing made of American cloth and put together by American hands. Universal tariffs are too blunt an instrument - tariffs large enough to actually bring all the jobs back would crush the economy, because it's currently deeply integrated with the outside world. And bringing back manufacturing wouldn't even bring back manufacturing employment. Americans don't want to work for Vietnam wages, but American robots will happily work at a total cost above Vietnam wages but below American wages.

"Yes-chad", I might say to all that. Yes, I want to destroy the degenerate, consumerist, metastasized economy. Yes, I don't want cheap garbage from foreign countries. America needs harsh medicine.

Even in that case, universal tariffs still aren't the right tool. If you want such radical change, you either need buy-in from the population because of the "democracy" thing, or something like regime change. In the former case, crashing the stock market and raising prices for the garbage everyone loves just doesn't sell! Peoples' jobs depend on particular economic arrangements, companies with specific suppliers and specific markets, and in current_year many of those suppliers and markets are in foreign countries, so huge universal tariffs that last for years means a lot of people will lose their jobs. People generally don't like that. Maybe with careful state management of a transition to something closer to autarky, people could be convinced. But universal tariffs don't do that, they're a sudden shock.

So, regime change. The thing about regime change is you need a lot more support than you do to do things through the normal democratic process. Often but not necessarily from the masses, but certainly from some people. Universal tariffs destroys elite buy-in, because you're nuking their stocks and businesses. It's the kind of thing you need to do after the coup, not before it. And once you get to absolute public policy, you can hopefully more directly pursue your desired outcome.

Targeted tariffs aren't as dumb as universal tariffs. America really should make chips, and ships, in America. But if even the Jones Act isn't enough to make America build American ships, moderate tariffs probably won't be either.

"Yes-chad", I might say to all that. Yes, I want to destroy the degenerate, consumerist, metastasized economy. Yes, I don't want cheap garbage from foreign countries. America needs harsh medicine.

One recent point of hilarity is that while there's been a movement of people on the left taking onboard traditional right-wing critiques of left-wing economic policy, there's also been a surge of right-wingers adopting what are essentially leftist degrowth arguments with a trad gloss.

Doesn't seem to be much pro-tariff writing visible at the moment, presumably because the usual suspects hate Trump more than they love accusing "free trade" of being the libertarian equivalent of crystalline Lisp pyramids.

Here are a few pieces I found lying around:
Michael Pettis, Foreign Affairs
Matt Stoller, newsletter

Not necessarily endorsed. Though I don't necessarily regard global efficiency as desirable when it's under somebody else's control, long run.

Oren Cass is the guy to watch right now. Trump's plan is basically what Cass has been begging for the past couple of years (though Cass understandably feels like Trump's implementation could use some work.) Below are all from Oren Cass-run outlets:

Policy Brief: The Global Tariff: https://americancompass.org/policy-brief-the-global-tariff/

O Canada! Time to Talk Tariffs: https://www.understandingamerica.co/p/o-canada-time-to-talk-tariffs

The One Word that Explains Globalization's Failure, and Trump's Response: https://www.understandingamerica.co/p/the-one-word-that-explains-globalizations

America's Three Demands https://www.understandingamerica.co/p/americas-three-demands

No Pain, No Gain On Canada and Mexico Tariffs: https://commonplace.org/2025/03/25/no-pain-no-gain-on-canada-and-mexico-tariffs/

How to Think About Liberation Day: https://commonplace.org/2025/04/04/how-to-think-about-liberation-day/

And bonus essay: China’s Tariff-Dodging Move to Mexico Looks Doomed" https://archive.is/m7a9L

Edit: Bonus X thread Tariff roundup: https://x.com/JamesNeilMeece/status/1886136306264129707

Companies may wish to domicile in your country (especially if you have low corporate income tax rates) in order to access your consumers and/or workforce.

Foreign companies will sell less, not more to Americans, unless they crowd out domestic production (which tariffs necessarily reduce) to sell domestic goods instead of imports, but since overall domestic production would be lower, you don't benefit from this. Tariffs can in no way move production into the country on net. They only change what is produced (e.g. replace services with manufacturing)

If everyone else is doing tariffs except you, then the economy is already distorted; and implementing reciprocal tariffs may "un-distort" the global economy.

No, they can't. They can only add to the trade barriers and add to the distortion. The only way to undistort the economy is by subsidizing trade, effectively paying tariffs for foreign companies, but that just allows other countries to extort you.

If you want to raise revenue and you don't fear a trade war, tariffs may have less of an impact on GDP as other methods of taxation (eg, income tax).

The income tax certainly has a greater impact on GDP because it is easier to avoid buying imported goods than to not work.

If you are going to do protectionism, tariffs are better than subsidies.

Tariffs will change the relative cost of goods, but being a tax they should be net deflationary rather than inflationary.

There is, in effect, very little difference. Subsidies send money to other countries whereas taxes take money from other countries, but most of the tax is incident on the consumers within your country, so the difference is small.

Tariffs allow other taxes to be reduced whole subsidies require other taxes to be raised, so the effect on purchasing power is about the same. If one is more inflationary than the other is unimportant.

Ideological benefits to tariffs:

  • Exemptions. With the tariffs being as high as announced, a lot of companies reliant on imports will no longer be feasible in the US. This means that the leaders of these industries will petition Trump for exemptions, which gives Trump a lot of power. Musk wants to import cheap lithium for Tesla -- sure, he is on team Trump, after all. But if he was not, denying them exemption would be a no-brainer for Trump: electric vehicles are very much a thing for urbanites who care about climate change (and, by correlation, are woke), and breaking the EV industry is denying his political enemies a power base. Bankrupt companies do not payroll Democrats, after all. For more neutral industries, Trump might ask "I don't know, what have you been doing for me lately?" -- thereby gaining political leverage: campaign contributions, building a factory in the state of a Republican senator, whatever.

Of course, this is is the case with every regulation which has exceptions. If the Democrats had passed an environmental regulation which forbade the emission of carbon dioxide, and then crafted exemptions for all the industries aligned with them, that would be just as bad.

Tesla already stopped importing cheap LFP cells from China (which they had already started switching almost every car model over to)... Because Biden slapped a huge tariff on them and made those Teslas ineligible for the ~20% federal subsidy. Forced a whole strategy shift.

Weird how that wasn't a story at all, because the economic warfare was approved of by the people who write the stories.

It wasn't a story for the same reason Trump's tariffs are a story.

Trump's tariffs would be a story anyway even if the left somehow did it. The order of magnitude is simply not comparable.

Okay, let me try too.

Dangers and downsides to having the US air force firebomb Kansas City:

  • A lot of people will die in agony.
  • A lot of housing and means of production will be destroyed.
  • Refugees will increasing the housing crisis in other cities.

Economic benefits of the USAF firebombing Kansas City:

  • Housing prices in KC will be much lower while it is an uninhabited wasteland
  • It will incentivize other US cities to prefer non-burning building materials and invest in air defense, which will both increase disaster preparedness and be a boon to the some industries.
  • It will open up avenues to redevelop the city.

Ideological benefits (for various ideologies):

  • It will drastically lower the amount of immigrant crime at ground zero.
  • Over a period of a decade, it will likely lead to lower GHG emissions.

In general, firebombing is much more acceptable than nuking because of (a) the lack of nuclear fallout and (b) it does not contribute to the normalization of nuclear weapon use.

In conclusion, there are good economic and ideological arguments both for and against firebombing random cities, and experts in law, strategy and economy disagree if it is net beneficial or not. The fact that every administration before president Harris has refrained from burning down KC does not mean that she is wrong to do so.

Generally best to not make Swiftian style proposals here. It makes it harder not easier to have open discussions on a topic.

This seems needlessly bilious. Yes, it is possible to make a cost/benefit analysis for literally everything. No, nobody is talking about bombing Kansas City, which is why you're using it as a reductio ad absurdam.

The point I was trying to make, unsuccessfully, was that in my world model, an economic superpower trying to fix their trade deficit by applying tariffs proportional to that deficit would be considered a terrible idea by a broad majority -- basically everyone except for "destroy all corporations" radical leftists, and lizardman's constant worth of outliers (some de-growthers, some sourvereign citizens, some fringe isolationists who want to see America 100% autark, even if that means giving up on oil and coffee, et cetera).

Naturally, here at the motte we have a proud tradition of taking fringe ideas far out of the overton window serious, and I am fine with that. I just feel that "starting a global trade war will actually go great" was plenty discussed here already, and I would much rather discuss the next fringe idea, perhaps "legalize marital rape" or "build a sub-aquatic habitat in the Mediterranean Sea for the Gazans". In my mind, the fact that someone has just announced a fringe idea as the national policy of the US should not make it less fringe than if a random poster had posted it here. I am not a fan of the forced neutrality displayed by the original poster. If party A wants the living room thermostat set to 280K, and party B wants it to be set to 680K, setting one's preference to 480 Kelvin is not neutral, but just about as insane as 680K.

I grew up vaguely left-wing and peace-y. Then Putin happened, and suddenly I found myself having to defend the North Atlantic Treaty and mutually assured destruction. Now Trump has taken a turn towards economic authoritarianism, and I find myself holding up the torch for libertarianism -- not because I think taxation is theft, but because I recognize that capitalism leads broadly to better outcomes than all the alternatives which have been tried.

I think your model of how people think is wrong. I would guess:

  • Proportion of population intellectually pro tariffs: 2%
  • Proportion of population non-intellectually pro tariffs ('countries like people are stronger when they build for themselves' / 'my job went to china' / 'why do we have all this chinese junk instead of sturdy American stuff'): additional 10%
  • Proportion of population tariff-curious: additional 10-20%

Noting that I don't expect these to be purely right or left wing positions. People's 'wing' is an alliance and various with which aspect of their identity is most politically salient. The total constituency for Trump's tariffs is probably 30% max - I don't expect them to be popular unless they turn out to work, but they're popular enough that Fox etc. can't dismiss them out of hand and neither can commenters here.

I would also suggest that going from discussion of tariffs to discussion of firebombing local cities is a bit like an anti-abortion activist saying, 'well, if we're discussing murdering innocent people, let's do the Holocaust next! Pros/cons of gassing all the Jews?'. It doesn't come across as a method of engagement, it comes across as a method of ridicule, and it's not likely to lead to a good conversation.

That's the first time I've been accused of being too neutral! Let me try to be less so: Income taxes are bad. We have had them for over a century. Tariffs are bad. We have not had them to this extent for nearly a century. Yet in a world in which Trump EO'd the income tax to zero rather than implementing tariffs there would be the same hand-wringing, from the same people, who are currently saying tariffs will destroy the economy. The hypocrisy irritates me.

Trump EOing the income tax to zero without cutting defence or entitlement spending would be far more destructive than the tariffs - it would be full Weimar/Zimbabwe.

The income tax is a bad thing that we tolerate because the spending it pays for is good and at certain margins it is less bad than borrowing.

Yet in a world in which Trump EO'd the income tax to zero rather than implementing tariffs there would be the same hand-wringing, from the same people, who are currently saying tariffs will destroy the economy. The hypocrisy irritates me.

Hypocrisy present only because of your head-canon isn't really hypocrisy. Certainly I'd be quite happy if Trump EO'd the income tax to zero (though alas he wouldn't get away with it)

I can't tell if this is a parody of chat GPT or a legit prompt response and I love it.

Oh, it was generated by a squishy neural network, but in retrospect I might have had the chatGPT bullet point format in my subconsciousness.

If you are in a position of strength, it can distort the global economy in your favor. Companies may wish to domicile in your country (especially if you have low corporate income tax rates) in order to access your consumers and/or workforce.

Supply chains will become more intra-national, improving national security.

Only if they're consistent and high enough to be worth moving here and the other markets aren't also using high tariffs. You have to be extremely dominant that international corporations will choose you exclusively over the rest of the world combined and you need some way to assure them that it won't be undone anytime soon.

Just imagine a world where all countries want everything done on their own land and they all enact high tariffs. We'll just have a less efficient system where everyone tries to achieve autarky and then we'll wait for another Adam Smith to come around and tell us all that this is stupid and we should just trade with each other.

If you are in a position of strength, it is a useful foreign policy tool.

How so? The only argument I've seen for this is that you can use it to pressure other nations to do things you want. But the only way it would work as a negotiation tool is if you're willing to lower the tariffs in response, which undermines the first two arguments entirely.

If everyone else is doing tariffs except you, then the economy is already distorted; and implementing reciprocal tariffs may "un-distort" the global economy.

That can be true but in this particular case not very relevant because these tariff plans are not reciprocal despite the claims and also importantly it has the same issue where you should be dropping them if the other nation drops theirs which undermines the first two arguments again.

If you want to raise revenue and you don't fear a trade war, tariffs may have less of an impact on GDP as other methods of taxation (eg, income tax).

This contradicts the first two points again! Generally the more "effective" tariffs are at reducing imports, the less revenue they are capable of generating. And if there are things that absolutely must come from out of the country like crops we can't grow or minerals we don't have then you're just making those super expensive for your population for no reason, because they're not going to be done locally anyway.

It's really unconvincing that all the arguments for tariffs I see are so contradictory. It's "Hey we can have our cake and eat it too!". You can't use them as a negotiation tool that gets lowered, a consistent tool to reduce imports and build up local supply chains, and a reliable means of taxation all at the same time.

Sanctions are like extreme "reverse" tariffs; if Russia and Iran are any example energy-rich countries seem to weather sanctions well.

Russia has put in tons of work to bypass the sanctions and has constantly made it a major goal of theirs to get them lowered. If ending trade was so useful then we would expect countries to embrace the sanctions on them, a "Haha all you're doing is bolstering our local economy idiots" response, instead of trying to circumvent those restrictions.

It's really unconvincing that all the arguments for tariffs I see are so contradictory. It's "Hey we can have our cake and eat it too!". You can't use them as a negotiation tool that gets lowered, a consistent tool to reduce imports and build up local supply chains, and a reliable means of taxation all at the same time.

Given I started with a list of dangers to tariffs I'm not sure why you think my post was an unmitigated endorsement for tariffs. I enumerated potential dangers and benefits. Not all outcomes can or will be realized. Tariffs "can" be used to raise revenue. Tariffs "can" be used for statecraft. It is unlikely that they can be used for both, especially long-term.

You have to be extremely dominant that international corporations will choose you exclusively over the rest of the world combined and you need some way to assure them that it won't be undone anytime soon.

The US is rather dominant. The world wants access to our markets.

Just imagine a world where all countries want everything done on their own land and they all enact high tariffs. We'll just have a less efficient system where everyone tries to achieve autarky and then we'll wait for another Adam Smith to come around and tell us all that this is stupid and we should just trade with each other.

And yet most countries already have protectionist policies. If we can use tariffs to push the rest of the world to a more efficient system (by forcing everyone else to give up their protectionist policies in exchange for us dropping tariffs), I'm assuming that would be a good thing in your eyes? (I'm not saying Trump will do this, but it is one way to use tariffs).

Russia has put in tons of work to bypass the sanctions and has constantly made it a major goal of theirs to get them lowered. If ending trade was so useful then we would expect countries to embrace the sanctions on them, a "Haha all you're doing is bolstering our local economy idiots" response, instead of trying to circumvent those restrictions.

If the pro-Russian posters here and the vatniks are to be believed, Russia's economy has in fact been pretty strengthened post-2022. I don't believe them, personally, but that is a claim that is often made.

Russia's economy has in fact been pretty strengthened post-2022.

It's keynes 101. Government procurement have always been a huge boost.

Does it raise the living standard of the ordinary russian - no. Does it grow the GDP - yes.

That's probably the truth of it, yeah.

Average living standards have risen in Russia, this is the most staggering part. Inflation is high, wages growth is higher.

https://carnegieendowment.org/russia-eurasia/politika/2024/05/russia-war-income?lang=en

From even this brief analysis, it’s clear that the main financial beneficiaries of the war in Ukraine (excluding security officials and soldiers) are those whose professions were long considered low paid and low status. Now they enjoy high salaries and a surfeit of attention from both employers struggling to fill job vacancies, and the state as a whole.

More money in their pockets makes these people—who are not accustomed to self-reflection and who do not have easy access to independent sources of information—even more susceptible to propaganda. Putin’s public image provides them with a comforting feeling of stability, and a sense that their leaders are making the right decisions. It’s unsurprising that the level of support for the Russian regime among these groups is only growing.

People realizing that running semi-war economies can boost people's living standards (that are vastly below American one as well) in the short-term, news at eleven.

Well, of course, those that have died in the war don't drag down the average standard of living, being dead.

But if you did still count them, how much would being dead when they otherwise would have been alive move the average?

If I take 100 people, kill 99, and give all their money to the last 1 alive, I suppose I've dramatically increased the average income and the average standard of living, haven't I?

It this is true, then mass deportations should also boost the standard of living.

Actually that sounds about right.

War deaths aren't a significant part of this, Russia hasn't lost even 1% of their population, let alone 99%.

If the Carnegie Foundation of all people is saying that 'the working class in Russia are doing well off the war and that's why they're supporting Putin' when they have every incentive to deny it, then the case in favour must be overwhelming.

Speaking of tarriffs, can someone help me with the economics/math I've seen? How does a price level rise of by 2.3% in the short-run, the equivalent of an average per household consumer loss of $3,800 work? Is it saying that the average household spends over $150k per year (and that thosr at the bottom, losing $1,700, spend almost $80k)? What am I missing? I've seen these numbers floating around (sometimes as much as "$5,000 per household"), and I cannot seem to figure out that math.

Responding to myself: I've found the source of the $5,000 claim I've seen floating around: The average tariff burden is estimated by dividing the total expected tariff revenue per year, $600 billion, by the total number of U.S. households in 2024, 132 million

I'm assuming, as has been said elsewhere, that this sort of math is not done with sales/corporate taxes or any other sort of tax increase. At least not by the same people.

That estimate shows zero understanding of economics. The actual tariff burden will be the deadweight loss caused by relative price changes as imported goods become more expensive. Relative price changes and imports becoming more expensive are driven by the elasticity of consumer demand for imports and the price pressure that US companies (such as Walmart) can put on their global suppliers, respectively.

The 600 billion is only tangentially related to the actual tariff burden, and, being government revenue, is actually a benefit to US households (the money can be returned to US households via tax breaks, spending, or debt servicing).

I suppose the assumption is that companies will raise prices on imported goods dollar-for-dollar with the tariff increases.

That's amazing, thanks for doing the research

Only 2.3%? That's chump change compared to the price increases on everything that we've seen in the last few years. Are they implying that it will be more in the medium and long term?

This is what it is saying. PCE is 20 billion and change. The amount of households is around 132k. This works out to about155k per household.

America is richer than most people realize.

But the median income is what, around $80k/household, average $115k, right? How is average expenditure $40k more than average (not even median!) income? I'm no economist, but wouldn't that be an insane amount of debt? Or am I looking at this from the wrong direction? Are housing and auto loans skewing things?

GDP per household is $224,000 per year.

We know that PCE includes purchases made on behalf of households (most importantly, health insurance) and charitable organizations. But these are not enough to bridge to the BLS numbers of about 80k. I would think that the bridge to income has a lot to do with savings drawdowns by retirees.

I am looking at the BEA vs BLS spending breakdowns right now, and I can tell you that BEA has $29k in 2023 for health vs only $6k for BLS. BEA also has drastically higher food services, "other", recreation, and durable household items.

That's what the Bureau of Economic Analysis says. But, according to the Bureau of Labor Statistics, annual expenditure per household is only 77 k$. What explains the discrepancy?

The market's huge selloff is a pretty clear indication tariffs are a net-negative. any gains in some small manufacturing are negated by losses elsewhere in the economy.

My personal opinion is that markets are highly overvalued, and a correction needed to be made at some point. The rise of index funds, ironically, have made markets less efficient. But, that is, like, my opinion man.

Tariffs do have a secondary negative effect on financial markets. As I said in my original post, reducing the trade deficit will decrease the amount of US dollars "abroad", which will reduce foreign investment in the US. This is a bad thing if you are a retiree spending your accumulated savings; it is a good thing if you are young and looking to buy a house or invest in stocks (as these investments become cheaper).

They’re a net negative at present because most companies are tooled for a free-trade environment. They generally outsource the labor needed to produce goods by building factories overseas or importing goods or inputs. Depending on what happens, 5 years from now it might not be a problem at all.

Unless the market expected the tariffs to be worse and is reacting negatively to the badly to the news that they're lower than expected. Of course, I don't really think that's what's going on.

No, they are an indication tariffs are a net negative for currently existing publicly traded companies.

If every market participant believes there will be major creative destruction as not yet public companies replace existing public ones, stock prices will go down even while every participant believes this will be good for the world.

(Not a tariff defender, just think it's worth making explicit what market movements mean.)

To be even more precise, it means that the people who trade in the market believe it's a net negative for those companies. They may not prove to be correct.

Only if you believe that markets are universally rational and efficient in practice not just theory.

They aren't. But they're the best prediction tool we have.

Stonk markets only predict themselves. Unlike prediction markets which resolve and pay out to an outcome, most publicly traded companies won't go bankrupt anytime soon and pay an arbitrarily decided pittance as dividend.

Are they?

They really aren't. You could predict AI being a big deal much better by reading blogposts than looking at stock prices.

Easy to say with hindsight. What do you think looks good in the next 10 years?

Markets are pretty efficient. We as individuals are significantly less efficient.

What do you think looks good in the next 10 years?

Still AI, the market's still not pricing it in AGI

Pretty sure. If you can find something better at predictions than the market is, you should be able to make tons of money (and incidentally make the market as efficient as your source).

Not always. Yudkowsky's example of "if the world will end in ten years, and you know this, this won't help you make money" holds water. Things shaped similarly to this also tend to be hard to make money from, due to difficulty collecting winnings and/or spending them; being a nuclear doomer might mean that I'm unusually well-equipped to survive a nuclear war, but I haven't figured out a way to actively profit from it.

There's also the famous (or perhaps infamous) saying, "the market can remain irrational longer than you can remain solvent". Frauds tend to go up and up and up before they come down; knowing they're fraudulent without knowing the exact timing of said fraud's discovery means you might not be able to hold out against the margin calls.

No, all you really have to believe is that the markets are more rational than Donald Trump, which is not a hard sell.

They are in the long run. Although bitcoin is doing it's best to disprove that too.

It has similar negative incentives to a high corporate income tax (the latter of which was reduced in 45's term to be more in line with the rest of the world).

There was a very incisive point about this on one of the economics blogs -- that is it difficult to have a consistent model in which the costs of tariffs are primarily borne by consumers but the cost of corporate taxes are primarily borne by producers (or vice versa).

It is possible to come up with reasons why this might be so -- by adjusting the specifics on incidence -- but this requires the kind of fine-tuning that one has to be suspicious of when it just so happens line up with one's preexisting political commitments.

I'm fairly sure consensus within the discipline is that corporate taxes mostly fall on labor and consumers. They're politically popular because tax incidence is illegible to most voters.

All voters know is that they're not corporations.

And likewise for tariffs.

It’s the folks that give different answers to the two questions that are suspect.

But yeah, voters don’t grok tax incidence.

I continue to believe that tariffs are, while a bad thing, a highly survivable thing for firms that deserve to survive. High taxes are not a death knell for business(even as they aren't a good thing).

Putting tariffs on garments, strawberries, etc is dumb. But it's just a tax. It might cause a recession- I suspect more by bursting bubbles already in the economy than by the actual deadweight loss. It won't cause the great depression 2.0.

I continue to believe that tariffs are, while a bad thing, a highly survivable thing for firms that deserve to survive.

How do you define "firms that deserve to survive?"

Firms that sell goods at the marginal cost of production deserve to survive.

Depending on your odds I’d take the counter bet. Sorting out the shocks in the supply chain will be really messy. 35% on some random country is a great way to determine what it actually does! Lack of certainty that any position will last through next week is a killer.

If you are going to do protectionism, tariffs are better than subsidies.

I disagree. Subsidies give you (the protecting government) more control over whatever it is you're trying to accomplish. If, e.g., you're trying to build/maintain export competitiveness, with tariffs you're hoping domestic producers decide to do that instead of collecting rents from their captive market. With subsidies you can enforce export discipline by withdrawing support from firms who don't do that or rewarding successful firms.

(Both are, of course, susceptible to corruption or throwing good money after bad)

The primary feature of tariffs strikes me as aesthetic - the payer see the transfer as a tax rather than the indirect subsidy it actually is, the beneficiary gets to pretend they're not getting a handout, and fiscal hawks don't have to bear the indignity of seeing it on the wrong side of the government balance sheet.

Yes, subsidies can be more targeted. But they are also more prone to capture and create a culture of dependency. It is similar to a government deciding to cut taxes or increase spending: while in theory both result in more money to the populace, psychologically "keeping more of my well-earned money" is healthier than "I'm receiving more free handouts".

I disagree. Subsidies give you (the protecting government) more control over whatever it is you're trying to accomplish.

This assumes that the government is able to actually exercise that control and not get undermined by lobbying efforts.

Having a lever is more control than not having it, even if you never decide to pull it.

"Undermined by lobbying efforts" is a fully generally problem for any policy. It can happen just as easily with tariffs.

It's easier to undermine a policy when the whole point of the policy is to favor some companies/sectors more than others, vs. just setting-and-forgetting a tariff rate. I admit that tariffs are also vulnerable to manipulation, but subsidies are in another universe.

It's easier to undermine a policy when the whole point of the policy is to favor some companies/sectors more than others, vs. just setting-and-forgetting a tariff rate.

This is contrary to the industrial policy rationale. The justification being offered for tariffs is to favor some companies/sectors more than others.

feels a little weird to have my very first post here after a decade or whatever of reading scott, subreddit, and then here be a sort of swipy rant, but here goes:

the main "danger" to this whole affair is that trump has managed to unite the left, right and center in every single country that isn't the US in being all-out "fuck those assholes, we're doing it live".
in theory, the rational response to US tariffs would be to enact no tariffs at all and to ask trump to pretty please be so nice as to remove his tariffs too.
in practice, this would be political suicide everywhere.

the only play is to throw up a huge middle finger to the US to widespread public applause and to double down.
whether or not that hurts the country that does it more than the US is completely irrelevant. any politician that doesn't go down the 'tard road won't be a politician for long.

any supposed analysis that doesn't take this pretty obvious reality into account is worthless.

I'd add that, unfortunately for me, if Trump proceeds to wreck the economy it will cause a lasting polarization against his anti-woke efforts.

It's important game theory to punish defectors; here, the US is the defector. There is certainly a question about how long countries like China, already facing weak growth, can keep up the retaliation, but:

A) The US trade war may prompt a reduction of non-US tariffs globally, which will boost growth for all those countries, especially if it results in a wave of investment to avoid US-related supply chains.

B) It is very unclear how long the Trump tariffs can be sustained given that they do not really seem to have a good legal basis. It does not seem ro me like they would win a legal challenge, and I think that Congress will be forced to step in to end the tariffs if Trump does not cave.

C) The US, by engineering itself a recession for goals that are probably unachieveable, is greatly diluting its supposed leverage - access to the US market is less attractive when our economy sucks.

the obvious play would be to short US equities, and then implement retaliatory tariffs. the windfall from the short would help offset the economic loss from the tariffs . imagine had Chinese officials shorted S&P 500 futures through intermediaries b4 announcing its retaliatory tariffs.

As soon as Trump announced, their retaliation was already basically locked in. Their announce didn't move the needle because it was highly improbable they were gonna just do nothing.

that sounds cute but that's all this is.

if america ditches their empire, yes, US equities will suffer. but
a) will that actually happen? currently I still assume trump will be reigned in by smarter people.
b) even if it does happen, the US will most certainly defend stock prices for the benefit of old people who vote. so... what's the timeframe of that short?

But this largely makes sense if those other countries didn’t have tariffs on the US to start with. But they do have tariffs and thus it comes across to me as rather hypocritical (ie fuck you for doing the very thing we do).

The tariffs the US just announced are about 10 to 20 times larger than the tariffs that most other countries have on US goods.

this is entirely irrelevant unless those other countries (or rather the people in those countries) are aware of those tariffs. which, I assure you, they aren't.

from the perspective of europe, trump is throwing up tariffs out of nowhere.

I’m sure you are right. That seems like a messaging problem.

This seems to be the standard justification for tariffs that I hear. I don't think it's realistic, but then again, I have only a cursory understanding of the subject.

From the numbers I've seen, most western countries have a some small niche industries that they protect, and so they have high tariffs on those. But those niche industries account for a very small percentage of overall trade. Take, for example, the US and Canada (before the current Trump tariffs). Canada puts huge tariffs on US dairy. And the US puts huge tariffs on softwood lumber. But those are only a tiny percentage of total trade. So while there were double digit tariffs in those specific categories, the overall effective tariff rate was very low (1-2%) flowing both ways.

Is that not the case?

Kind of.

'Overall effective tariff' is always a bit of a shell game that depends on how you calculate averages. It is basically always in your interest to present your 'overall average' as low as possible to look better than the opponent / disqualify critiques. This in turn leads to incentivizing constructing a standard that lets you average things in a more favorable way. Note the dispute over formal tariffs and informal trade barriers, which were factored in to the trump tariff claims. Or how media on EU vs US cartariffs emphasize the US pickup truck tariff versus an EU automative tariff. How you gerrymander the boundaries matters. Which numbers you draw attention to matters. As they say, there are lies, damn lies, and statistics.

Because there is no single standard on how to calculate such an 'overall effective tariff,' it is a claim that requires either perfect transparency, or trust. And since governments tend not to be perfectly transparent even at the best of times, let alone when money is at stake, this comes down to trust. Critically, this is both trust in the other side (who you know has an incentive to present their best face), but also a trust in your own side's negotiators to actually meet that 'fairly.'

Part of the issue in the current trade war is that the American foreign trade establishment, like much of the rest of the political establishment, has broadly lost trust / credibility. This has been part of the dynamic since the neoliberals were forced to concede major policy negotiating mistakes, such as the deindustrialization of the rust belt due to various trade concessions with, say, NAFTA, or Europe, or letting China into the WTO. Some of these were explicit tradeoffs 'for a greater good', where economic forecasts of 'we know you'll lose these jobs, but we're sure you'll get better jobs' never materialized. The regional-specific dynamics of free trade were somewhere between under-recognized, dismissed, or actively mislead by interests with their own priorities. (See the favored trade policies of city-based service-industry establishments that tend to prioritize, well...)

What this means is that 'niche industries are well protected but relatively small' is a bounding argument whose bounds relies on trust. Trust in those numbers, trust in the people providing the numbers, and trust in the judgement of people who helped create those numbers, i.e. previous institutional elites caught up in the anti-establishment political movement.

I mean, I agree on a bunch of the points about why the establishment has lost credibility in terms of protecting domestic manufacturing interests. In my view, letting China into the WTO was the single largest political blunder of the last 50 years. But that doesn't change the fact that mathematically an overall effective tariff rate should be relatively straight forward to calculate. TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS doesn't leave a lot of wiggle room. I suppose you could always add other taxes onto the goods once they've entered the market and not charge them at the border, but that wouldn't exactly be subtle or easy to cover up.

TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS doesn't leave a lot of wiggle room.

That's meaningless. If Canada puts a 1000000% tariff on US dairy, the US will export 0 dairy to them and there will be 0 tariff paid.

The reason it's not relatively simple is because states, and more importantly corporations, don't use TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS as the basis of evaluating tariffs.

For one thing, that's a retrospective evaluation (how much you did pay) as opposed to the forward-planning factor that comes with things like quota-steps (first X amount receives Y tariff, second X amount receives Z tariff, etc.). Companies are looking at their marginal gains for continuing to ship more product to the location. When the marginal costs exceed the marginal gains, the rational members stop, regardless of if they'd still 'average' a net positive overall.

Even the premise of 'Total Value' is totally gameable. What, specifically, is a particular country using for the value they are using? The cost of the product at time of purchase? At time of entry into the market? Value-added tax at a particular point in assembly? At time of sale to final customer?

Further, how are you combining categories? Are you biasing the data with mean averages, or median averages, or are you- more likely- mixing the two methods?

The reason it's not relatively simple is because states, and more importantly corporations, don't use TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS as the basis of evaluating tariffs.

Yeah, but I don't think the details add much in the context of this conversation.

We're not talking about a specific corporation deciding whether to ship one more container load based on marginal costs hitting a quota step. We're talking about the justification for blanket "reciprocal" tariffs, i.e. zeke's point about hypocrisy "fuck you for doing the very thing we do." It seems to me that the overall effective tariff burden is the relevant stat when discussing whether the existing tariffs justified the kind of blanket tariffs currently being enacted, simply because the burden of the new blanket tariffs will approximate how that stat is calculated. If that stat is actually about 1% then that's a defense against the hypocrisy claim.

Part of the challenge is that you don't see trade that doesn't happen. We don't know the counterfactual of how large trade would be in a heavily tariffed vertical absent the tariffs. Sure the US exports very little milk to Canada so the high tariff there doesn't mean much, but that just assume the conclusion, maybe exports of milk to Canada would be way higher if the tariff was lower.

The MSM seems to think canada's dreaded dairy tariff is effectively 0%.

It's not 0%. It's effectively a (maximum) quota rather than a tariff, though it is written as a tariff with a cliff. It's still a trade barrier.

Doesn't seem to be playing out that way in Canada -- I keep waiting for the egregoire to notice that we are locked in a cage with an 800lb gorilla and are responding to his shitflinging by poking him with a (slim) stick, but even normally levelheaded folks are so wrapped in the flag (the one they were spitting on a couple of years ago when it was being flown by truckers) that I can't see it happening no matter how bad things get.

If you go broke enough you may not become a state, bug I guess the US will accept you as a territory

There is no scenario where Canada becomes part of the US voluntarily. It just isn't politically possible. Canada has a deep-seated anti-Americanism, which doesn't normally manifest as hate towards the US, but it does manifest as a deep conviction to never be part of the US.

Remember, Canada was largely founded by Americans who were loyal to the Crown during the American Revolution and established new settlements in a freezing cold theretofore sparsely populated territory. It is the only country that was founded in explicit opposition to the founding principles of the US. And then followed two hundred and seventy years of selective migration of Canadians who did not care about this out of the country into the more prosperous and warmer US.

Today, the politics are very different, but not being American is still the single core defining feature of our national identity, which we latch onto because we are culturally so similar. Quebec is another story, in that they have a different ethnic origin and a separate national identity, but they only make voluntary annexation more certainly impossible, because a change to the constitution of this kind would require unanimous agreement by all ten provinces. And if English Canada defines itself by not being American, modern Quebec defines itself by its French language and there is no more sacred political principle in Quebec than the belief that the French language must be protected by law. These laws would undoubtedly violate the first amendment. They violate Canada's own constitutionally protected freedom of expression, but Quebec sidesteps that using the notorious notwithstanding clause. Quebec will not join the US and be forced to give them up.

No amount of economic pressure is going to make Canadians want to give up these cherished identities. For most of our country's history, Canadians have been able to increase their incomes substantially by moving to the US. The profesional class in Canada can still do this, and there is still a significant brain drain. As irrational as it may seem, the ones who remain do not care as much about their material well-being as they do about preserving their independence and national identity, even if they associate it with ideas about peacekeeping and free healthcare rather than loyalty to the British Crown.

Annexation is extremely unpopular and there is an absolute determination not to get stuck with what is regarded here as a seriously dysfunctional political culture.

there is no more sacred political principle in Quebec than the belief that the French language must be protected by law. These laws would undoubtedly violate the first amendment.

Minor part of your broader point, but could you sketch out the argument here? I'm not sure whether I'm missing some portion of what these laws do or some portion of 1A precedent.

There are law that forbid the use of languages other than French in many situations. For example, businesses must be able to communicate to employees in French. Employees have the right to demand that all communication be in French. Employment offer letters must be in French. Engineers and doctors must speak French.

Core things like that in Quebec many things must be in French, from store signs to school classes.

I'm not sure what the 1A argument is, though. Moreover, I have a factual question. Do such laws prevent store signs from also having other languages, or do they just mandate that French must be present? If the former, I could perhaps see a 1A challenge that they are restricting speech. If just the latter, it's not so clear to me. There is some compelled nature to the speech, but the standards there are different, especially if it's just commercial regulation or gov't-run schools. So yeah, I'd really appreciate if anyone could put out at least a sketch of the argument.

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The real question mark is if the counter-actions are only counter-US, or also include other country-specific grievances. We are already seeing European establishment media consider the quote/unquote 'necessity' of countering Chinese dumping for Chinese goods that redirect from the US to EU.

The more this becomes a global everyone-vs-everyone, rather than US-only trade war, the greater the negative impacts to countries that depend more on foreign trade. And if you rank countries by their trade-to-GDP ratios, i.e. how much of their GDP comes from selling abroad, or even imports-to-GDP ratio...

Well, the United States is ranked 183 of 195 countries in terms of exports as % of GDP (11.6%), and 191 of 195 in terms of imports as % of GDP (15.4%). It is one of the least global-trade economies in the world in terms of %s. There are certainly grounds for not over-stating that statistic alone. Even small %s to the scale of the US economy can be big absolute numbers. But the general point is there are reasons to suspect the US will do relatively well the worse global trade environment gets for everyone even if that matters little for domestic political purposes.

Some asian countries are already signaling an intent to negotiation rather than stick to 'fuck trump,' so the nature of political suicide may be more limited than the anglosphere media generally recognizes.

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