Remember Trump’s declaration that “trade wars are good, and easy to win”? How about “I am a Tariff Man,” or his repeated (inaccurate) claim that foreigners pay tariffs.
Have we ever had a less-informed President? (That’s a rhetorical question. Obviously, being ignorant is one contest Trump wins in a walk.)
Let Paul Krugman explain Trump’s fallacies.
Over the course of 2018 Trump imposed tariffs on about 12 percent of total U.S. imports, and many of those tariffs have been in effect long enough that we can get a first read on their consequences.
On Saturday economists from Columbia, Princeton, and the New York Federal Reserve released a paper, “The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall.
Krugman explains the essential findings of the cited paper, with graphs–you should click through for the details–and then gives examples.
Consider the following example: pre-tariff, the U.S. imports some good from China that costs $100. Then the Trump administration imposes a 25% tariff, raising the price to consumers to $125. If we just keep importing that good from China, consumers lose $25 per unit purchased – but the government raises an extra $25 in taxes, leaving overall national income unchanged.
Suppose, however, that importers shift to a more expensive source that isn’t subject to the tariff; suppose, for example, that they can buy the good from Vietnam for $115. Then consumers only lose $15 – but there is no tariff revenue, so that $15 is a loss for the nation as a whole….
Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.
Now, the numbers aren’t that big. The new paper puts the net welfare loss at $1.4 billion a month, or $17 billion a year; that’s less than 0.1 percent of U.S. GDP. But winning it isn’t.
Stubbornly low crop prices have been exacerbated by the trade war that decimated the once-lucrative Chinese market for soybeans. China used to be the biggest buyer of U.S.-grown soybeans. But this year, in retaliation for similar U.S. tariffs on Chinese imports, China imposed a 25 percent tariff on imports of U.S. soybeans, resulting in a dramatic drop in shipments.
The American Soybean Association has elaborated on the problems. According to the organization, Trump’s actions have “rocked the foundation of a decades-old trade relationship” between U.S. soybean farmers and China, which has been the largest market for American beans. It has resulted in halted sales, plummeting crop prices, and a lack of security for farmers seeking funding for the 2019 season.
The value of U.S. soybean exports to China has grown 26-fold in 10 years, from $414 million in 1996 to $14 billion in 2017. China imported 31 percent of U.S. production in 2017, equal to 60 percent of total U.S exports and nearly one in every three rows of harvested beans. Over the next 10 years, Chinese demand for soybeans is expected to account for most of the growth in global soybean trade, making it a prime market for the U.S. and other countries.
U.S. soybean growers have realized a nearly 20 percent drop in soy prices since the threat of tariffs began last summer, and the future of soy growers’ relationship with China continues to be in jeopardy. China has pursued new means to procure soybeans and other protein crops, including maximizing soybean imports from other exporting countries, particularly Brazil.
Growers have taken to Twitter and other social platforms today with the hashtag #185DaysStillNeedTrade, along with the popular #RescindtheTariffs hashtag to continue demanding that the Administration bring an end to its lingering trade war with China and help restore certainty and stability to the soy industry.
Certainty and stability aren’t Trump’s strong suits, to put it mildly. Thanks a lot, “Tariff man.”
Forgive me for asking such a simplistic question,
but what does Trump think his tariffs are doing? What do hos advisors tell him regarding this and why?
At the bottom of the income scale here in the good old US of A the poor feel that 25% tariff just as hard as any farmer in Iowa. The unseen and unheard still buy their necessities but now they shop more often at the Dollar Tree for these items. For clothing and household items you can find them at Goodwill or making the rounds at yard sales. That big Republican tax break they thought they got hasn’t panned out.
Thanks to Trump, we are all poorer for the experience.
Forgive the simplicity in my question, but what precisely does Trump think there tariffs are doing and what do his advisors tell him about these policies?
Stupid is as stupid does
He is consistent
Each time I grocery shop I wonder what I can remove from my list; meat is now a luxury item, produce is of poor quality everywhere and costs are at ridiculous levels, bread products and dairy have not escalated as high or as fast yet. Let me clue you in to Kroger bread prices and the trick used by their commercial bakery located on English Avenue where my daughter worked for 25 years. Those loaves of Kroger breads at different prices all come from the same batches of bread; the psychological factor of those who refuse to buy “cheap” bread buy the loaves in the higher prices LABELS are buying the same bread being sold in the cheaper labels.
The U.S. and state tax increases to supposedly maintain and/or repair our infrastructure increase; are the increases to pay for the materials used to repair and the vehicles and equipment which have been imported as almost everything we buy? We know the workers are not benefiting by increased wages for the work being done. And with China being our primary source for many goods which haven’t yet had Trump’s tariff increases imposed; how many increases will we be paying and for what? The last TV I bought at a good price at Walmart had large printing on the box “ASSEMBLED IN AMERICA”; another dog whistle telling us the parts were imported from other countries, meaning American workers had lost those jobs.
Two Family Dollar stores on the east side have closed; a recent news report stated that Dollar Tree was in the process of making changes which can only mean increased prices in their stores. What was once the DAV Thrift Store in Irvington Plaza Mall moved to the far East Washington Street long ago with a DAV drop off site next to the newly named City Thrift store which closed about 2 years ago. The losses of these reasonably priced outlets has been going on and has increased at a rapid rate recently; denying many low-income families of sources to afford the luxuries of toilet paper, bath, general cleaning and laundry products and over-the-counter medications. Corporatism takeover is depriving Americans of simple basics to maintain the even the low-income level standards of life.
What happens when Trump’s tariffs go into full effect? When we near the bottom of the income level can no longer afford to buy the basics; what happens to the corporations providing these materials and services and denial of Global Warming destroys our environment? My generation will not live to see it reach that level of deprivation but our children, grand-children and great-grandchildren will be living in the “Soylent Green” world which is science fiction today. Trump’s tariffs are much more than “stupid”; they are life threatening.
So Trump imposes tariffs and then issues a $7.5 billion bailout package for farmers. If Krugman continues his assessment, we are paying twice for the Idiot & Chief’s trade war.
#BernieOrBust
Even the local BSU economic hack has been slamming the so-called “trade wars”. The Koch owned puppet, Mike Hicks, has been ranting on Twitter for quite some time about the tariffs and calling for Trump’s resignation. BTW, the Koch brothers have been booted from the GOP–I’ve read where the depart was mutual so Hicks isn’t going against his funders. 😉
Don’t think he grew a backbone.
The tariffs are no different than the wall Mexico was supposed to pay for along our southern border. Trump is an idiot and he surrounds himself with idiots who don’t question him. In leadership circles, we call them, “Yes men and women.”
He needs reassurance daily that he is brilliant and everybody else is the problem. I guess for the right price, he’s found a few dozen people who will confirm his brilliance while the country pays the ultimate price on the world’s stage.
Trade between countries is so complicated and especially complicated between the most powerful countries. Trump did not surround himself with qualified economic advisors and even if he had he probably would not have listened to their advice.
What he doesn’t understand is that the financial destruction his tariffs are causing to family farmers will continue to create even fewer but larger corporate farms in the US. This may have the potential to really skew the markets in our own country for their buyers, whether they need crops for livestock feed or for other human food production. Power and control of food sources in too few hands is dangerous.
I live in rural northern Indiana and multi-generation farm families are throwing in the towel more frequently than in the past. These are people who have farmed for generations, but the huge investments that are necessary to farm and the increasing risks in the market have just become too much. When you lose hundreds of thousands each year for maybe three years in a row and the market doesn’t give you any hope of recovering in the near future, the game is over so to speak. Of course, lenders have a voice in these decisions too. They may ultimately be the ones to stop the operating loans. Farmer suicides have been increasing over the past few years. I wonder what the stats will show after the pain from the tariffs.
As You may have guessed, when the source of our food is more concentrated or diminished we will ultimately be paying a higher price for less choice and most likely lower quality.
Cynthia,
It should be obvious that nobody advises 45 on economic policy, since Hannity knows nothing about economics. After all, our President has a “very good brain.”
Trump told us long ago that the knew “more than all the admirals and generals” and it now appears we can add Ivy League economists to that list of inferior talent. He has spent 7.5 billion out of a slush fund of 12 billion to compensate soybean and other farmers for their losses due to countervailing tariffs by the Chinese, thus substituting welfare for the free market Republicans say they champion, while Argentina and Brazil have taken over our former soybean market in China.
We are therefore paying a higher tax bill in order to keep farmers afloat and higher prices due to countervailing tariffs by our trading partners, all while enduring historic trade deficits due in part to lesser export trade which is in turn adversely affected by countervailing tariffs and our strong dollar.
It’s nice to know we have a brilliant economist in the Oval Office surrounded by yes men and women along with sycophants on the order of 35% of the voting populace who support ego and bullying over settled trade norms. Fasten your seat belt.
while looking at the charade trump builds on(clown for clown) ,long term its going to get worse,as he allows mercer like scams to thawart common sense,and for the people. wall streets silence is booming,as they allow this game to be played,to satisfy the money. who cares if people die in other nations as long as people like wilber ross can make a deal, screwing anyone but himself. we have a cabinet full of grotesque minds set on imbalance for thier own desires. menuchin is probabaly the worst, his ideals are strictly market wise, while screwing anything that gets between his portfolio and his wallet..none of the cabinet is in anyway going to help this nation except to exploit its power,and sell it to the highest bidder,while gambling with other peoples money. they have sheltered themselves from harm ,via the republican clan. they have done a great job in influencing minds who refuse to read,and take part in a one time democracy, and they dont have a clue,they are voting themselves in to economic slavery. if the coal miners in kentucky would take this apart piece by piece ,without bubbas help, that would be a start,as they, could throw bitch out and start as new begining without the hazards of their job. theres plenty of people willing to help,but ya gotta mentor them,one on one. if they wont read and comprehend.then its a waste of time. by then, its too late,and poverty will keep them down while they accuse someone else of the issue. we are already seeing this,if you didnt notice,how the wages went backwards after 2008, and we have a wage growth that again,is as stagnated as bayou water. when the congress allowed trade with oleg deripreska for his aluminum,it was again a slap in the employment here in America. we could have opened a former plant,and went about making our own, but, as i see it, the commerce dept didnt want to have another union wage,interfering with his portfolio, or any of his buddies who has concern in this matter.(mob rules ya know) instead,we deal with a known killer,gangster,and first in line fraud,and putins buddy(manafarts to) who supports the invasion in Ukraine. very little media in this matter,but, like the present whitehouse, who does not a give a shit as long as thier happy…if the demos have a plan,start with hacking away one by one the cabinet, and set the tone for some payback via taxing that profit,they have personally made,and put it to use where it needs be..best wishes…
Gerald…and all,
These characteristics that we’ve been flogging for 2 years are all on the list for psychopaths. Not all psychopaths are deadly, but ALL of them are liars and con men. All of them. Trump is easily diagnosed as a psychopath using any number of metrics. The term for someone like him that is less harsh is “malignant narcissistic personality disorder”.
Well done, voters. There probably are still 50-55 million of them who will vote for him again even as their farms collapse, their kids starve, their schools rot and their earned benefits get stolen. These are the 5th Avenue people. Mass ignorance among them is an epidemic.
It will be interesting to see how the farm belt reacts to President Agent Orange’s and Pastor Pence’s trade wars. Once these other sources for China’s needs are established, American farmers will find out they are shut out of the market. Lots of product but no one to sell it to.
Todd @ 7:53 am. The Koch’s know the GOP is in their back pocket. That is the GOP can be reliably counted on to carry out the Koch Directives.
Part Two, is the plan to undermine the Progressive Wing of the Democratic Party. Common Dreams Web Site makes the point:
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Why is it that the mainstream media sees politics as entertainment, and largely ignores the major crises facing our country? The answer lies in the fact that corporate media is owned by, well, large multinational corporations.
These powerful corporations also have an agenda, and it would be naive not to believe that their views and needs impact coverage of issues important to them. Seen any specials lately as to why we pay the highest prices in the world for our prescription drugs, or why we are the only major country on earth not to have a national health care program? That may have something to do with the hundreds of millions of dollars each year that drug companies and insurance companies spend on advertising.
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The Corporate Media and their puppets are casting about trying to find that Centrist puppet candidate that can undermine the Progressives in Democratic Party and keep the policies of Neo-Liberalism, Interventionism and Militarism alive and well. Joe Biden is that hoped for puppet and stooge of Wall Street.
Typical of the puppets is former Sen. Joe Donnelly Democratic Senator Who Opposed Medicare for All Will Lobby For Health-Care Interests. Months after advising the Democratic Party to abandon the idea of “Medicare for All,” a former U.S. senator has been hired by a lobbying firm whose clients are leading the fight against changes to the nation’s health care system.
He campaigned against Medicare for All, even though polling by Data for Progress and the Kaiser Family Foundation last year estimated that 55 percent of Indiana residents support a universal health insurance plan.
Wendell Potter, a former health insurance executive who has spent a decade investigating the industry’s predatory practices, panned Donnelly’s career move.
“Sen. Donnelly kept health care reform efforts at bay his whole tenure in Congress, and on his way out he went on national news to tell Democrats that Medicare for All was dangerous,” said Potter. “Now we see his reward: A cush lobbying gig working for the health-care industry.”
https://maplight.org/story/democratic-senator-who-opposed-medicare-for-all-will-lobby-for-health-care-interests/?fbclid=IwAR0Iq8ivOxJQ98jQA9YgVzMYvcnSfpL3rbHe7tVhYz_nEo60QeNrifISS4M
The total damages mount everyday. We are long, long past the times when inept government was affordable. We have to end this as soon as possible.
We can but there will have to be a price paid, the price that democracy demands. Unity. Compromise. Not everybody gets their way.
Democrats offer a huge selection that we have to sort through this year but even a random choice would be a huge improvement over what we have.
As 2019 comes to an end so will our choice. We have to unify. We have to align behind the choice that wins the primary.
Everyone: get all of your whining and criticism and concerns and preferences out this year to be factored into the primary, then it’s over. The winners will be the our choice. Then we must be, if not of like mind, of like purpose. Defeat Republicans.
Vernon at 10:32am
“Well done, voters.”
We voters didn’t do it, Vernon. We voters elected Hillary by a huge margin.
The Electoral College did it and, with only a handful of Republican Electors overturning the popular vote.
Now how about supporting the people doing away with the archaic Electoral College?
FYI I do not read those posts without proper punctuation and capitalization. Just not worth the effort when you run into a word or meaningDha than cannot be discerned.
It’s all about the political benefit in another chapter of his narrative of blaming the “other”.
I believe Trump knows the difference between Mercantilism and global capitalism, and the trade deficit from national deficit. Krugman does not need to explain it to him. He just plays the fool.
Wasn’t it Rachel or another sharp cookie who described DJT as “a lyin’ liar who lies”? Send your thank-you notes to the Electoral College for delivering this guy to us.