A Photo for Friday
“Halo”
March 14, 2025
Pike Road, AL
Some Tariff Related Content
If things go as expected, later today, President Trump will be unilaterally enacting a huge regressive tax increase on the American public. I realize that some galaxy brains will claim that other countries pay for tariffs–not American citizens. This is, off course, utter bullshit. But you don’t need to take my word for it. Here is a noted economist on the topic:
Tariffs are taxes on imports which serve to raise the prices of those imports, and thus enable domestic producers to charge higher prices for competing products than they could in the face of cheaper foreign competition. . . .
Sometimes this approach is buttressed by claims that this or that foreign country is being “unfair” in its restrictions on imports from the United States. But the sad fact is that virtually all countries impose “unfair” restrictions on imports, usually in response to internal special interests. However, here as elsewhere, choices can only be made among alternatives actually available. Other countries’ restrictions deprive both them and us of some of the benefits of international trade. If we do the same in response, it will deprive both of us of still more benefits. If we let them “get away with it,” this will minimize the losses of both sides. [Source ]
That is a quote from Basic Economics: A Common Sense Guide to the Economy by famed conservative economist Thomas Sowell (who knew he wrote on more than the failures of academia and black culture). An earlier National Review article excerpted several portions of the work relevant to tariffs.
Now I realize that some readers must be thinking: “But something needs to be done with China, and therefore we should impose tariffs as a radical solution. The fact is we know what the economic impact of this will most likely be–because Trump has already done it. Again, I’ll go back to Sowell, this time from a Reason interview :
Thoughts on the Trump trade war?
Oh my gosh, an utter disaster. I happen to believe that the Smoot-Hawley tariffs had more to do with setting off the great depression of the ’30s than the stock market crash. Unemployment never reached double digits in any of the 12 months that followed the crash of October 1929, but it hit double digits within six months of passage of Smoot-Hawley, and stayed there for a decade.
What about the view by President Trump that other countries are ripping us off by running trade surpluses?
It’s pathetic. The very phrase “trade surpluses” gives half a story. There are countries that supply mainly goods, physical goods, and there are other things like services that other countries provide, and the United States gets a lot of money from providing services. To talk about one part of the trading and ignore the other part fails to understand that money is money no matter whether it’s from goods or services.
When you set off a trade war, like any other war, you have no idea how that’s going to end. You’re going to be blindsided by all kinds of consequences. You do not make America great again by raising the price to Americans, which is what a tariff does. [source ]
Then there’s always this guy, who also had strong thoughts on tariffs:
All this matters because, by most estimates, the tariffs that are about to be enacted will represent the largest peacetime tax increase in American history–to the tune of $600 billion a year on the American People. That is, unless you are Peter Navaro who claims that tariffs are actually a tax cut . It’s good to know that Professor Sowell would most likely fail one of the President’s current economic advisors. Estimates put the impact on average households as high as $3,400 :
In the analysis released by the policy research center this week, the group found that a 20-percent tariff on all imports would bring the average effective U.S. tariff rate to the highest since 1872 when stacked together with the other tariffs that have taken effect in recent months.
Researchers said the proposal would increase prices somewhere between 2.1 percent and 2.6 percent, depending on how other countries retaliate to Trump’s new tariffs and the Federal Reserve’s response.
“This is equivalent to a loss of purchasing power of $3,400-4,200 per household on average in 2024 dollars,” the group said. [source ]
That’s before we get to the other economic challenges these tariffs create. For that, I’ll turn to Rand Paul (one of the few Republicans willing to publicly admit that this is a tax increase that is being enacted without the Constitutionally required Congressional consent):
“I haven’t had a single business person or individual in my state come up to me and say the tariffs are a good idea,” says Paul. … “I have had people come up—farmers which are a big presence in our state—and say they export 20 to 25 percent of their products and this will hurt them,” says Paul. “They are still suffering from some of the tariffs and retaliation from 2018 and 2019, when the previous Trump administration did tariffs,” Paul said. “I have home builders and real estate brokers who say if the price of lumber goes up, if the price of steel goes up, the prices of homes will go up and we’ll sell less homes. I have the bourbon distillers coming to me, which is a big industry in my state, and they say due to the retaliation that Europe is placing on us and Canada is placing on our bourbon, we will export less bourbon. We have shippers in our state, people who ship internationally as well as across the U.S.” [source ]
Paul’s point about farmers is an important one, as during the last Trump Administration, the government had to “bail out ” farmers to help them survive the self-inflicted wounds of the last trade war. To my knowledge, there have been no budget provisions made for the current budget and tax plan working its way through Congress to create a similar fund proactively. That forward planning failure seems kind of important if we let history be our guide. That’s before we get to how the budget’s tax cuts are primarily based on shifting tax burdens onto these tariffs.
Extending the expiring 2017 Tax Cuts and Jobs Act (TCJA ) would decrease federal tax revenue by $4.5 trillion from 2025 through 2034. Long-run GDP would be 1.1 percent higher, offsetting $710 billion, or 16 percent , of the revenue losses. Long-run GNP (a measure of American incomes) would only rise by 0.4 percent, as some of the benefits of the tax cuts and larger economy go to foreigners in the form of higher interest payments on the debt. [Source ]
To me, at least, (not to mention most economists and trade experts) this has the makings of an unmitigated disaster for the country. And, unlike some things the President has done since being elected, this is a case where he promised to do this throughout the campaign. And frankly the rationalization that “we have to do something about our trade deficit and debt and at least this is something” is akin to a surgeon suggesting the best way to deal with brain cancer is just to remove the head altogether.
[Addendum] I forgot to mention that one tariff that the President has already announced is that he’s apparently putting a tariff on illegal Fentanyl. I’m not entirely sure how he plans to collect said tariffs, but it’s a bold plan.Tesla Sales Down
Via CNN: Tesla sales plunge 13%. The brief write-up calls it “the largest drop in deliveries in its history.”
I am reminded of Michael Jordan’s quip, “Republicans buy sneakers, too.” Whether he was joking or not , the notion that wrapping up one’s brand in politics can have downsides.
It can especially have downsides when your key demographic largely adheres to one side of the spectrum and you decide to go all-in on the other side.
I am also reminded of this.
Which then reminds me of this.
He was specifically talking about taking in immigrants (source: CNN ). The whole interview is here .
“If they had another four years, they would legalize enough illegals in the swing states to make the swing states not swing states,” Musk told Rogan. “They would just, they would be blue states. Then they would … win the presidential; they’d win the House, the Senate and the presidency.”
[…]“We’ve got civilizational suicidal empathy going on,” Musk said, borrowing the term from Gad Saad, a Canadian scholar who is also a frequent Rogan host.
While Musk said he believes in empathy and that “you should care about other people,” he also thinks it’s destroying society.
“The fundamental weakness of Western civilization is empathy, the empathy exploit,” Musk said. “There it’s they’re exploiting a bug in Western civilization, which is the empathy response.”
Empathy, he said, has been “weaponized.”
Sooo, he wants us to have empathy for stock prices. But, you know, not for refugees nor tens of thousands of fired federal employees. And you can forget about worrying about the degree to which earthquake relief to Myanmar was hampered by the closure of USAID or the substantial death toll from the shuttering of US humanitarian aid.
Will no one think of the stock prices?
The added layer of hypocrisy here is the degree to which Musk revels in the alt-right’s usage of crass humor while constantly deploying the “just joking!” response.
But, you know, Tim Walz is an “evil” “creep” because he used Tesla stock as a political punching bag.
I don’t throw the word around lightly, but this sure looks like an oligarchic response to me: money being more important than people.
This is clearly not a person who should have the power he has been given.
Of course, I suppose some readers might assume that the decline in sales is the Biden administration’s fault, given the horrible economy he left behind, and it is just now catching up with us. As such, Musk’s tethering of himself to Trump is all just superfluous. Further, the fact that Musk and Trump had a massive photo op on the White House lawn was just a couple of bros talking cars, as bros do.
Friday’s Forum
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‘The Economic Version of the Iraq War’
The Economist (“President Trump’s mindless tariffs will cause economic havoc“):
If you failed to spot America being “looted, pillaged, raped and plundered by nations near and far” or it being cruelly denied a “turn to prosper”, then congratulations: you have a firmer grip on reality than the president of the United States. It’s hard to know which is more unsettling: that the leader of the free world could spout complete drivel about its most successful and admired economy. Or the fact that on April 2nd, spurred on by his delusions, Donald Trump announced the biggest break in America’s trade policy in over a century—and committed the most profound, harmful and unnecessary economic error in the modern era.
Speaking in the Rose Garden of the White House, the president announced new “reciprocal” tariffs on almost all America’s trading partners. There will be levies of 34% on China, 27% on India, 24% on Japan and 20% on the European Union. Many small economies face swingeing rates; all targets face a tariff of at least 10%. Including existing duties, the total levy on China will now be 65%. Canada and Mexico were spared additional tariffs, and the new levies will not be added to industry-specific measures, such as a 25% tariff on cars, or a promised tariff on semiconductors. But America’s overall tariff rate will soar above its Depression-era level back to the 19th century.
Mr Trump called it one of the most important days in American history. He is almost right. His “Liberation Day” heralds America’s total abandonment of the world trading order and embrace of protectionism. The question for countries reeling from the president’s mindless vandalism is how to limit the damage.
Almost everything Mr Trump said this week—on history, economics and the technicalities of trade—was utterly deluded. His reading of history is upside down. He has long glorified the high-tariff, low-income-tax era of the late-19th century. In fact, the best scholarship shows that tariffs impeded the economy back then. He has now added the bizarre claim that lifting tariffs caused the Depression of the 1930s and that the Smoot-Hawley tariffs were too late to rescue the situation. The reality is that tariffs made the Depression much worse, just as they will harm all economies today. It was the painstaking rounds of trade talks in the subsequent 80 years that lowered tariffs and helped increase prosperity.
On economics Mr Trump’s assertions are flat-out nonsense. The president says tariffs are needed to close America’s trade deficit, which he sees as a transfer of wealth to foreigners. Yet as any of the president’s economists could have told him, this overall deficit arises because Americans choose to save less than their country invests—and, crucially, this long-running reality has not stopped its economy from outpacing the rest of the G7 for over three decades. There is no reason why his extra tariffs should eliminate the deficit. Insisting on balanced trade with every trading partner individually is bonkers—like suggesting that Texas would be richer if it insisted on balanced trade with each of the other 49 states, or asking a company to ensure that each of its suppliers is also a customer.
And Mr Trump’s grasp of the technicalities was pathetic. He suggested that the new tariffs were based on an assessment of a country’s tariffs against America, plus currency manipulation and other supposed distortions, such as value-added tax. But it looks as if officials set the tariffs using a formula that takes America’s bilateral trade deficit as a share of goods imported from each country and halves it—which is almost as random as taxing you on the number of vowels in your name.
This catalogue of foolishness will bring needless harm to America. Consumers will pay more and have less choice. Raising the price of parts for America’s manufacturers while relieving them of the discipline of foreign competition will make them flabby. As stockmarket futures tumbled, shares in Nike, which has factories in Vietnam (tariff: 46%) fell by 7%. Does Mr Trump really think Americans would be better off if only they sewed their own running shoes?
NYT (“‘It’s a Disaster’: Global Markets Slide After Trump Unveils Tariffs“):
Markets around the world tumbled on Thursday after President Trump announced across-the-board tariffs on America’s main trading partners, including the European Union and Japan.
Futures on the S&P 500, which allow investors to trade the index outside normal trading hours, slumped more than 3 percent. Asian and European stock markets fell sharply, with benchmark indexes dropping more than 3 percent in Japan, and nearly 2 percent in Hong Kong, South Korea, Germany and France.
The value of the U.S. dollar against a basket of other major currencies dropped more than 1 percent.
The slide came after Mr. Trump, speaking at a ceremony at the White House on Wednesday, announced a new 10 percent base line tariff on all imports as well as country-specific taxes on goods from a host of other countries. Those included an additional 34 percent tax on Chinese imports, on top of 20 percent in tariffs he recently put on China, and 20 percent on goods coming from the European Union and 24 percent on Japanese imports.
The market reaction suggested that the scale of the tariffs on Wednesday had come as a surprise, and there was confusion about how the figures had been derived.
“The numbers are shockingly high compared to what people were expecting and it is inexplicable in many ways,” said Peter Tchir, head of macro strategy at Academy Securities. “I think it’s a disaster.”
The Trump administration had modified its estimates of the tariffs imposed on the United States to include adjustments for what it deemed currency manipulation or even other taxes, with analysts questioning the analytical basis for doing so.
“Trump is going to war with countries on this,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “It’s ridiculous. It shows no comprehension as to what he is doing to other countries. And it is going to hurt the U.S.”
Investors flocked to government debt as a haven. The yield on the 10-year U.S. Treasury bond, which moves inversely to prices, fell to 4.08 percent, the lowest since October.
POLITICO (“EU ‘prepared’ to retaliate against Trump’s 20 percent tariffs“):
European Commission President Ursula von der Leyen on Thursday slammed U.S. President Donald Trump’s imposition of a 20 percent tariff on EU goods and vowed to retaliate, saying the bloc was “prepared to respond.”
Trump dumped the European Union on Wednesday into a group of 60 countries subject to higher “reciprocal” tariffs, along with China, India, Japan and Korea, while subjecting the rest of the world to 10 percent tariffs. It’s the biggest lurch into protectionism by America since the Great Depression of the 1930s.
Von der Leyen said Trump’s tariffs would have dire consequences for consumers and businesses that have prospered through trade with the United States since World War Two. The European Union, the world’s largest single market, must also defend itself against profound disruptions to global commerce that would result from Trump’s isolation of the United States.
“There seems to be no order in the disorder. No clear path through the complexity and chaos that is being created, as all U.S. trading partners will be hit,” she said in a televised statement.
[…]She warned of the impact Trump’s dismantling of the global trade order will have on consumers and on businesses. “Millions of citizens will face higher grocery bills. Medication will cost more, as well as transportation. Inflation will go up,” she said.
“The costs of doing business with the United States will drastically increase,” she stressed.
James Fallows believes we’re “Launching the Economic Version of the Iraq War.” His post is long and only partly available without a subscription. But the takeaway is succinct:
I think this is a historically reckless moment in US economic policy. And even by Trump-era standards it’s a historically shameful moment for the Republican Party. Its leaders know that their alpha-figure is launching a dollars-and-Euros version of the Iraq war. And they stand by, grinning and clapping.
It’s possible that all of the experts are wrong. They may not be aware that trade wars are good, and easy to win .
A handful of Congressional Republicans seem to be hedging their bets on that score.
NYT (“Senate Votes to Rescind Some Trump Tariffs, With G.O.P. Support“):
The Senate on Wednesday approved a measure that would block some of the tariffs President Trump has imposed on Canada, with a handful of Republicans joining Democrats to pass a resolution that would halt levies set to take effect this week.
The measure is all but certain to stall in the House, where G.O.P. leaders have moved preemptively to shut down any move to end Mr. Trump’s tariffs. But Senate passage of the measure on a vote of 51 to 48 — just hours after Mr. Trump unveiled sweeping tariffs on more than 100 trading partners, including the European Union, China, Britain and India — sent a signal of bipartisan congressional opposition to the president’s trade war.
The resolution targets the emergency powers Mr. Trump invoked in February to impose sweeping tariffs on Canada, a move that has rattled markets and drawn bipartisan criticism from lawmakers concerned about the economic impact on their states and districts.
Mr. Trump imposed the tariffs in an executive order that cited the International Economic Emergency Powers Act, a Cold War-era law that has most often been used to impose sanctions on rogue states and human rights violators. His administration argued that unchecked drug trafficking from Canada constituted a dire threat to American national security and used it as justification to unilaterally impose 25 percent tariffs on America’s closest trading partner.
“The president has justified the imposition of these tariffs on, in my view, a made-up emergency,” said Senator Tim Kaine, Democrat of Virginia and the lead sponsor of the resolution. “The fentanyl emergency is from Mexico and China. It’s not from Canada.”
The resolution, cosponsored by two fellow Democrats, Senators Mark Warner of Virginia and Amy Klobuchar of Minnesota, seeks to revoke the emergency declaration and, with it, Mr. Trump’s ability to enforce the tariffs set to go into effect on Wednesday.
Senator Rand Paul of Kentucky was the lone Republican sponsor of the resolution. But three other G.O.P. senators who have expressed unease about the potential economic consequences of Mr. Trump’s trade measures joined him in support: Susan Collins of Maine, Lisa Murkowski of Alaska and Mitch McConnell of Kentucky.
We shall see if economic calamity is enough to cause a handful of House Republicans to break ranks. I am not confident.
Thursday’s Forum
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