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> "This worldview led McKinley, first, to tariffs. > "A tariff is, essentially, a tax on foreign goods that makes them more expensive relative to similar items

> "This worldview led McKinley, first, to tariffs. > "A tariff is, essentially, a tax on foreign goods that makes them more expensive relative to similar items made domestically. In theory, this helps boost and protect local industry. The tariff—paid for by the foreign entity—also generates revenue for the government." > Taxing foreigners was superior to taxing Americans, McKinley rationalized. A tax on foreign products would also protect American businesses I don't know how it worked in the late 19th century, but today the tariff is always paid by the importer. If a US-based manufacturer needs tariffed sheet steel, and has it imported, that manufacturer -- not the foreign steel mill -- owes the tariff to US Customs when the import is processed at the port or border. Today, a tariff is quite literally the same thing as taxing Americans, though it could be said that it might shift patterns of consumption and incentivize domestic production. (Which, however, takes time to spin up -- and there are better ways to do that, on display throughout Asia: Subsidies and government investment.)

rqtwteye 2y ago
I think it may work in the long term but it requires a lot of domestic investment to create that manufacturing capacity. This would require investor confidence that the tariffs will stay around for a long time. In the short term it will just be basically a sales tax. And I bet corporations will add a few more percent to the price increase caused by tariffs. Same as in the last years with high inflation.
- tharmas 2y ago
  Don't forget a key component of Trump's tariff policy is to "replace" income tax with the tariff (tax). This effectively replaces income tax with sales tax. And you can guess which economic class benefits from this the most.
  - rqtwteye 2y ago
    That's probably the real goal. I was a little skeptical about Project 2025 but it really looks like they are following it.
    - llamaimperative 2y ago
      Why were you skeptical of it?
      - saghm 2y ago
        People seem to be willing to go out of their way to rationalize around having to take threats beyond a certain magnitude seriously. I think something similar seems to be happening with all of the discussion around Greenland (and Canada, for that matter); the idea of us actually getting into a serious territorial dispute with Denmark or Canada would be such a divergence from what anyone is familiar with that it's easier to just discount it as not being a realistic concern.
        potato3732842 2y ago
        Sure, on one hand there's normalcy bias. But on the other hand screeching about every little thing is just as stupid. At the end of the day you can't use brain dead rules of thumb to alleviate the need to actually think things though. You actually need to consider the political and economic realities the various moves that various parties might make.
        llamaimperative 2y ago
        All big things are actually just series of little things. This is unfortunately a fact that’s easily obscured by the “clarity” of retrospection, through which big things look like obviously big things.
- terribleperson 2y ago
  Also, you can't do it across the economy all at once. If you really wanted to build up domestic manufacturing, you'd pick a few small sectors that are either almost in the wheelhouse of existing domestic producers or simple enough that that production capability can be realistically developed from scratch in a few years, and then you tariff just those sectors while providing the aforementioned investment. Once you've gotten the results you're looking for, you expand to other sectors. You don't do it to the whole economy at once because the negative economic effects of the tariffs will impede the very development you're hoping for, and because there's just not enough free labor, expertise, and funding to simultaneously develop domestic production of everything.
fatbird 2y ago
I think you're correct about the importer paying the tariff, but it doesn't really matter, does it? If I sell into the US and have to pay the tariff, I'm going to raise my prices to cover the additional expense. Regardless of who pays, the importer's final cost is higher, who then passes it onto the consumer.
- A_D_E_P_T 2y ago
  A lot of imports are basic components; low-level industrial inputs. So there are lots of products which are genuinely made in America -- with, e.g., Chinese aluminum or Canadian steel -- yet will nevertheless probably go up in price. It almost becomes an across-the-board thing. Practically every American-made product that contains aluminum is going to go up in price, for instance, as there's not nearly enough US aluminum production to satisfy demand. (And, even if there were, US aluminum tends to be considerably more expensive than foreign aluminum, even with the 25% tariff applied...)
- llamaimperative 2y ago
  Yes ultimately it will. People don't have a good intuition for this, but when you buy a good you are paying for the entire supply chain of that good. All the way up to the batteries that go into the miner's headlamp as he pulls raw ore out of the earth.
- jgalt212 2y ago
  > 'm going to raise my prices to cover the additional expense. Only if the market will bear such expense. If your product sells at $100 and the tariff is $15, what makes you think the importer will be able to sell the same number of units at new price of $115? Depending on the demand, the $15 cost will be born by a combo of the importer and consumer.
  - fatbird 2y ago
    Well, yes, that's the point: it doesn't matter who pays up front, it affects the supply/demand equation, typically hurting everyone. Regardless of where I am in the chain, I'm not going to run at a loss and hope to make it up in volume.
llamaimperative 2y ago
> on display throughout Asia: Subsidies and government investment. Also on display throughout the United States during the Biden administration.
throw0101d 2y ago
> Today, a tariff is quite literally the same thing as taxing Americans […] Not just a tax, but a subsidy as well: > Executives from U.S. steel companies were enthusiastic backers of the 2018 tariffs and have urged Trump to deploy them again in his second term. They have called for the elimination of tariff exemptions and duty-free import quotas, saying those carve-outs allow unfairly low-price steel to enter the U.S. and undermine the steel market. […] > Higher prices for imported steel are often followed by domestic suppliers raising their own prices, which then get passed through supply chains, manufacturing executives said. For consumers already reeling from rising retail prices and inflation, pricier steel and aluminum could further lift costs for durable goods like appliances and automobiles, as well as consumer products with aluminum packaging, such as canned beverages. > “The issue with tariffs is everybody raises their prices, even the domestics,” said Ralph Hardt, owner of Belleville International, a Pennsylvania-based manufacturer of valves and components used in the energy and defense industries. Steel and aluminum are Belleville’s largest expenses. * https://www.wsj.com/economy/trade/trump-tariffs-mexico-canada-us-steel-market-a36c3b99 https://www.wsj.com/economy/trade/trump-tariffs-mexico-canad... Why not just go directly to the subsidy and skip taxing the public?
- A_D_E_P_T 2y ago
  Ultimately, you get what you subsidize. Tariffs are very weak subsidies; they're more of a penalty for domestic end-users. Going directly to the subsidy would get the government what it wants -- more steel, aluminum, or whatever -- and spare end-users the pain. Direct investment in small and nascent business is also a powerful lever. At trade shows, I've personally spoken with more than a few Chinese factory owners, and many of them mentioned that they got their start with an $_M investment by the government, and that the government is a minority shareholder in their business. This is how you get lots of factories in sectors you want to see, and you can force them into competition to keep end-user prices low. Just imagine the US doing this for drones, AI, mining and metals production, etc. It would be like mega-YC.
drewcoo 2y ago
> Today, a tariff is quite literally the same thing as taxing Americans Assuming Americans cannot change their spending habits. I'd rather assume that most Americans are smart enough to make choices to their advantage, though. Why do Americans not drive more EVs from BYD? Because the Biden administration put a 100% tariff on Chinese EVs. Nobody accused Biden of unduly taxing Americans, only of making BYD unaffordable.
- A_D_E_P_T 2y ago
  The latest tariffs apply to steel and aluminum, which are the most basic of industrial inputs. Have you seen how much aluminum the US produces? > https://en.wikipedia.org/wiki/List_of_countries_by_aluminium_production https://en.wikipedia.org/wiki/List_of_countries_by_aluminium... It's roughly on par with Iceland and a little bit less than Saudi Arabia. There's no way to meet the demands of industry with domestic aluminum production. What's more, US production and processing of aluminum focuses on "high-end" aerospace grades that are not always suitable for things like household appliances & can be far more expensive than foreign alternatives. Now let's do steel: > https://en.wikipedia.org/wiki/List_of_countries_by_steel_production https://en.wikipedia.org/wiki/List_of_countries_by_steel_pro... Not so bad, but only 8% of China's production and 4.25% of global production. Again, no way to meet domestic demand with entirely domestic steel. Further, US steel is in the opposite position described above: Most US steel grades come from very old mills and are "low-end." A lot of tool steels, automotive steels, and specialty steels are simply not made in the US, and must be imported. What's interesting is that the most high-end steels come from Japan and Germany. (Also, increasingly, China.) What happened, to simplify things a little bit, is that their steel mills were bombed into oblivion during WWII, so, after the war, they built new and much more modern mills. Whereas the US kept using its far older pre-war mills. Over time this developed into a durable advantage on the high-end. As for BYD -- a 100% tariff is practically a de facto import ban. Try a 100% tariff on everything, or on steel and aluminum, and see what happens. It'll make periods of normal inflation seem like a Golden Age.

rqtwteye 2y ago

I think it may work in the long term but it requires a lot of domestic investment to create that manufacturing capacity. This would require investor confidence that the tariffs will stay around for a long time. In the short term it will just be basically a sales tax. And I bet corporations will add a few more percent to the price increase caused by tariffs. Same as in the last years with high inflation.

tharmas 2y ago
Don't forget a key component of Trump's tariff policy is to "replace" income tax with the tariff (tax). This effectively replaces income tax with sales tax. And you can guess which economic class benefits from this the most.
- rqtwteye 2y ago
  That's probably the real goal. I was a little skeptical about Project 2025 but it really looks like they are following it.
  - llamaimperative 2y ago
    Why were you skeptical of it?
    - saghm 2y ago
      People seem to be willing to go out of their way to rationalize around having to take threats beyond a certain magnitude seriously. I think something similar seems to be happening with all of the discussion around Greenland (and Canada, for that matter); the idea of us actually getting into a serious territorial dispute with Denmark or Canada would be such a divergence from what anyone is familiar with that it's easier to just discount it as not being a realistic concern.
      - potato3732842 2y ago
        Sure, on one hand there's normalcy bias. But on the other hand screeching about every little thing is just as stupid. At the end of the day you can't use brain dead rules of thumb to alleviate the need to actually think things though. You actually need to consider the political and economic realities the various moves that various parties might make.
        llamaimperative 2y ago
        All big things are actually just series of little things. This is unfortunately a fact that’s easily obscured by the “clarity” of retrospection, through which big things look like obviously big things.
terribleperson 2y ago
Also, you can't do it across the economy all at once. If you really wanted to build up domestic manufacturing, you'd pick a few small sectors that are either almost in the wheelhouse of existing domestic producers or simple enough that that production capability can be realistically developed from scratch in a few years, and then you tariff just those sectors while providing the aforementioned investment. Once you've gotten the results you're looking for, you expand to other sectors. You don't do it to the whole economy at once because the negative economic effects of the tariffs will impede the very development you're hoping for, and because there's just not enough free labor, expertise, and funding to simultaneously develop domestic production of everything.

fatbird 2y ago

I think you're correct about the importer paying the tariff, but it doesn't really matter, does it? If I sell into the US and have to pay the tariff, I'm going to raise my prices to cover the additional expense. Regardless of who pays, the importer's final cost is higher, who then passes it onto the consumer.

A_D_E_P_T 2y ago
A lot of imports are basic components; low-level industrial inputs. So there are lots of products which are genuinely made in America -- with, e.g., Chinese aluminum or Canadian steel -- yet will nevertheless probably go up in price. It almost becomes an across-the-board thing. Practically every American-made product that contains aluminum is going to go up in price, for instance, as there's not nearly enough US aluminum production to satisfy demand. (And, even if there were, US aluminum tends to be considerably more expensive than foreign aluminum, even with the 25% tariff applied...)
llamaimperative 2y ago
Yes ultimately it will. People don't have a good intuition for this, but when you buy a good you are paying for the entire supply chain of that good. All the way up to the batteries that go into the miner's headlamp as he pulls raw ore out of the earth.
jgalt212 2y ago
> 'm going to raise my prices to cover the additional expense. Only if the market will bear such expense. If your product sells at $100 and the tariff is $15, what makes you think the importer will be able to sell the same number of units at new price of $115? Depending on the demand, the $15 cost will be born by a combo of the importer and consumer.
- fatbird 2y ago
  Well, yes, that's the point: it doesn't matter who pays up front, it affects the supply/demand equation, typically hurting everyone. Regardless of where I am in the chain, I'm not going to run at a loss and hope to make it up in volume.

llamaimperative 2y ago

> on display throughout Asia: Subsidies and government investment. Also on display throughout the United States during the Biden administration.

throw0101d 2y ago

> Today, a tariff is quite literally the same thing as taxing Americans […] Not just a tax, but a subsidy as well: > Executives from U.S. steel companies were enthusiastic backers of the 2018 tariffs and have urged Trump to deploy them again in his second term. They have called for the elimination of tariff exemptions and duty-free import quotas, saying those carve-outs allow unfairly low-price steel to enter the U.S. and undermine the steel market. […] > Higher prices for imported steel are often followed by domestic suppliers raising their own prices, which then get passed through supply chains, manufacturing executives said. For consumers already reeling from rising retail prices and inflation, pricier steel and aluminum could further lift costs for durable goods like appliances and automobiles, as well as consumer products with aluminum packaging, such as canned beverages. > “The issue with tariffs is everybody raises their prices, even the domestics,” said Ralph Hardt, owner of Belleville International, a Pennsylvania-based manufacturer of valves and components used in the energy and defense industries. Steel and aluminum are Belleville’s largest expenses. * https://www.wsj.com/economy/trade/trump-tariffs-mexico-canada-us-steel-market-a36c3b99 https://www.wsj.com/economy/trade/trump-tariffs-mexico-canad... Why not just go directly to the subsidy and skip taxing the public?

A_D_E_P_T 2y ago
Ultimately, you get what you subsidize. Tariffs are very weak subsidies; they're more of a penalty for domestic end-users. Going directly to the subsidy would get the government what it wants -- more steel, aluminum, or whatever -- and spare end-users the pain. Direct investment in small and nascent business is also a powerful lever. At trade shows, I've personally spoken with more than a few Chinese factory owners, and many of them mentioned that they got their start with an $_M investment by the government, and that the government is a minority shareholder in their business. This is how you get lots of factories in sectors you want to see, and you can force them into competition to keep end-user prices low. Just imagine the US doing this for drones, AI, mining and metals production, etc. It would be like mega-YC.

drewcoo 2y ago

> Today, a tariff is quite literally the same thing as taxing Americans Assuming Americans cannot change their spending habits. I'd rather assume that most Americans are smart enough to make choices to their advantage, though. Why do Americans not drive more EVs from BYD? Because the Biden administration put a 100% tariff on Chinese EVs. Nobody accused Biden of unduly taxing Americans, only of making BYD unaffordable.

A_D_E_P_T 2y ago
The latest tariffs apply to steel and aluminum, which are the most basic of industrial inputs. Have you seen how much aluminum the US produces? > https://en.wikipedia.org/wiki/List_of_countries_by_aluminium_production https://en.wikipedia.org/wiki/List_of_countries_by_aluminium... It's roughly on par with Iceland and a little bit less than Saudi Arabia. There's no way to meet the demands of industry with domestic aluminum production. What's more, US production and processing of aluminum focuses on "high-end" aerospace grades that are not always suitable for things like household appliances & can be far more expensive than foreign alternatives. Now let's do steel: > https://en.wikipedia.org/wiki/List_of_countries_by_steel_production https://en.wikipedia.org/wiki/List_of_countries_by_steel_pro... Not so bad, but only 8% of China's production and 4.25% of global production. Again, no way to meet domestic demand with entirely domestic steel. Further, US steel is in the opposite position described above: Most US steel grades come from very old mills and are "low-end." A lot of tool steels, automotive steels, and specialty steels are simply not made in the US, and must be imported. What's interesting is that the most high-end steels come from Japan and Germany. (Also, increasingly, China.) What happened, to simplify things a little bit, is that their steel mills were bombed into oblivion during WWII, so, after the war, they built new and much more modern mills. Whereas the US kept using its far older pre-war mills. Over time this developed into a durable advantage on the high-end. As for BYD -- a 100% tariff is practically a de facto import ban. Try a 100% tariff on everything, or on steel and aluminum, and see what happens. It'll make periods of normal inflation seem like a Golden Age.