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How do tariffs depreciate the dollar? Do you just mean in the “prices go up” sense? I’m not trying to nitpick, just wondering if there is some mechanism I don’t
by pfannkuchen 1y ago
How do tariffs depreciate the dollar? Do you just mean in the “prices go up” sense? I’m not trying to nitpick, just wondering if there is some mechanism I don’t know about that actually devalues the dollar in a fundamental way. Like if there is a chicken flu and the price of eggs skyrockets, I wouldn’t say that depreciates the dollar, for example, in strict terms, prices have just risen.
- immibis 1y agoPrices going up is dollar devaluation. One doesn't cause the other - they're already two different words for the same thing. If potato prices rise but soybean prices fall, then you can say potatoes got more expensive, soybeans got cheaper, and the dollar is worth the same. But if prices go up all across the economy in general, that is dollar devaluation.
- pfannkuchen 1y agoBut tariffs don’t cause prices to go up all across the economy in general. Domestic products will get more expensive in the short term due to a positive demand discontinuity, but they will fall again in the medium term as domestic producers regain access to the large swaths of the market they lost access to under the old global free market trade policy. If the tariffs continue for a long time (not guaranteed) then domestic labor compensation will also recover (perhaps not fully due to automation, but automation on the high volume stuff would free up workers to work on smaller volume products). Side question - would you consider the converse, globalization, to be a deflationary force?