Let's talk tariffs and (U.S.) domestic commodities
733 sats \ 11 comments \ @SilkyNinja 20 Jul econ
Love 'em or hate 'em it looks like tariffs are here to stay.
The lip service around tariffs equates to 'protectionism' in consumer and worker terms - in a functioning economy, tariffs would lead to mercantilism. I, however, see former President Trump's implementation of tariffs as a managerial tactic. I wonder if their upholding in President Biden's administration speaks to government puppetization...but regardless, former President Trump's insistence of greater tariffs seems to imply they are in fact here to stay - and maybe we can expect a storm or a wave depending how we see it.

Tariffs as a managerial strategy
From my point of view, the implementation of tariffs is more about putting pressure on domestic producers to produce more and produce better than it is about getting fairer deals in trade (or necessarily protecting individual workers...). It might even be about disrupting and domesticating supply chains - although my recent session with ChatGPT implies that is a can of worms. Because this is not necessarily the explicitly stated purpose, producers are more or less tasked with figuring it out (and getting rewarded as they do). I wonder if this could even cut out a lot of administrative and otherwise needless bloat in domestic corporations - could tariffs lead to reducing corporate corruption? Time will tell.
But if we have a robustly productive economy - particularly one that is domestically interdependent - couldn't that be protective of our global status, and couldn't that be protective of the average American citizen? Couldn't that be a good thing?
A lot of the discussion around this centers on steel and car manufacturing, or otherwise recognizable consumer products such as Coca Cola. But increasingly I see the logic of domesticating, reshoring and streamlining goods of all varieties.
I am a big fan of paper products - and it pains me their dismal quality today. I can go to the store and find several Japanese notebooks of rather fine quality (although Japanese paper texture generally does not have enough 'tooth' for my liking) and it frustrates me that there isn't a fine quality American paper (and notebook/journal) manufacturer. The United States is the greatest producer of paper pulp in the world - where does all of that paper pulp go?
At the risk of beating both of us over the head with my just-beginning research (quite literally I have gone from asking "why tariffs?" to this in only the past 6 days), I wonder, rather optimistically, if there are good bets to be made in U.S. domestic commodities - particularly nondurable commodities such as cotton, paper, and glass. What do you think? Would you be interested in coming along for the ride in my domestic commodity market research phase?
write
preview
related posts
189 sats \ 8 replies \ @Undisciplined 20 Jul
I’m entirely opposed to tariffs on both moral and humanitarian grounds. However, you’re right to wonder if economically there might be more here than meets the eye.
For a large country like the United States, the potential economic losses from tariffs are actually pretty small (at least in equilibrium).
Modern trade theory, which has decent empirical backing, even suggests that a large country might be able to gain from tariffs. I’m very skeptical of the practicality of that theoretical argument, but it does exist.
reply
99 sats \ 5 replies \ @freetx 20 Jul
Within the pantheon of taxes, I believe that tariffs are less evil then income, wealth, or property taxes.
From a historical perspective, its clear the framers of the constitution considered excise taxes to be the main form of allowed taxation. Excise taxes, of course, are avoidable. If tea is taxed at 50%, you have the option of not buying tea....whereas if I tax your income at 50% (or your property) you have no practical way of avoiding that tax.
Moreover, I know its good to point out the concept of "free trade" and how tariffs undermine the efficiency of the markets. In theory that is a very good point and also philosophically (and morally) sound.
However, the world is more messy than just that simple analysis: What if your trading partner is using slave labor? Is that free trade?
reply
21 sats \ 1 reply \ @Bell_curve 20 Jul
I have noticed that more people have embraced free trade since the rise and electoral success of Trump out of spite
reply
13 sats \ 0 replies \ @Undisciplined 20 Jul
That's only rhetorical support. It's not worth the paper it's not printed on.
reply
13 sats \ 2 replies \ @Undisciplined 20 Jul
You're right that this gets very messy when you take the actual conditions of our trade partners into account. That's why I'm not as animated about trade as many other libertarians, compared to how much I hate income or property taxes.
What might be worse than the generic inefficiencies of restricting trade, is the way trade policy is used to benefit certain industries and corporations. That is a major corrupting influence in our economy and government, so it would probably be better if they didn't have the option.
reply
21 sats \ 1 reply \ @Bell_curve 20 Jul
Why does WTO exist?
USA should leave WTO and establish free trade/low tariff zones or agreements
EU was originally founded as Economic Union, a Common Market, zero or low tariffs between member nations post WW2
reply
13 sats \ 0 replies \ @Undisciplined 20 Jul
USA was pretty much founded as an internal free trade zone, too.
I agree. America is a huge market that everyone wants access to. There's very little to gain from being in these organizations, other than special favors for politically connected groups.
reply
55 sats \ 1 reply \ @kepford 20 Jul
I'm far from an expert on tariffs but they are a tax and they do affect the prices we will pay for goods. Bob Murphy does a good job explaining them back when Trump was in office.
reply
68 sats \ 0 replies \ @Undisciplined 20 Jul
I agree and Bob has probably addressed why some of these theoretical results are implausible.
In brief, our fancy trade models indicate that a very large economy, trading with smaller ones, can more than offset the economic loss of higher prices with the additional economic activity from producing those goods domestically. The trade partners will all be worse off to the point where the world as a whole is less prosperous, though.
Tariffs don't always affect equilibrium prices very much, because domestic production is often nearly as efficient. Also, a large market like the US can usually pass most of the tax incidence onto it's trade partners.
Like I said, they're bad for humanity and it's immoral to prevent free association, but it's possible for certain countries to enrich themselves at their neighbors' expense via certain tariffs.
reply
13 sats \ 0 replies \ @zuspotirko 20 Jul
the implementation of tariffs is more about putting pressure on domestic producers to produce more and produce better than it is about getting fairer deals in trade
Because this is not necessarily the explicitly stated purpose, producers are more or less tasked with figuring it out
Lol, the gaslighting of framing more inefficiencies as a positive.
Free trade is a good thing. It maximizes competition, and skews every industry into operating at its most efficient place (the place with the highest comparative advantage)
But if we have a robustly productive economy - particularly one that is domestically interdependent - couldn't that be protective of our global status, and couldn't that be protective of the average American citizen?
More efficiency and dynamism comes at the cost of robustness and resilience. That's not a new insight, economists have argued about that since the 1700s.
However, we believe that the superior economic growth and companies explicitly optimizing for resilience (e.g. building warehouses, backup resources etc) is greater in the long term than creating redundant supply chains through tariffs
I wonder, rather optimistically, if there are good bets to be made in U.S. domestic commodities - particularly nondurable commodities such as cotton, paper, and glass. What do you think?
The thing about markets is that the question is never if you have a good trade idea. Because the market probably anticipated it. The question is rather if the market has misspriced something
reply
0 sats \ 0 replies \ @IamSINGLE 20 Jul
Can be or can be not! Tarrifs are only tarrifs, not real money!
reply