I predict that Trump's tariffs will not be high enough to help U.S. workers much. It will be just high enough for MAGA PR value but otherwise will be ineffective. Tariffs that are set high enough to re-direct investment toward new plants in the U.S. will eat into profits and possibly start a trade war.
If so, Trumpian tariffs will be the worst of all worlds -- hurting consumers but not helping workers. That's typically "good enough for government work" in D.C. Stephanie reminds us of how marginal Trump's "deals" with China, Mexico and Canada were (compared to Trump's hype).
I suspect Trump's tariff talk may be so much hot air to bully other countries (without knowing yet to what end). His base will love watching this theatre on Fox news, but their actual economic condition won't improve much.
Except the Federal Govt doesn't really "borrow" money from anybody. This is somewhat just moving the F.E.A.R. to a new target.
Isn't one danger of permanent large trade deficit a somewhat unpredictable inflation risk? Bizarro Chinese Trump decides he doesn't like being in surplus and puts duties on exports to the USA. Or the kinds of disruptions the pandemic produced - not as arbitrary, but a year before you would never have guessed it would happen. Or does this get to what we mean by "inflation"? If it's not about too much money trying to buy too few goods and services, then taking money out of the economy would just make things worse, yes?
Bizaro Chinese Trump could certainly tax Chinese exports. But that would do real harm to domestic Chinese industries, wouldn't it? BCT is desperately trying to grow the Chinese economy and this action would threaten that growth.
Taking money out of the economy would selectively make things worse for countries that don't print their own money. The US can just print more money as you allude to in your headline "Except the Federal Govt doesn't really "borrow" money from anybody."
Great piece and a solid video on top of that. Those that are backing his tariff threats truly don't know what they're in for. He looks at trade deficits the way he looks at gov deficits as that a deficit that must be restored into balance and the way he's going about it will hurt those Trump is claiming to protect. These next 4 years coming up are going to be a total circus.
Absolutely true; another point is that, since the trade is in $, a large part of the deficit actually returns to the US as investment in U.S. debt and stocks; this helps keep domestic interest rates low and the dollar strong, both contrary to what a trade deficit warrants.
I may be giving Trump more credit than he is due, but I sense here there is a simplification going on.
When he says that we 'lose a lot of money to X', is he not stating the issue in simple terms? X isn't buying American output and that means Americans end up without a job. Instead X are using US finance instruments as 'hard currency' illusions in their own financial system to hide the fact that they are really issuing their local money against the power to tax, not the 'hard currency'.
Trump's real mistake is failing to realise there is an alternative - accommodate the belief rather than attempting to dispel it: understand that US finance instruments are an export product, which work in exactly the same way as exports of Buddha Idols. They are an export product to prop up a belief system. The solution isn't to denigrate hard currency believers and say it is a silly belief that has no basis in fact. It's to produce more of the idol they desire so that true believers can feel satisfied.
The interesting corollary of looking at the situation like that is you realise you don't actually need to pay hard currency believers to take your idols. They'll take them anyway as part of their belief.
Hire the Americans without jobs to do things for free for Americans and pay them in Idols. The hard currency believers will then give you stuff in exchange for the new idols as much as any 'classic' ones. You won't even need any 'special editions' with an annual percentage reward.
With higher tariffs on imports, as Trump threatens, not only will the price of those imported items increase for U.S. consumers, but the price of domestically produced complementary items will also increase. Let’s say we consume 60% of imported home appliances—20.4 million items—and 40% of U.S.-manufactured home appliances—13.6 million items. Trump wants to flip that so we export 60%. To reach this goal, our manufacturers would need to increase production by 50%—6.8 million items. It’s doable, but it would probably take time (x years) to build the plants needed to operate at new capacity. Additionally, the cost of supply chain logistics may go up, and U.S. manufacturers will want to recover their investments.
If the tariffs are not high enough, as Portlander says, or if manufacturers believe the business cycle will turn into a recession, or if they don’t know when the huge tariffs will end, they will not invest in expansion. Instead, it will be less risky to simply hike up their prices, assuming demand is there.
The video makes a profound point. Foreign holders of US dollars can save them, spend them, OR EXCHANGE THEM FOR ANOTHER FOREIGN CURRENCY. But then this new holder of US dollars will be faced with the same problem that the previous owner had. And this highlights a crucial fact: holders of US dollars exert far less leverage than people think. Let's say you hold $100 million in 10-year treasury bills, yielding about 4.3% or so (it changes daily). What would you do if the Fed suddenly declared that the interest the US gov't was willing to pay on those notes was now a mere 1%? Not much. Scream that it's not fair!? The Fed would tell you to go pound sand. At least your $10 million is guaranteed by the full faith and surety of the US gov't.
You could sell your treasuries for hard currency and then spend or invest it, but the reason you bought those bonds in the first place was because there were no currently attractive investment opportunities.
Forget about paying interest! The US gov't should charge a fee for allowing holders of large quantities of US dollars to park their money in an absolutely secure location.
In his first term, Trump declared that "tariff" was his favorite word. He loved it so much, he wanted to demonstrate his ability to increase US revenues, jobs and manufacturing when he imposed it. After all, his tariffs would be paid for by those countries that he raised taxes on.
Guess he didn't anticipate retaliation from those countries. No jobs came back to US, only misery, especially to farmers who lost export sales of their products. Trump had to end up subsidizing them for their loss.
Now the "master negotiator" and Tariff Man is at it again. He is convinced that his "only I can fix it" mantra will bring all those export countries to capitulate to him. But, as before, they could call his bluff, retaliate and bring on a trade war resulting in high prices, high inflation or worst case, depression, that would put the 1930's to shame. IMHO
Welfare Works! Universal Living Capital, what it costs to live, wherever you live paid for by the Federal Reserve, directly to the people who need it will resolve many many issues. We can all be couch potatoes, enjoying the great content on platform and of course, the NFL, purchase the subscriptions, keeping the quality content coming, supporting the advertisers which fund the sports, and arts that we so enjoy. Welfare Works.
We are in the desperate need for WELFARE. The US economy needs a cash infusion from the government in the form of direct payments to consumers. We already produce too much stuff. We dont have the money available to buy it. We need services, mostly trash removal, but we cant aford it cuz the wealthy have saved all the money, and we have none to take out the trash. We dont need jobs. We need trash removal., ok, maybe a nail job, but then trash removal.
IMO, that is a fabulous video - clear and concise!
I predict that Trump's tariffs will not be high enough to help U.S. workers much. It will be just high enough for MAGA PR value but otherwise will be ineffective. Tariffs that are set high enough to re-direct investment toward new plants in the U.S. will eat into profits and possibly start a trade war.
If so, Trumpian tariffs will be the worst of all worlds -- hurting consumers but not helping workers. That's typically "good enough for government work" in D.C. Stephanie reminds us of how marginal Trump's "deals" with China, Mexico and Canada were (compared to Trump's hype).
I suspect Trump's tariff talk may be so much hot air to bully other countries (without knowing yet to what end). His base will love watching this theatre on Fox news, but their actual economic condition won't improve much.
Except the Federal Govt doesn't really "borrow" money from anybody. This is somewhat just moving the F.E.A.R. to a new target.
Isn't one danger of permanent large trade deficit a somewhat unpredictable inflation risk? Bizarro Chinese Trump decides he doesn't like being in surplus and puts duties on exports to the USA. Or the kinds of disruptions the pandemic produced - not as arbitrary, but a year before you would never have guessed it would happen. Or does this get to what we mean by "inflation"? If it's not about too much money trying to buy too few goods and services, then taking money out of the economy would just make things worse, yes?
Bizaro Chinese Trump could certainly tax Chinese exports. But that would do real harm to domestic Chinese industries, wouldn't it? BCT is desperately trying to grow the Chinese economy and this action would threaten that growth.
I’m just saying, we aren’t the only country that can do dumb things.
Taking money out of the economy would selectively make things worse for countries that don't print their own money. The US can just print more money as you allude to in your headline "Except the Federal Govt doesn't really "borrow" money from anybody."
Great piece and a solid video on top of that. Those that are backing his tariff threats truly don't know what they're in for. He looks at trade deficits the way he looks at gov deficits as that a deficit that must be restored into balance and the way he's going about it will hurt those Trump is claiming to protect. These next 4 years coming up are going to be a total circus.
Bernie and Jane need to get off their butts with you and start doing something to get shit done
Absolutely true; another point is that, since the trade is in $, a large part of the deficit actually returns to the US as investment in U.S. debt and stocks; this helps keep domestic interest rates low and the dollar strong, both contrary to what a trade deficit warrants.
Clearly it appears the Public isn’t on to this apparent crisis! As if we don’t have enough Crisis’! Ding Ding Ding!
Well done👍
I may be giving Trump more credit than he is due, but I sense here there is a simplification going on.
When he says that we 'lose a lot of money to X', is he not stating the issue in simple terms? X isn't buying American output and that means Americans end up without a job. Instead X are using US finance instruments as 'hard currency' illusions in their own financial system to hide the fact that they are really issuing their local money against the power to tax, not the 'hard currency'.
Trump's real mistake is failing to realise there is an alternative - accommodate the belief rather than attempting to dispel it: understand that US finance instruments are an export product, which work in exactly the same way as exports of Buddha Idols. They are an export product to prop up a belief system. The solution isn't to denigrate hard currency believers and say it is a silly belief that has no basis in fact. It's to produce more of the idol they desire so that true believers can feel satisfied.
The interesting corollary of looking at the situation like that is you realise you don't actually need to pay hard currency believers to take your idols. They'll take them anyway as part of their belief.
Hire the Americans without jobs to do things for free for Americans and pay them in Idols. The hard currency believers will then give you stuff in exchange for the new idols as much as any 'classic' ones. You won't even need any 'special editions' with an annual percentage reward.
With higher tariffs on imports, as Trump threatens, not only will the price of those imported items increase for U.S. consumers, but the price of domestically produced complementary items will also increase. Let’s say we consume 60% of imported home appliances—20.4 million items—and 40% of U.S.-manufactured home appliances—13.6 million items. Trump wants to flip that so we export 60%. To reach this goal, our manufacturers would need to increase production by 50%—6.8 million items. It’s doable, but it would probably take time (x years) to build the plants needed to operate at new capacity. Additionally, the cost of supply chain logistics may go up, and U.S. manufacturers will want to recover their investments.
If the tariffs are not high enough, as Portlander says, or if manufacturers believe the business cycle will turn into a recession, or if they don’t know when the huge tariffs will end, they will not invest in expansion. Instead, it will be less risky to simply hike up their prices, assuming demand is there.
The video makes a profound point. Foreign holders of US dollars can save them, spend them, OR EXCHANGE THEM FOR ANOTHER FOREIGN CURRENCY. But then this new holder of US dollars will be faced with the same problem that the previous owner had. And this highlights a crucial fact: holders of US dollars exert far less leverage than people think. Let's say you hold $100 million in 10-year treasury bills, yielding about 4.3% or so (it changes daily). What would you do if the Fed suddenly declared that the interest the US gov't was willing to pay on those notes was now a mere 1%? Not much. Scream that it's not fair!? The Fed would tell you to go pound sand. At least your $10 million is guaranteed by the full faith and surety of the US gov't.
You could sell your treasuries for hard currency and then spend or invest it, but the reason you bought those bonds in the first place was because there were no currently attractive investment opportunities.
Forget about paying interest! The US gov't should charge a fee for allowing holders of large quantities of US dollars to park their money in an absolutely secure location.
In his first term, Trump declared that "tariff" was his favorite word. He loved it so much, he wanted to demonstrate his ability to increase US revenues, jobs and manufacturing when he imposed it. After all, his tariffs would be paid for by those countries that he raised taxes on.
Guess he didn't anticipate retaliation from those countries. No jobs came back to US, only misery, especially to farmers who lost export sales of their products. Trump had to end up subsidizing them for their loss.
Now the "master negotiator" and Tariff Man is at it again. He is convinced that his "only I can fix it" mantra will bring all those export countries to capitulate to him. But, as before, they could call his bluff, retaliate and bring on a trade war resulting in high prices, high inflation or worst case, depression, that would put the 1930's to shame. IMHO
I had to pause the video several times and go back and listen to each part until if finally sunk in. I am 79 years old but I think I get it now.
Welfare Works! Universal Living Capital, what it costs to live, wherever you live paid for by the Federal Reserve, directly to the people who need it will resolve many many issues. We can all be couch potatoes, enjoying the great content on platform and of course, the NFL, purchase the subscriptions, keeping the quality content coming, supporting the advertisers which fund the sports, and arts that we so enjoy. Welfare Works.
We are in the desperate need for WELFARE. The US economy needs a cash infusion from the government in the form of direct payments to consumers. We already produce too much stuff. We dont have the money available to buy it. We need services, mostly trash removal, but we cant aford it cuz the wealthy have saved all the money, and we have none to take out the trash. We dont need jobs. We need trash removal., ok, maybe a nail job, but then trash removal.