4 ms·

> Tariffs kinda make sense when you have a deficit in a widely available item. Big trade deficit with Bangladesh? Sure you can buy cheap textiles from Thailand

by eru 1y ago

> Tariffs kinda make sense when you have a deficit in a widely available item. Big trade deficit with Bangladesh? Sure you can buy cheap textiles from Thailand or Vietnam or something. Sorry, how do they 'make sense'? What's the problem with a trade deficit with Bangladesh? And in your example, you'd just shift bilateral trade balances around, without impact the overall trade balance of the US? I could perhaps believe that an overall trade deficit is bad (maybe..), but I've yet to hear why bilateral trade deficits should matter, especially with places like Bangladesh that are not strategic rivals or are even allies like Japan or Taiwan or NATO.

CSMastermind 1y ago
Because of the Triffin dilemma: https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma Trade deficits in isolation aren't good or bad but because the US has the world reserve currency it must supply it's currency to the world. This basically forces it to have a trade deficit with everyone which over time can hollow out manufacturing sectors. Making the whole economy vulnerable to shocks and ultimately causing it to fail. It's similar to "Dutch disease," where external demand overvalues the currency and harms tradable sectors. It's not sustainable without careful policy management, and attempts to weaken the currency via tariffs, devaluation, or some other mechanism. You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now).
- dmix 1y ago
  Doesn’t this assume tariffs are efficiently adapting to changes in the market? Markets, trade, innovation, even currency prices change all the time. Tariffs change every decade if you’re lucky and when they do there’s a thousand conditional statements baked in that make it even more disconnected from reality
- protimewaster 1y ago
  > You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now). Interestingly, though, Robert Triffin International put out a paper essentially arguing that Trump's tariff approach is all wrong.
- aceofspades19 1y ago
  On what sort of basis do you make the claim that the US is on track to be the only 1st world consumer driven economy 5 years from now? What do you mean by a 1st world consumer driven economy, as opposed to what exactly? I do agree that having tariffs on certain items to encourage domestic production definitely does work. The tariffs have to be consistent and on things that can actually be produced in the country. The issue with Trump's approach is that its not consistent, has nothing to do with which products can be made domestically. Changing tariffs daily/weekly/monthly is not going to encourage domestic production.
  - eru 1y ago
    > I do agree that having tariffs on certain items to encourage domestic production definitely does work. The tariffs have to be consistent and on things that can actually be produced in the country. Compare and contrast https://en.wikipedia.org/wiki/Import_substitution_industrialization https://en.wikipedia.org/wiki/Import_substitution_industrial...
- eru 1y ago
  Huh? The US gets to print money for free. They don't even need to have printer's ink any more, since it's all entries in a database these days. And in return they get real stuff from overseas. And you want to tell me that this is somehow unfair for the US? The US can print an arbitrary amount of dollars, if there's demand for them in the rest of the world. Btw, focussing on dollars is actually a bit narrow. When Americans sell stocks or bonds to the rest of the world, that's also part of the trade deficit. So Americans aren't just exporting dollars, they are also exporting stocks and bonds and options and futures. Financial engineering is one of great American manufacturing industries. Interestingly enough, despite exporting so many financial products (= 'trade deficit'), Americans as a whole still make more money from their foreign investments abroad that foreigners make on their American investments. To simplify a bit too much: foreigners buy low yielding American government debt, while Americans make savvy investments abroad. > It's not sustainable without careful policy management, and attempts to weaken the currency via tariffs, devaluation, or some other mechanism. Oh, magical tariffs! They can strengthen or weaken your currency, just as the plot demands. They also prevent hollowing out of industry, and cure toothache. If you want to weaken your currency, just print more of it. It's much simpler. > You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now). What does 'consumer driven economy' even mean? Could you make your prediction more concrete. Perhaps we can even have a little bet.
  - selimthegrim 1y ago
    I’m just waiting for the 21st century versions of the ograbme act cartoons complete with turtles
snickerbockers 1y ago
>Sorry, how do they 'make sense'? To the same extent that other forms of taxation make sense. I wish people had this same sudden interest in protecting the free market and maximizing trade when we're taking about income tax or sales tax or property tax, etc.
- eru 1y ago
  > I wish people had this same sudden interest in protecting the free market and maximizing trade when we're taking about income tax or sales tax or property tax, etc. But people do have these interests! Different taxes distort markets differently. Tariffs are one of the worst ways to tax. Similarly transaction taxes, like a Tobin tax or stamp duty, are bad. Income tax ain't great, but it's ok. (Details depend on implementation.) Property tax is one of the best taxes, only beaten out by land value taxes. VAT is ok. And, btw, a tariff designed to raise revenue is very different from a tariff designed to change the balance of payments.
  - croemer 1y ago
    Glad to see someone with economics knowledge! The best taxes are Pigouvian taxes on externalities. They not only raise revenue but distort the market in the right direction. Carbon tax comes to mind (though that's a tricky case as there is no world government, tax works best for local externalities like air pollution).
    - eru 1y ago
      Well, for Pigouvian taxes to make sense, you first have to argue why in your specific situation Coasion bargaining breaks down. Similar to how, if you want to use 'market failure' to justify your favourite government intervention, it actually comes with lots and lots of restrictions and only justifies a very narrow slice of possible interventions.
      - croemer 1y ago
        Thanks for reminding me of that, it's been a while since I read Varian's Micro textbook. There are lots of ways for Coase to break down. Lack of clear property rights, transaction costs etc

by eru 1y ago

CSMastermind 1y ago

Because of the Triffin dilemma: https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma Trade deficits in isolation aren't good or bad but because the US has the world reserve currency it must supply it's currency to the world. This basically forces it to have a trade deficit with everyone which over time can hollow out manufacturing sectors. Making the whole economy vulnerable to shocks and ultimately causing it to fail. It's similar to "Dutch disease," where external demand overvalues the currency and harms tradable sectors. It's not sustainable without careful policy management, and attempts to weaken the currency via tariffs, devaluation, or some other mechanism. You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now).

dmix 1y ago
Doesn’t this assume tariffs are efficiently adapting to changes in the market? Markets, trade, innovation, even currency prices change all the time. Tariffs change every decade if you’re lucky and when they do there’s a thousand conditional statements baked in that make it even more disconnected from reality
protimewaster 1y ago
> You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now). Interestingly, though, Robert Triffin International put out a paper essentially arguing that Trump's tariff approach is all wrong.
aceofspades19 1y ago
On what sort of basis do you make the claim that the US is on track to be the only 1st world consumer driven economy 5 years from now? What do you mean by a 1st world consumer driven economy, as opposed to what exactly? I do agree that having tariffs on certain items to encourage domestic production definitely does work. The tariffs have to be consistent and on things that can actually be produced in the country. The issue with Trump's approach is that its not consistent, has nothing to do with which products can be made domestically. Changing tariffs daily/weekly/monthly is not going to encourage domestic production.
- eru 1y ago
  > I do agree that having tariffs on certain items to encourage domestic production definitely does work. The tariffs have to be consistent and on things that can actually be produced in the country. Compare and contrast https://en.wikipedia.org/wiki/Import_substitution_industrialization https://en.wikipedia.org/wiki/Import_substitution_industrial...
eru 1y ago
Huh? The US gets to print money for free. They don't even need to have printer's ink any more, since it's all entries in a database these days. And in return they get real stuff from overseas. And you want to tell me that this is somehow unfair for the US? The US can print an arbitrary amount of dollars, if there's demand for them in the rest of the world. Btw, focussing on dollars is actually a bit narrow. When Americans sell stocks or bonds to the rest of the world, that's also part of the trade deficit. So Americans aren't just exporting dollars, they are also exporting stocks and bonds and options and futures. Financial engineering is one of great American manufacturing industries. Interestingly enough, despite exporting so many financial products (= 'trade deficit'), Americans as a whole still make more money from their foreign investments abroad that foreigners make on their American investments. To simplify a bit too much: foreigners buy low yielding American government debt, while Americans make savvy investments abroad. > It's not sustainable without careful policy management, and attempts to weaken the currency via tariffs, devaluation, or some other mechanism. Oh, magical tariffs! They can strengthen or weaken your currency, just as the plot demands. They also prevent hollowing out of industry, and cure toothache. If you want to weaken your currency, just print more of it. It's much simpler. > You might not like Trump or his approach but he is directionally correct and does have a powerful bargaining chip (access to the US market - which is basically on track to be the only 1st world consumer driven economy 5 years from now). What does 'consumer driven economy' even mean? Could you make your prediction more concrete. Perhaps we can even have a little bet.
- selimthegrim 1y ago
  I’m just waiting for the 21st century versions of the ograbme act cartoons complete with turtles

snickerbockers 1y ago

>Sorry, how do they 'make sense'? To the same extent that other forms of taxation make sense. I wish people had this same sudden interest in protecting the free market and maximizing trade when we're taking about income tax or sales tax or property tax, etc.

eru 1y ago
> I wish people had this same sudden interest in protecting the free market and maximizing trade when we're taking about income tax or sales tax or property tax, etc. But people do have these interests! Different taxes distort markets differently. Tariffs are one of the worst ways to tax. Similarly transaction taxes, like a Tobin tax or stamp duty, are bad. Income tax ain't great, but it's ok. (Details depend on implementation.) Property tax is one of the best taxes, only beaten out by land value taxes. VAT is ok. And, btw, a tariff designed to raise revenue is very different from a tariff designed to change the balance of payments.
- croemer 1y ago
  Glad to see someone with economics knowledge! The best taxes are Pigouvian taxes on externalities. They not only raise revenue but distort the market in the right direction. Carbon tax comes to mind (though that's a tricky case as there is no world government, tax works best for local externalities like air pollution).
  - eru 1y ago
    Well, for Pigouvian taxes to make sense, you first have to argue why in your specific situation Coasion bargaining breaks down. Similar to how, if you want to use 'market failure' to justify your favourite government intervention, it actually comes with lots and lots of restrictions and only justifies a very narrow slice of possible interventions.
    - croemer 1y ago
      Thanks for reminding me of that, it's been a while since I read Varian's Micro textbook. There are lots of ways for Coase to break down. Lack of clear property rights, transaction costs etc