The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120. If you then put a 50% tariff on the foreign product, it would cost $150, and then people would prefer the domestic product and only be paying 20% instead of 50%. Moreover, they might prefer the domestic product in general (e.g. higher quality and/or patriotism) and only buy the foreign product if it's actually less expensive, and then the foreign manufacturer would have to lower their price from $100 to $70 so that the tariff only raises the price to $105 because any higher price than that and they lose the business.
The result, in theory, is that you would pay $5 more rather than $50 more. Meanwhile the government collected $35 in tariffs on the foreign product, $30 of which came from the manufacturer rather than you, and that allows the government to lower your other taxes by $35 at the same level of government spending and borrowing.
There are essentially two things required for this to work in your favor on net: 1) the tariffs cause the foreign manufacturer to lower their pre-tariff prices at all, and 2) the government uses the tariff revenue instead of some other taxes they would have collected directly or indirectly from you, so that your net tax burden stays the same. It can also be some mix of these, e.g. the foreign manufacturer lowers their price by $10, you pay $15 in tariffs and get a $10 reduction in other taxes, and then you're ahead by $5.
Ironically, the primary way domestic taxpayers end up paying more is if the tariffs succeed in causing people to buy domestic products, because then there is no tariff revenue on the domestic products and people pay the higher price for the domestic products without a reduction in other taxes.
There is hardly anything that is made domestically in the US. So the premise falls apart almost immediately. This premise works great for India where domestic production exceeds exports by massive margins and the economy depends mostly on domestic economy. It does not work for US where there is hardly any domestic production and is totally import driven economy.
The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU. It used to be the largest. Moreover, if the premise is that you're trying to bring back manufacturing capacity, it doesn't matter if something is currently made in the US, what matters is what it would cost if it was, because a tariff in excess of the difference would then make that cost effective.
Obviously in the latter case you would then have to wait until that manufacturing capacity comes back online, but "customers switch to a domestic product" isn't the only thing that can cause foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
While in the abstract and academic sense this is true, in practice there are two big problems that make it an utter non-starter*:
1) Due to the absolutely massive supply chains that have been built up in East Asia (not just China, but many other countries around there), and lack of same in the US, even for products where it's physically possible to produce it all domestically, from the raw materials on up, it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis. Any step that can't be done in-country gets the tariffs slapped on again. And there are a fair number of raw materials we just don't have, at least not in the kinds of amounts that, um, the entire rest of the world does, that are required for mass production.
2) Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back. He's applying tariffs as his personal punishment stick, and to all appearances that's the best he's actually capable of doing with them. In order for any of what I described in #1 to happen, ever, the tariffs need to be applied consistently, predictably, and for a long time.
Trump doesn't want to do any of that. He's just found a magic stick that makes people kowtow to him, and he's going to use it however he pleases.
* Not that I think you're unaware of these, based on your post; to a large extent I'm just expanding upon your second paragraph here.
Based on my (limited) understanding of RTRI, they have very specific items they fund and pretty low overall impact to the trade balance ($1M per org and $1B over 3 years program total across all industries). From [1]:
----------
Productivity improvement:
- investing in digitization, automation, or technology to enhance business productivity and competitiveness
- reshoring production, research & development (R&D) operations, recruiting highly qualified personnel (HQP) and expertise
Market expansion and diversification:
- developing and diversifying markets to help businesses find new customers
- business support, market development and diversification, and guidance services (e.g., advice for businesses from a sectoral expert organization)
Strengthening supply chains and trade resilience:
- optimizing supply chain logistics and ensuring compliance with standards to gain market access and/or enhance sales
- strengthening domestic supply chains and facilitating internal trade to increase the resilience of businesses and reliability of domestic markets
----------
This $1B program — even if it all went straight to subsidizing tariffs on Canadian imports — would be a pretty small rounding error out of the total $200B raised through tariffs from the article.
If anything, RTRI funds are largely about efficiency and pivoting to new markets. While there may be some outcomes that result in producers being able to lower their export costs, they're not "paying for" US tariffs.
It's like punching yourself in the face and then taking Tylenol for the pain until your friends do what you want. It's psychotic, doesn't work, and they're probably not going to want to hang out until you get some help.
Even with 90B in tariffs collected this fiscal year (since October) the government still spent 600B more than they collected.[1][2] Tax cuts would be great, but if you cut taxes without cutting spending you're just borrowing that tax cut from future generations. (270B of that 600B hole is interest payments on debt incurred by previous generations doing exactly that to us.)
Far from getting a break, you guys are paying tax on tax. You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax. AFAIK there are no input credits for US sales tax. Then you also have VAT but at least VAT is only on the added value.
Income tax is way better as you can reduce the tax burden by including expenses/deductions. You cannot do the same for tariffs, sales tax and VAT as an end consumer. VAT is only beneficial to businesses as they can subtract inputs from outputs.
> You indirectly pay for import taxes every time your companies import raw materials needed to finish their goods (added value) and then that final value (cost of import + added value) has its own sales tax.
This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income. The construction company pays sales tax when it buys a backhoe, which increases construction costs and therefore real estate prices, and then you pay property tax on the higher real estate prices, and make the bigger mortgage payment with money that was already taxed as income.
The only way you'd really get something different with tariffs is if the supply chain for some product passes through the local country multiple times, i.e. it gets imported, exported and then imported again. Which probably happens occasionally but isn't the common case.
Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
Oh no no, we still have tax cuts for the wealthy, $800B in debt servicing, and $1T/year in military spending to pay for. The tariffs were a regressive tax to compensate for the tax cuts for the wealthy.
You really don't need ANY study to know the obvious thing that tariffs are taxes on imports. It is being paid by Americans from DAY 1. The only difference being American Companies were taking the brunt of it all and it is now obvious that they cannot keep swallowing it and will eventually pass it on to the American consumers.
It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
US is sabotaging itself and pushing in the same "New World Order" that the right-wing conspiracy nuts kept warning about but ironically have been instrumental in accelerating it themselves anyways.
Or maybe that was the design all along. To not go out in a whimper but with a big bang.
If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
> If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
Not a great idea. The US will have lost a lot of political goodwill by then. And given up a lot of geopolitical status and influence. The devices will be back in the saddle but have to resort to really unpopular measures to clean up the mess, basically guaranteeing a republican win afterwards.
And some credibility and influence will never recover. The rest of the world will remember there can always be another trump. And they will have switched to (and restarted) local industries. Once those are running there's no incentive to look at US ones again. And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves.
> It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
They knew it was a lie then, and they know it's one now. A plurality of voters want what's happening currently, they're not crazy, it's just a mix of xenophobia, isolationism, and inbreeding.
The problem with that last is that if the Democrats do nothing, there's a very real chance that Trump deploys the military to either prevent the midterms from happening, or to force their outcome to be what he wants.
(Of course, if they do something there's still a chance he does that—they have to do the right thing and they have to do it well to reduce the chances by much!)
There's also that pesky matter of, y'know, their constituents. Who are getting bled dry by the stagflation that's happening.
The only threat that works against Trump doing destructive things is to say to build a slightly bigger white house for Biden to feature him in a reality show and put him on the front page on a full page and Trump on a the second page at a half page.
I am checking conservative echo chambers from time to time and find it ridiculous that they always find a positive spin on all the obvious grifting and destruction that is happening around them. we are witnessing the downfall of an empire with our own eyes and can do absolutely NOTHING
I build homes and so am adjacent to many blue collar Trump fanatics, here's the thing I constantly hear;
> My tool for X used to cost $500 or $2000. The $500 was imported and good enough for me. I could never justify spending $2000 on the Made in USA version although it was very well built and I wanted it. Now, with tariffs, the import costs $1800, so it's easy for me to justify spending $2000 on the Made in USA option. Trump got me to buy American and support American manufacturing. Go MAGA!
It's strange how if the same economic condition existed due to a Biden (or any liberal presidents term) they surely would have been villainized for eliminating ANY lower cost option, increasing the cost of business (when tools cost more, everything they create costs more), and simply stealing food from people's families (as the $1500 extra he spent would have presumably remained in this contractor's profits in the pre-tariff reality not to long ago). It takes massive mental gymnastics to view this as beneficial and anything other than a direct tax on American consumers. The brain washing rhetoric of conservative media is an extremely powerful weapon.
So when are they coming out with a study on how to regain the lost industrial and technological base, so as not to become totally dependent on a hostile competitor?
There's a guaranteed fix, but no one is going to advocate for it: replace the dollar as the global reserve currency.
The replacement of the Bretton Woods system in the 1970s with the petrodollar, transformed the US from a creditor nation to a debtor nation, and shifted economic and financial incentives in ways that resulted in deindustrialization followed by trade imbalance.
If we want to reindustrialize, it's simple: de-dollarize the global reserve. The downside is that it affects the finance bros and the US's ability to apply economic pressure to achieve political outcomes on the world stage. If you think the benefits afforded in international politics outweighs deindustrialization, thats fine, but you can't have both.
My boneheaded proposal is the opposite of Trump's approach: give the rest of the world coupons to buy made-in-USA products and machinery at a steep discount. Ship stuff to the rest of the world and ask nothing in return. Get the orders rolling in from around the world, pushing up economies of scale.
Of course, this will make American consumers much poorer on average, but boost production capacity. Sort of what China does.
Any such plan requires evicting the fascist grifters first, and rejecting these fake calls of "austerity" that have been running interference for the past several decades. Then, proceeds from having the world reserve currency could be spent deliberately (re)building our industry rather than just being dumped into handouts for the rich.
But in a way the reelection of the New York conman was the final nail in the coffin assuring that this will never happen. The red tribe found it more appealing to turn their frustration inwards and attack our country rather than working with the blue tribe to constructively address these types of problems. And with the subsequent destruction of most everything that had made us a world leader, it's questionable whether we will even have the world reserve currency for much longer.
Not to mention, as has been said many times before, there isn't much incentive to build out manufacturing in the US when its trade policy is constantly shifting at the whims of one person. Businesses need stability, and this President delivers the opposite.
The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120. If you then put a 50% tariff on the foreign product, it would cost $150, and then people would prefer the domestic product and only be paying 20% instead of 50%. Moreover, they might prefer the domestic product in general (e.g. higher quality and/or patriotism) and only buy the foreign product if it's actually less expensive, and then the foreign manufacturer would have to lower their price from $100 to $70 so that the tariff only raises the price to $105 because any higher price than that and they lose the business.
The result, in theory, is that you would pay $5 more rather than $50 more. Meanwhile the government collected $35 in tariffs on the foreign product, $30 of which came from the manufacturer rather than you, and that allows the government to lower your other taxes by $35 at the same level of government spending and borrowing.
There are essentially two things required for this to work in your favor on net: 1) the tariffs cause the foreign manufacturer to lower their pre-tariff prices at all, and 2) the government uses the tariff revenue instead of some other taxes they would have collected directly or indirectly from you, so that your net tax burden stays the same. It can also be some mix of these, e.g. the foreign manufacturer lowers their price by $10, you pay $15 in tariffs and get a $10 reduction in other taxes, and then you're ahead by $5.
Ironically, the primary way domestic taxpayers end up paying more is if the tariffs succeed in causing people to buy domestic products, because then there is no tariff revenue on the domestic products and people pay the higher price for the domestic products without a reduction in other taxes.
There is hardly anything that is made domestically in the US. So the premise falls apart almost immediately. This premise works great for India where domestic production exceeds exports by massive margins and the economy depends mostly on domestic economy. It does not work for US where there is hardly any domestic production and is totally import driven economy.
Obviously in the latter case you would then have to wait until that manufacturing capacity comes back online, but "customers switch to a domestic product" isn't the only thing that can cause foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens.
1) Due to the absolutely massive supply chains that have been built up in East Asia (not just China, but many other countries around there), and lack of same in the US, even for products where it's physically possible to produce it all domestically, from the raw materials on up, it would take decades of sustained investment without return before actual consumer products could be made on anything other than a one-off basis. Any step that can't be done in-country gets the tariffs slapped on again. And there are a fair number of raw materials we just don't have, at least not in the kinds of amounts that, um, the entire rest of the world does, that are required for mass production.
2) Trump isn't applying tariffs in a strategic manner to get domestic manufacturing to come back. He's applying tariffs as his personal punishment stick, and to all appearances that's the best he's actually capable of doing with them. In order for any of what I described in #1 to happen, ever, the tariffs need to be applied consistently, predictably, and for a long time.
Trump doesn't want to do any of that. He's just found a magic stick that makes people kowtow to him, and he's going to use it however he pleases.
* Not that I think you're unaware of these, based on your post; to a large extent I'm just expanding upon your second paragraph here.
----------
Productivity improvement:
- investing in digitization, automation, or technology to enhance business productivity and competitiveness
- reshoring production, research & development (R&D) operations, recruiting highly qualified personnel (HQP) and expertise
Market expansion and diversification:
- developing and diversifying markets to help businesses find new customers
- business support, market development and diversification, and guidance services (e.g., advice for businesses from a sectoral expert organization)
Strengthening supply chains and trade resilience:
- optimizing supply chain logistics and ensuring compliance with standards to gain market access and/or enhance sales
- strengthening domestic supply chains and facilitating internal trade to increase the resilience of businesses and reliability of domestic markets
----------
This $1B program — even if it all went straight to subsidizing tariffs on Canadian imports — would be a pretty small rounding error out of the total $200B raised through tariffs from the article.
If anything, RTRI funds are largely about efficiency and pivoting to new markets. While there may be some outcomes that result in producers being able to lower their export costs, they're not "paying for" US tariffs.
Edit: formatting.
--
1: https://www.canada.ca/en/prairies-economic-development/servi...
https://archive.is/lvQHh
It's like punching yourself in the face and then taking Tylenol for the pain until your friends do what you want. It's psychotic, doesn't work, and they're probably not going to want to hang out until you get some help.
[1] https://fiscaldata.treasury.gov/americas-finance-guide/gover...
[2] https://fiscaldata.treasury.gov/americas-finance-guide/feder...
Income tax is way better as you can reduce the tax burden by including expenses/deductions. You cannot do the same for tariffs, sales tax and VAT as an end consumer. VAT is only beneficial to businesses as they can subtract inputs from outputs.
This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income. The construction company pays sales tax when it buys a backhoe, which increases construction costs and therefore real estate prices, and then you pay property tax on the higher real estate prices, and make the bigger mortgage payment with money that was already taxed as income.
The only way you'd really get something different with tariffs is if the supply chain for some product passes through the local country multiple times, i.e. it gets imported, exported and then imported again. Which probably happens occasionally but isn't the common case.
Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once.
Is this before or after Infrastructure Week:
* https://politicaldictionary.com/words/infrastructure-week/
It is crazy that so many in US STILL think tariffs are being paid for by exporting countries.
US is sabotaging itself and pushing in the same "New World Order" that the right-wing conspiracy nuts kept warning about but ironically have been instrumental in accelerating it themselves anyways.
Or maybe that was the design all along. To not go out in a whimper but with a big bang.
If I were the Democrats, I would do nothing and just let the US admin destroy whatever little credibility it has left on the World stage... thereby securing mid-terms and the next Presidential elections.
Not a great idea. The US will have lost a lot of political goodwill by then. And given up a lot of geopolitical status and influence. The devices will be back in the saddle but have to resort to really unpopular measures to clean up the mess, basically guaranteeing a republican win afterwards.
And some credibility and influence will never recover. The rest of the world will remember there can always be another trump. And they will have switched to (and restarted) local industries. Once those are running there's no incentive to look at US ones again. And any geopolitical influence that was lost will already have been filled by other players who will entrench themselves.
They knew it was a lie then, and they know it's one now. A plurality of voters want what's happening currently, they're not crazy, it's just a mix of xenophobia, isolationism, and inbreeding.
(Of course, if they do something there's still a chance he does that—they have to do the right thing and they have to do it well to reduce the chances by much!)
There's also that pesky matter of, y'know, their constituents. Who are getting bled dry by the stagflation that's happening.
> My tool for X used to cost $500 or $2000. The $500 was imported and good enough for me. I could never justify spending $2000 on the Made in USA version although it was very well built and I wanted it. Now, with tariffs, the import costs $1800, so it's easy for me to justify spending $2000 on the Made in USA option. Trump got me to buy American and support American manufacturing. Go MAGA!
It's strange how if the same economic condition existed due to a Biden (or any liberal presidents term) they surely would have been villainized for eliminating ANY lower cost option, increasing the cost of business (when tools cost more, everything they create costs more), and simply stealing food from people's families (as the $1500 extra he spent would have presumably remained in this contractor's profits in the pre-tariff reality not to long ago). It takes massive mental gymnastics to view this as beneficial and anything other than a direct tax on American consumers. The brain washing rhetoric of conservative media is an extremely powerful weapon.
I assume they're working on that, right?
The replacement of the Bretton Woods system in the 1970s with the petrodollar, transformed the US from a creditor nation to a debtor nation, and shifted economic and financial incentives in ways that resulted in deindustrialization followed by trade imbalance.
If we want to reindustrialize, it's simple: de-dollarize the global reserve. The downside is that it affects the finance bros and the US's ability to apply economic pressure to achieve political outcomes on the world stage. If you think the benefits afforded in international politics outweighs deindustrialization, thats fine, but you can't have both.
Of course, this will make American consumers much poorer on average, but boost production capacity. Sort of what China does.
Expect other countries to retaliate.
But in a way the reelection of the New York conman was the final nail in the coffin assuring that this will never happen. The red tribe found it more appealing to turn their frustration inwards and attack our country rather than working with the blue tribe to constructively address these types of problems. And with the subsequent destruction of most everything that had made us a world leader, it's questionable whether we will even have the world reserve currency for much longer.
Don't anthropomorphize the misguided missiles in the Trump administration. There is no teleology behind the tariffs, only chaos and grift.