At the end of the day it looks like we are going to end with like 30% China and 15% world tariffs. With some specific goods higher and lower than that.
Overall this raises about 1% of GDP in tariff revenue, which is something but also not much. Which is how much the OBBB cost (net of tax and spending cuts combined).
It looks like exporters are just going to pay it. China's government has decided it wants to subsidize manufacturing exports to the point of unprofitability, and paying the tariffs is just the cost of doing business if you've decided that's what you're going to do. Doesn't seem smart of them but they are communists. Exponentially larger trade imbalances based on financial repression doesn't seem like a story that will end well for anyone.
Trying to route the trade through other countries (export to the EU who then exports to us) has limited effect because you've got the 15% universal tariffs.
This just doesn't seem like the end of the world to me. I get to keep a little more of my income and I suspect my consumption basket is less import heavy then an average Americans.
You make an excellent, important point that elasticities are hugely important here.
But Lott never says they are not, and you go way too far and are far too unfair to Lott when you claim Lott is “absolutely wrong”. Since Lott’s basic point remains unchanged, something you actually acknowledge near the end of your piece.
You seem here to be yet another economist who is pro-trade and anti-tariff who makes (appropriate) generic anti-tariff arguments to buttress their point, but then makes specific Trump-total-package arguments to say why Trump and his (partial, in this case of Lott) supporters are wrong in their arguments and actions just because Trump’s total package indeed has awful elements and probably is on net bad.
Here, despite asserting up front that Lott is “absolutely wrong”, with your own words (“Could you design a tariff system that was paired with sufficient cuts to capital taxes that the net effect was positive? Maybe…”) you acknowledge that Lott is *correct* in his core argument.
If you kept your criticism of Lott to the claim that Lott was being misleading and unrealistic with his NY Post article, I could support that 100%.
But since you instead claimed “absolutely wrong”, it is you who are wrong - even though *most* of your argument is quite valuable.
P.S. I do strongly agree with you that tariffs on intermediate goods are essentially taxes on capital and so particularly bad (while tariffs on end user goods are in fact consumption taxes and the only ones worthy of consideration for a more optimal tax system).
When the substack auto-reader read:
"Your budget constraint is: c · p(1 + τ_c) = w(1 - τ_y) · L"
It switched to a Russian accent. No idea why. It switched back right after.
I didn’t think about the read feature. Yeah the second half won’t be great for that :)
I think Substack has some Latex functionality. Great post btw.
I debated that but don't like everything on it's own line. Maybe I'll fix it.
At the end of the day it looks like we are going to end with like 30% China and 15% world tariffs. With some specific goods higher and lower than that.
Overall this raises about 1% of GDP in tariff revenue, which is something but also not much. Which is how much the OBBB cost (net of tax and spending cuts combined).
It looks like exporters are just going to pay it. China's government has decided it wants to subsidize manufacturing exports to the point of unprofitability, and paying the tariffs is just the cost of doing business if you've decided that's what you're going to do. Doesn't seem smart of them but they are communists. Exponentially larger trade imbalances based on financial repression doesn't seem like a story that will end well for anyone.
Trying to route the trade through other countries (export to the EU who then exports to us) has limited effect because you've got the 15% universal tariffs.
This just doesn't seem like the end of the world to me. I get to keep a little more of my income and I suspect my consumption basket is less import heavy then an average Americans.
You make an excellent, important point that elasticities are hugely important here.
But Lott never says they are not, and you go way too far and are far too unfair to Lott when you claim Lott is “absolutely wrong”. Since Lott’s basic point remains unchanged, something you actually acknowledge near the end of your piece.
You seem here to be yet another economist who is pro-trade and anti-tariff who makes (appropriate) generic anti-tariff arguments to buttress their point, but then makes specific Trump-total-package arguments to say why Trump and his (partial, in this case of Lott) supporters are wrong in their arguments and actions just because Trump’s total package indeed has awful elements and probably is on net bad.
Here, despite asserting up front that Lott is “absolutely wrong”, with your own words (“Could you design a tariff system that was paired with sufficient cuts to capital taxes that the net effect was positive? Maybe…”) you acknowledge that Lott is *correct* in his core argument.
If you kept your criticism of Lott to the claim that Lott was being misleading and unrealistic with his NY Post article, I could support that 100%.
But since you instead claimed “absolutely wrong”, it is you who are wrong - even though *most* of your argument is quite valuable.
P.S. I do strongly agree with you that tariffs on intermediate goods are essentially taxes on capital and so particularly bad (while tariffs on end user goods are in fact consumption taxes and the only ones worthy of consideration for a more optimal tax system).
The object of "But it’s absolutely wrong." is the quote that I open up with. I thought that was clear but I guess not.
Ok, but I don’t think the quote *is* in fact absolutely wrong, for the reasons noted above.
But even if I gave you that, you also claim Lott “makes an elementary mistake” in your subhead.
Misleading in toto, sure. But an elementary mistake? No.