5 ms·

I think it's pretty clear that for the tariffs to work you have to play a long game. It's not like the capacity is there immediately so it needs to be built up

I think it's pretty clear that for the tariffs to work you have to play a long game. It's not like the capacity is there immediately so it needs to be built up slowly. and it will only be built up if the investors have confidence that the tariffs will still be in place once they built up the capacity. If I had a company I would be very hesitant to build up US capacity because there is a good chance the tariffs will be removed again soon. I think right now everything is in limbo which is not good for anybody.

supertiger 7y ago
not necessarily, last time the same tariff play worked for Japan, and Japan arguably never recovered since.
jjwhitaker 7y ago
If plans for diversifying supply and finding alternative markets for goods impacted by retaliatory tariffs had happened first, much of the short term impact of what are basically import taxes passed to consumers could be assuaged or limited like if Apple had built alternative supply chains. However, we have lost long term markets for goods like soy beans that will take years to recover (see the farm bailouts pushed by the current administration to cover these costs) while not hedging against other short term losses or even building the increase in taxes into a credit so citizens see a net 0 from the tariffs. Tariffs can be influential in trade negotiation but must be used like a scalpel, skillfully restricting trade in areas that don't cripple domestic industry while pressuring the other economy. this is incredibly difficult against such a large trading partner as China without building up alternative supply of goods or shoring up domestic capacity first. Blanket Tariffs, unless against a small country with small or specific exports, will hurt everyone involved much more than an existing deal. Meanwhile, promises of future gains from a new deal are just that, promises by politicians who already have the largest record of lying to the public and blocking any transparency like in the documented obstruction of the special counsel investigation. Usually, the costs are never made up by future gains and promises fall short if reveal themselves at all. For steel, it may be that different countries have taken to what they can make the most profit from, diversifying production globally to meet demand. Domestic industry compensates for foreign competition by either doing it better/cheap/more profitable or specializing in ways that competitors can't like massive production of cheap steel foreign competition can't match touch due to high shipping costs or developing and producing a specialty steel that nobody else can match. If this specialization moves to an extreme so one type isn't made domestically at all, that's going to hit consumers and industry hard. It will take time to increase capacity or shift production, potentially away from more profitable and established goods, to meet demand. That lapse in supply could be huge, give US companies a cheap way into that market, but at the cost of further government intervention, higher taxes, and a step away from capitalism which allowed countries to specialize and decrease costs long term. In this example, that supply drop opened an opportunity to other countries like Russia who are conveniently dropping millions on a project in Kentucky. If US steel can't compensate and foreign groups are able to push into the domestic market anyway, what does the tariff do to help domestic industry at all? We are in limbo then, with goods sitting around or being taxed higher to hopefully get a better deal than what exists. If that falls through, we are all much worse off from all this.

supertiger 7y ago

not necessarily, last time the same tariff play worked for Japan, and Japan arguably never recovered since.

jjwhitaker 7y ago

If plans for diversifying supply and finding alternative markets for goods impacted by retaliatory tariffs had happened first, much of the short term impact of what are basically import taxes passed to consumers could be assuaged or limited like if Apple had built alternative supply chains. However, we have lost long term markets for goods like soy beans that will take years to recover (see the farm bailouts pushed by the current administration to cover these costs) while not hedging against other short term losses or even building the increase in taxes into a credit so citizens see a net 0 from the tariffs. Tariffs can be influential in trade negotiation but must be used like a scalpel, skillfully restricting trade in areas that don't cripple domestic industry while pressuring the other economy. this is incredibly difficult against such a large trading partner as China without building up alternative supply of goods or shoring up domestic capacity first. Blanket Tariffs, unless against a small country with small or specific exports, will hurt everyone involved much more than an existing deal. Meanwhile, promises of future gains from a new deal are just that, promises by politicians who already have the largest record of lying to the public and blocking any transparency like in the documented obstruction of the special counsel investigation. Usually, the costs are never made up by future gains and promises fall short if reveal themselves at all. For steel, it may be that different countries have taken to what they can make the most profit from, diversifying production globally to meet demand. Domestic industry compensates for foreign competition by either doing it better/cheap/more profitable or specializing in ways that competitors can't like massive production of cheap steel foreign competition can't match touch due to high shipping costs or developing and producing a specialty steel that nobody else can match. If this specialization moves to an extreme so one type isn't made domestically at all, that's going to hit consumers and industry hard. It will take time to increase capacity or shift production, potentially away from more profitable and established goods, to meet demand. That lapse in supply could be huge, give US companies a cheap way into that market, but at the cost of further government intervention, higher taxes, and a step away from capitalism which allowed countries to specialize and decrease costs long term. In this example, that supply drop opened an opportunity to other countries like Russia who are conveniently dropping millions on a project in Kentucky. If US steel can't compensate and foreign groups are able to push into the domestic market anyway, what does the tariff do to help domestic industry at all? We are in limbo then, with goods sitting around or being taxed higher to hopefully get a better deal than what exists. If that falls through, we are all much worse off from all this.