15% is a huge number of people. This shock is going to spiral.
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wrt the “stagflation” scenario:
When Chrysler was crying for a government bailout (the late 70s time, not the 2008 time) they were whining the government needed to “save jobs”.
I suggested that, if Chrysler stopped building cars, former Chrysler buyers would simply move to Ford or GM. Those companies would need to hire more staff, to increase production rates, to meet the additional demand. There would be no net loss of “jobs”, except for the nitwits at the top of Chrysler, who ran the company into the ground.
On this go around, would there necessarily be economic stagnation, if imports are broadly tariffed out of the market? Domestic producers would need to increase production of substitutes for imported product, therefore they would need to increase staff. Revenues and profits of US based operations would increase. Where is the “stagnation”?
Steve
Nice but there is a problem. First of all who is going to buy American Cars when they have jacked up the prices and who is going to build those cars when we have such a low unemployment rate and we are kicking people out of the country.
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You left out an important point or two. Two scenarios: an imported car is $1000 cheaper than a given US car, or an imported car is roughly the same price as a US car. Now add, say, 10% tariffs and you’ve added $3000 to the price of the foreign car.
Is the US manufacturer going to stay at the same price? No, they’re going to come up right behind the new price, so both choices are now more expensive. When cars cost more, fewer people will buy them (which is why the cheaper foreign car was selling in the first place.) Fewer cars sold by both manufacturers. Imports get hurt, US car do OK because their margin is much better, poorer US customers get rogered because they can’t buy a new car.
Scenario 2: same, but worse. US manufacturers raise prices $2500. They’re still cheaper, but only a little. The might lose a couple of sale at the margin but don’t care because they’ve got an extra $2500 pure profit n all the other sales.
Domestic producers won’t increase production because they’ll be selling at an even higher price point, which means better profits on fewer (or the same) sales.
The price differential here is large enough to make a good example, but the same sort of phenomenon will happen at every price point for every product. Yes, there will be some additional production, but not nearly as much as the sales lost because consumers are overpaying for this thing and therefore have less money for other things.
Is it a perfect one-for-one trade off? No. But neither is it something which will automatically stoke domestic production, especially in things which require a developed supply chain, like cars, where engines, seat assemblies, transmissions, lights, and infotainment systems are sourced from many different vendors already developed in other countries.
If you can make the tariffs stick for, say, a decade or more, and if they are egregious enough those supply chains will tend to move. Over the short term it will be painful, both for business and for people spending money on overpriced goods.
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One more point. When the prices go up because of Tariffs, they never come back down when the Tariffs are lifted. So this is a tax on the American people in perpetuity. Thank you Trump for making things better for billionaire’s.
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Do you have a link that supports that? It would imply that there is no benefit to removing tariffs.
DB2
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Have you seen the car prices come down since the last tariffs were imposed?
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The primary question is: does removing tariffs benefit the economy?
DB2
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I think the primary question is: Does putting tariffs on benefit the economy. Bush 2 would tell you no since he tried it and then removed them right away. Do you notice all our allies are putting on more tariffs and isolating us? We have much further to fall.
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But what about the products that are no longer produced in the US.
Look at your shoes. My hiking boots are either made in China or Italy. The last pair of dress shoes I bought for a wedding were made in Portugal. I could buy Allen Edmonds if I wanted to spend $350 dollars for shoes I might wear once every 2 or 3 years.
Look at your underwear. I just checked mine. It’s Thailand and Vietnam.
When I was teaching I would buy 2 or 3 Brooks Brothers dress shirts a year. They were made in the US and wore like iron. I eventually ran out of closet space and stopped buying them. I still have a dozen even after giving that many to my nephews. BB is just a label now. Who knows where they are made.
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Except that you wrote that prices don’t come down when tariffs are removed. If that is true, why remove tariffs?
DB2
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You never answered my question. Did you see automobile prices come down after the last Tariffs?
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And you never answered mine. 
DB2
I learned from you. 
You have a habit of not answering. Look at the foreign markets they are all in an up trend while the U.S. is falling. China is really looking good and that is after the Trump administration put the tariffs on them. The markets seem to think that the U.S is in for some hurt. I think I will be looking at foreign stocks to make my money this year.
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Reciprocal tariffs go into effect on April 2nd. If Tariffs were so bad, why would countries have them on American imports ? Drop them and issue goes away.
Everyone has tariffs including the United States. They do it to protect industries they don’t want to lose. That is why you will never see the United States drop their tariffs on lumber from Canada. Canada would put our lumber industry out of business.
The example I am most familiar with is the protectionist tariff on Korean laundry washers. When the tariff was imposed on Korean washers, the price of US made washers also increased. When the tariff on Korean washers expired, the price of US made washers fell. I posted the link to an article that discussed that some time ago.
wrt “affordability” of cars, for instance. The big three, in particular, are all about juicing ATP and GP. Several CEOs have openly said they intend to jack prices higher and higher, and they don’t care if some can’t “afford” a new car. Tariff the imports out of the market, which are typically lower priced, and ATP and GP automatically rise. Add the certainty that the big three will revive the “shortage” narrative of 21-22 to gouge customers, and ATP and GP go even higher. The imported cars do not count toward GDP, but the soaring prices of domestic alternatives do count in GDP. Doubling the GP adds a lot to the “JC’s” pocket. Line workers with a union contract that includes a profitability bonus may get a piece. Some may “trickle down” to the shareholders. You just don’t want to be the guy who leased a car three years ago, and needs to obtain a replacement ride now, because the lease is running out.
The countries that TIG is targeting are the ones the US runs a trade deficit with (“ripping us off”, in TIG-speak) That leaves a lot of the world for the US to pedal it’s wares, while ending trade entirely with the countries the US runs a deficit with, would improve the US’ trade balance. It might even strengthen the Dollar in currency markets, because there would not be such huge quantities floating around.
It’s just the way he is doing it is so incredibly toxic
Steve
There are lots of things the US can not get from anyone but the countries with which the US has a deficit. Those items will go sky high in price because there are no alternatives. Been down that path. No alternatives available–period. I knew in a few years there would be a return to a more normal market–because the material in question would be replaced because the items made would be redesigned to be able to use the alternate material.
Maybe Foxconn would actually make the TV screen panels in Wisconsin, like they said they would?
Steve
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A thought about that “ripping us off” narrative that TIG is so fond of.
The GDP of the US is $29.72T. The GDP of the EU is $18.59T. Is it reasonable to expect the EU to buy as much from the US, as the US buys from the EU, given the economy of the EU is 37% smaller?
The GDP of Canada is $2.14T. Is it reasonable to expect Canada to buy as much from the US, as the US buys from Canada, given Canada’s economy is nearly 93% smaller?
Steve
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