I have very little understanding of geopolitics or economics, so these tariffs don't make sense to me, and they don't seem to make sense to most people.
What’s the best steelman argument for them?
I’ve read a bit of Peter Navarro and others who support this line of thinking, but I’m trying to understand: is there a coherent endgame here that benefits the country long-term, or is this just short-term political theater dressed up as strategy?
What would the best possible version of this policy look like if it were smart?
The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local, and have become increasingly unaffordable in recent decades even as economic numbers have gone up.
The question that really matters to most people is, "What will these tariffs do to the prices of these things that actually matter?" And that it actually rather hard to predict.
The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear. It may be that global trade makes certain classes of society very very wealthy, while not necessarily being such a positive for the middle class.
It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers. The economists who have told us since Reagan that this is inefficient and stupid might be ... wrong.
> The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
> It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers. The economists who have told us since Reagan that this is inefficient and stupid might be ... wrong.
You are quite wrong there with all of those three points.
#1. a lot of food items come from Mexico, South America, Asia also. Housing material from Canada and China. A lot of meds come from Asia especially India. Majority of Stationary is manufactured in China as well.
#2. Russia is struggling with economy. But remember it has a lot of help from China, Iran, N Korea, and India. That offset a lot of sanctions. Europe is still buying gas from them.
#3. I’ve to remind you this - China exports in trillions.
#1. Total US food imports are about $200B. That's about 10% of US household spending on food, measured by supermarket plus restaurant sales ($800B + $1T).
#2. It's hard to know what's going on in Russia.
#3. High exports don't disprove GP's claim about "state economic planning and market barriers". In fact, they prove the success of those policies and help China maintain a $1T trade surplus, the very opposite of the US's situation.
One thing to note when comparing imports to spending. Import numbers are based on the commercial invoice value (i.e., how much it cost to produce) while spending is based on the sale price. So it's an...apples and oranges comparison. But I agree with the broader point that a lot of what we eat is produced here (especially meat).
>One thing to note when comparing imports to spending. Import numbers are based on the commercial invoice value (i.e., how much it cost to produce) while spending is based on the sale price. So it's an...apples and oranges comparison.
The context of this is the impact of tariffs on households' budget, and in that context, invoice value is fine, because that's the value on which tariffs are applied. 30% tariffs don't mean all foods go up 30%, it means it goes up by 6% (20% of 30%).
I'm confused what this means? I think OP meant that 10% of the _spending on food_ is imported, so 90% of the household spending on food is from domestic markets.
> were also the economists who claimed that sanctions would destroy the Russian economy.
This is _very much_ up for debate. It's been a couple of years since Russia went completely dark on publishing key numbers on their economy. [This was three years ago.](https://www.youtube.com/watch?v=ZRgS6gpiMX0). They had a large war chest ready before they went to war (part of which has been frozen in the west), and there are a lot of signs that they are on their last stretch before things go really bad for them.
Predicting _when_ things go bad is very difficult, so I do not hold that against said economists. The most telling sign is that the first thing the Russians ask for is for sanctions relief before any peace negotiations.
>The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
They didn’t have the opposite effect. They were ineffective in general, because Russia has large trade partners not aligned with the West and it has been preparing for it, optimizing the government apparatus for 20 years (financial bloc for 30 years). There are plenty of A-players (head of central bank, minister of finance etc), working industrial policy and digitalized processes, and they can make decisions very fast both politically and bureaucratically.
Prices will very likely go up for products that are not 100% local.
Some resources for end products are currently mostly imported.
The new tarifs also affect resources and unfinished products.
New trade routes and spinning up local production will take time (likely longer five years) so the consumer will pay a price.
Question is how high it will be.
To purely imported goods (a lot of tech for example): cost will go up substantially.
To Russia:
They are currently in a war economy.
You will likely not really see a collapse coming until it is to late.
Banks have been forced to give far to cheap loans to the arms industry complex which are unlikely to ever pay them back.
This partially masks the true cost of the war.
New trade routes and spinning up local production will take time (likely longer five years) so the consumer will pay a price.
The main issue I see is that in 3.5 or possible 1.5 years, a new president ( or laws passed through congress ) will just vacate all Trump executive orders, tariffs in included. So that $100 million you invested in a new factory that is 3/4 built? Sorry, tariffs are gona and now you are out $100 mil. Why would any corp assume that risk?
If an investment is profitable with 30% tariffs, but not at 10% tariffs, the risk of changing policy means your profitable investment has a risk of being unprofitable, and thus you are less likely to invest in it.
> Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
That seems backwards. A trade deficit (more goods coming into the country) should be balanced by a capital outflow (money leaving the country). We've sustained that for decades by printing more money and sending it around the world.
Some people think that's a good deal, because we get real stuff in exchange for money we create for nothing. But what will have left when other countries no longer want our money?
Edit: As the comment below points out, I should technically ask what happens when they no longer want U.S. government debt?
Money in this context is just a representation of value. You presume the money for foreign goods is leaving the USA when we import the goods, but that is actually not necessarily the case.
Make no mistake, these countries are getting something in return for the extra goods and services they give to us. It is not for free. One of the big things trade to China to make up this deficit is an investment in the US government (treasury notes) or assets. That is, they are taking the dollars they get and then parking it in the US as investment . The deficit is they're choosing us to invest in rather than themselves!
>The U.S. trade balance has been in a deficit position since the 1970s. This means that the
total value of imported goods has been greater than the total value of exported goods.
This means the U.S. is a “debtor” nation, running a merchandise trade deficit. However,
the merchandise trade deficit refers only to imports and exports of goods and services. It
shows that imports are greater than exports, hence the “deficit.” But, think about it for a
minute, why does the world keep giving us goods, without getting goods from us in
return? Is this a good deal or what? Well, clearly, this can’t be the whole story.
>What is happening is that the people from whom we buy goods abroad are taking our
dollars investing in the U.S. economy. They may buy U.S. government debt (securities
issued by the U.S. government to finance past federal budget deficits) or other assets in
the U.S. For example, they may invest in U.S. companies.
Trump is ha-ha-only-serious joking about a third term and has said that, if people voted for him, they'd never have to vote again. So... in case of Emperor Trump, the tariffs wouldn't go away. I wonder if somebody is already working out how to tell "the economy" about that without being too obvious about the seriousness of his third term plan.
> The main issue I see is that in 3.5 or possible 1.5 years, a new president ( or laws passed through congress ) will just vacate all Trump executive orders, tariffs in included. So that $100 million you invested in a new factory that is 3/4 built? Sorry, tariffs are gone and now you are out $100 mil. Why would any corp assume that risk?
If I were to be as generous as possible, I might say that's why Trump is being so chaotic with the tariffs? If you turn everyone against us and no one is willing to trade with us, it may force people's hand to build locally and then 4 years from now, there's still no appetite to resume our normal trade patterns.
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
It is somewhat unclear to me that sanctions had the opposite effect to destroying Russian economy.
Does that mean it is doing great? I don't think so.
> The things that dominate middle class budgets: food [...] have become increasingly unaffordable in recent decades
I tried finding some number to corroborate your claims.
The proportion of food in the American budget has decreased from ~17% to ~13% between the 60's and now. In fact, it has decreased a lot for "at home food" and increased slightly for "dining out food"[1]. Food seems cheaper than ever - on average.
The current price of a calorie sufficient diet is now roughly $0.44/day in the US [2] that sounds very
low.
Between the 60's and today; the average daily supply of calories per person has increased from ~3000 kcal to ~3800 kcal [3]. People eat more than ever - on average.
I really wanna believe you, but aren't you just looking at the past with rose tainted glasses. And if you are young; aren't you making up a past that doesn't even exist ?
Yes, that's how proportion works; if thighs like food take a smaller portion of spending, some other things will take a bigger share.
GP comment is cited food as the first item; and decades (not 5 year) as the reference timeframe, so I focused on that. I am sure that by cherry picking both items and timeframe (look at food but only over 5 year; education but only since the 60's; telecommunication but only since the price hike of last week) you can paint a different story, but that's not the point here.
Those things that are highly local have been dominating middle class budgets because foreign stuff like clothes has gotten so cheap. That's a good thing -- if you spend less money on some things you have more money for others. If you make the foreign stuff expensive, the local stuff will less dominate budgets as they destroy those budgets.
And labor shifts from activities where we have comparative advantage (highly skilled labor) to things where we have less comparative advantage (low skilled labor).
So now you have a lower skill low pay job and paying more than before.
I cannot make sense of it other than as a few others posted here that Trump is preparing for war and wants to soften the blow of the interruption to international trade by making sure we are more prepared for isolation.
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy.
Nobody can predict the future, least of all economists. Having said that I think economists were not wrong on the headwinds that Russian economy would face. They just failed to account for extraordinary measures that dictatorship could take.
And even with said measures there had been a steady deterioration of the economic situation... The real question is what is the state of their mineral (cough gold cough) production rates and reserves. They might just be able to buy their way out of the current situationship.
Food is not entirely local. CA gets majority of fruits from Mexico, Peru, Chile etc. Olive, Sunflower, and other oils are imported. Many spices are imported. Lumber tariffs will impact housing and repairs. Any thing with semi-conductors will be expensive: routers, modems, tablets, phones.
Middle class expenses may arise around 5-10% at the very least.
Most of our potash comes from Canada, but surely the US is self-sufficient in nitrogen fertilizer (since it is made from natural gas, which is really cheap in the US) and ISTR it's being close to being self-sufficient in phosphate, too.
Maybe. But as an OSS developer, I find it cozy that even domestic food production has a certain global component. I like the image of a global community helping each other, just as we do in software projects.
I mean, if American companies had rejected Linux/Ruby/Lua because "they are foreign goods, born in Finland/Japan/Brazil", were it better?
> The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local, and have become increasingly unaffordable in recent decades even as economic numbers have gone up.
Really you have to split goods into two categories, stuff that has no geographic ties(alot of these goods manufacture has been outsourced to asian countries and low wage countries) and stuff that is tied to a location, think Mexican tequila or Swiss watches.
The first category is more tied to the middle class and I could alot of the manufacturing coming back to the US due to cost. The second category cannot be made in the US and buyers will bear the brunt of the cost runups.
The stuff in the first category that is going to be hit hard with tariffs is by and large big ticket items like cars and electronics, and conversely the really cheap plastic junk that is ubiquitous at dollar stores. I think the days of 50 inch flat screens for a few hundred dollars are gone. In addition cars sold in the US(US made brands and not foreign companies) have alot of their supply chain in either mexico and canada but the middle class is not buying alot of newer cars - average age of a car is reaching the longest ever due to cars jumping in cost the past few years.
I see this really hurting high income americans alot more, new cars especially European luxury are going to be quite expensive, alot of expensive wines and liquor will jump in price, jewelry and luxury handbags will also be alot more expensive.
> also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
On what timeframe did they say that?
There’s a good argument they ARE working to that end, just not as fast as policymakers would like. See the RU economic weakness in September.
One can make a decent argument that the sanctions were insufficient as Russia is effectively a petrostate (now with industry on a war footing) and the sanctions largely avoided RU oil/gas. Also China took up the slack by buying whatever Russia was willing to sell, and in Russian currency which extended their runway.
Lastly, Russia predicted the sanctions as a response to their Feb 2022 invasion because similar things happened before, so they planned ahead and made themselves resilient to The US dollar financial system locking them out (the same way they made their internet resilient to foreign sovereigns potentially cutting them off.
well for the Russia sanctions, initially it did have an impact but then both people and corporations found workarounds...
for example, blocking swift does not make money transactions impossible, makes it difficult for the layman in the first a few times.
nowadays, everyone uses crypto/usdt for the transactions and realizing it is actually cheaper and faster than the swift.
for the europe, they still buy the gas even at a higher price. grounding berlin to moscow flights only benefits turkish airlines and qatar airlines as now they profit from being monopolies (connections through istanbul and dubai)
the reality is that people adapt. i am not a trump supporter, i do not agree with the tariffs but that's what trump is trying to do; force people to adapt local goods
> They had the opposite effect, for reasons that still remain somewhat unclear.
The US deindustrialized since the 70s. Russia has had 100 years to practice being an independent, self-reliant, sanctioned country. The reasons are obvious.
With all respect, that's not a steelman argument in favor of tarrifs. It's a stack of whatabountism fallacies. "Tariffs are Good" does not follow from "People who say Tariffs are Bad were wrong about other things". Everyone is wrong about lots of stuff. The world is hard to predict.
You don't shoot a hole in the bottom of your life raft because the person pleading with you not to was wrong about how many people it could hold.
> They had the opposite effect, for reasons that still remain somewhat unclear.
It's clear that Russia redirected most of its exports. Just look at how much oil India is now buying from Russia — before the war, it was around 5%, and now it's over 40%. They rerouted a large part of their trade, created shadow fleets, and many EU exports still end up in Russia, but through proxy countries like Kazakhstan. (You can see this in the trade statistics between the EU and former Soviet bloc countries before and after the war.)
But the situation here is entirely different. The US has placed tariffs on much of Asia, the EU, and several other regions. There's nowhere for the US to reroute trade in a way that allows it to import the same goods at the same or lower prices.
The Ruble was on it's way to complete devaluation before Trump propped up the Russian economy by signaling he's willing to give them everything in exchange for nothing.
But it's also true that the west never really fully committed to the sanctions, the fact that you still had Russian oligrarchs traveling around Europe with relative ease was a pretty strong tell.
It wouldn't be this steep if he wasn't trying as hard as he can to follow through on his promises of "his own brand" of prosperity, the only way he has ever known how, unfortunately that's when massive losses have always proven the most likely outcome.
Anyone else with a proper business background would have been able to negotiate international trade agreements more favorably, including overall increases in tariffs, and if there was going to be unavoidable downward pressure it would certainly be much less than this at this point.
Plus someone with actual useful deal-making experience would have been able to maintain stability on the way to a noticeable if not shocking upturn by now, there was a lot of low-hanging fruit left over after Biden.
Why not do something with that, rather than take it out on the American people? Just because all of them didn't vote for Trump, he can't bring himself to care about the country as a whole, or average citizens hardly at all. Much less legal residents.
If the only way to "sink the liberals" makes almost everyone else go down with the ship, so be it.
>It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers.
Meanwhile in California, the high-speed rail project is not going so well. There's some serious problems in the U.S bureaucracy, especially blue states. A recent extension of a rail line in San Francisco came in at $1 billion per mile. There are huge amounts of people dependent on the government running inefficiently, vastly overpaying and taking as long as possible to complete work. As we've seen with DOGE, as soon as someone starts to dig into all that, the whole establishment dependent on that inefficiency screams bloody murder. They seem to be adept at developing flywheels where the more money they spend, the worse the problems get, and that justifies spending more money. The $300 million a year homeless budget in San Francisco is a great example of that tendency. Somehow, that needs to get fixed if we want to compete at a world standard level.
This is a great question. For me, the steelman argument is the following: Without trade barriers, the local production economy is disadvantaged. Local companies have to comply with things like environmental and labor law regulations, making it more expensive to produce things. Other countries may not have these regulations. Therefore, by institution these rules without tariffs, the net effect is a reduction of environmental and social standards, as manufacturers move to locations where they do not exist.
A strong version of the policy would thus involve directly tying tariffs to environmental and labor laws of the producing country, thus equalizing the field with the local companies. Not only would this allow for fair international competition, it would also economically incentivise the global development of good standards.
I've never understood why countries like the EU pass strict environment and labor laws and then DONT place some kind of tariff or tax on countries without those restrictions. Not only to offset making your own market less able to compete on cost, but to provide a financial incentive for the other countries to up their game on environmental and worker quality-of-life issues (if that is the overall aim).
>I've never understood why countries like the EU pass strict environment and labor laws and then DONT place some kind of tariff or tax on countries without those restrictions.
This happens all the time though? GMO are very restricted there, so farmers there can't use them. Imports are also banned.
Because those ither countries would and do lie all the zime to placate delusional western citizens . it would result in tax carousels with countries were there is no legal recourse.
There are already ways to enforce those -- for example, Democrats and US labor unions used the USMCA negotiations to enact a "facility specific rapid response mechanism" that lets the US essentially strong-arm Mexico and Mexican companies into improving collective bargaining rights within the context of the trade deal; section 307 products (created by forced labor) have been illegal since 1930 (and enforced more strictly over the past decade, given concerns about Chinese slave labor); carbon import taxes addressing environmental regulations have been proposed in Congress, but haven't been implemented yet. The government also has existing authorities under anti-dumping and countervailing duty (ADD/CVD) legislation, so long as those duties comply with American obligations under international treaties (Trump's tariffs exist outside the ADD/CVD framework, and place the US in noncompliance relative to our WTO obligations).
Trump's tariffs don't really serve any specific policy goals other than "trade is bad and everyone should buy more from us than we buy from them," which is self-evidently absurd; why are we punishing Madagascar because we buy their vanilla and they're too poor to have extensive need of our services-based economy? Beggar-thy-neighbor trade policies inevitably beggar us as well, as we're likely to find out quite soon.
There's no coherence here, the people coming up with this policy are either ignorant or incompetent to the point of malice (Navarro, AKA "Ron Vara," being the benchmark). Tariffs, when used judiciously, can help support "infant industries" where domestic investment in emerging technologies means that supply constraints are less of a concern and where there are long-run expectations of lower domestic prices through efficiencies. In some cases, targeted punitive sanctions (against dumping policies, or to enforce labor and environmental standards) make sense, but the economic evidence on efficacy is mixed.
There is somewhat of an argument that countries such as China overuse American consumption as a crutch for development, rather than stimulating domestic consumption (Xi has, to give very mild credit, proposed policies to increase domestic demand); tariffs would certainly force countries and trade blocs to focus on non-American consumption, though this is a bit like losing weight by removing the patient's esophagus.
What we're seeing here is just ridiculous, from an economic perspective. Low-cost low-margin manufacturing is not coming back to the US, absent an economic crisis that pushes down to a upper-middle-income-level state (stay tuned!), while putting tariffs on agricultural products simply ensures that consumers will pay more without a corresponding increase in domestic competition (how many pineapples does the US grow?). The "calculation" of the tariffs, such as it is, is simply a tax on comparative advantage, which is mercantilist nonsense we left behind centuries ago. There's no steelman for this; even if there were, the increase in raw material costs would make the steelman unaffordable for us both.
US manufacturing output is at an all-time high. It doesn't feel that way because there aren't as many jobs involved. I understand you're not actually arguing this, just speculating, but, "we need to boost manufacturing capability" isn't a convincing argument.
Hmm that is interesting. I understand this plot is showing the gross output of US manufacturing, but it strikes me that it might be the relative growth that matters, not the absolute growth — I wonder if there’s a similar plot normalized by the total world output?
If this were indeed the case, I’m not sure tariffs are the right direction to do it.
Principally, that a company would need more guarantees on their capital investment that extend beyond a single president’s term. Since tariffs can be revoked at any moment, companies will want more assurances that the long path of capital investment will be worthwhile, or else they might find themselves disadvantaged before even getting off the ground.
They would find themselves lobbying the government to hold back the free market for them within a few years time.
I did see a talk where someone was making the case that if the U.S. depends heavily on China for steel, and Taiwan for chips, then if China invades Taiwan the U.S. would very quickly be unable to wage a war with both supplies cut off. So the goal is to build some capacity for such products domestically.
They also tied that to Trump's desire to get out of Europe and deescalate the Middle East, being that if the U.S. was already stretched across Ukraine and say Iran, it would be way to stretched to also wage anything in the far east.
I'm no expert by a long way, but I can see some logic in the argument.
In what crazy worldview would these be seen as good for America? Here's one.
Hypothetically, if you perceived that the root cause of some foreign policy problems you felt were important to solve was the gap in civil liberties between your country and powerful overseas countries, you could conclude that peace could be achieved by handicapping your own country so that it regresses to match the lower standards of the foreign nations that appear to have a problem with your country and its ideologies.
.
No guarantees that this is the actual belief of the people in power, it would just satisfy your requirement.
If the best possible version of this policy were smart, it would be coupled with boosting science and education, and improving conditions for the working class, including health care. It would also include governing in good faith.
I think it's about reducing the impact of outside market forces on the US, and increasing its sovereignty in the long term, and potentially laying the groundwork for a white ethnostate that doesn't rely on immigration. The globalised world is going to be crippled by climate change, mass climate immigration, demographic instability and food security.
This avoids the demographic and, depending on your perspective cultural challenges that are coming for many countries in the future, and lets America march to its own beat. America is setting up to be a fortress and a world unto itself in an unstable world. While a lot of countries will be going through these issues in the future America is doing its hard yards now.
Still years of economic misfortune ahead in the meantime.
That's not my thinking but it aligns with his practice, especially considering his buddy's interesting hand gestures. Caucasian people are set to become a minority in a lot of their traditional countries pretty soon, and race is potentially going to become extremely heated imo to the point of constant brazen violence. I'm most worried about what he's using all this tarrif(tax) revenue for in the proposed sovereign wealth fund.
The best possible rationalization with extremely favorable glasses is that Trump is forcing a return to US manufacturing. The best version of this would incorporate things like a scheduled increase over time to give companies time to migrate, amounts based off of things like differences in living conditions, along with minor things like congressional approval so it's actually legal at all.
However the vastly more likely reason is he's a complete fucking moron that treats all interactions as binary "winning" or "losing". A mindset that helped him bankrupt numberous companies, and now likely a country. So trade deficits are "losing" and he's retaliating with tariffs. This logic befitting a toddler completely fits everything he's demonstrated over the years.
Let's say you want to bring back semiconductor manufacturing. It seems counterproductive to start with immediate blanket tariffs that include the machines necessary to fabricate semiconductors, where no domestic alternatives exist. Yet that's exactly what's happening. Previous policies would have used long lists of exemptions, carefully crafted tariff schedules, and other policies to try and minimize collateral damage. These tariffs do not.
Like many things carried about by this administration, the charitable interpretation of the intent is harmed by the manner of implementation. Countless policies have been implemented in a rushed, haphazard, confusing, nonsensical, surprising, and inconsistent manner which makes it tough to believe they are actually well-thought-out strategic moves.
Ref. manufacturing, any serious-scale company is not going to commit to a decade-long (or more) plan to building factories in the US with this sort of uncertainty; I'm sure a few will pay lip-service to the current POTUS but what CEO is going to commit to the long-term in a country in turmoil?
And even when this is past, those same CEO's - and their successors - will think long and hard about committing to any long-term investment in the US.
In Starcraft, the Terran Factory structure had the ability to Lift Off, fly around, and land somewhere else.
I think the obvious thing to do is for manufacturing companies to start strapping Space-X Starships to their factories. Then when the administration changes, or tariffs or taxes become more favorable in another country, they can just Lift Off and move them to the new location.
Alternatively, we could pursue a Waterworld future where all the factories float around in international waters.
All this churn is just an opportunity to think outside the box!
I think the real reason is more insidious. The purpose is to raise more tax revenue from the middle and lower classes so they can fund a massive tax cut for the billionaire class.
the most likely reason is the simplest one - he is deliberately manipulating market so that his family’s companies can benefit. He did this very transparently with crypto. Now with a larger stakes.
Corruption plain and simple. Now “lobbyists” will rush in offering him favors so that he removes some restrictions
Long negative beta securites, short positive betas, on margin. Sell calls on ETFs, buy puts on ETFs, etc. There's risk though because his actions are rather unorthodox and the full effects aren't known (and resulting fear can cause betas to shift drastically)
Or if the necessary capital is out of reach for margin trades or options (for his friends it isn't), buy long 3x inverse ETFs as much as you can risk.
If you expect him to play yo-yo some more, rinse and repeat buying either regular or inverse 3x ETFs as needed.
Is this happening at some scale? Surely. Is it the main purpose? Probably not. I'd expect there are easier ways for corrupt politicians and their cronies to profit.
Yes, you can short a total US market ETF. Or just exit the market and be prepared to enter when the floor is hit (impossible, unless you have outsider knowledge).
If Trump is effectively insider-trading, much of the profit would come from the flip-flopping rumors he spreads every week. To keep going, there does need to be the occasional concrete action, otherwise traders start ignoring the rumors.
Yes. It's probably a combination between "have to do something about China; this is something" and "now I can move FX markets at will; time for my friends and I to enrich ourselves"
I didn’t see any other responses mention this, but a Reddit tinfoil hat argument that’s going around, which sounds more plausible than the other theories like wealth consolidation and systemic destruction of middle class, is the national debt that needs to be rolled over in the near future. Higher interest rates make it more expensive to roll over the debt and intentionally tanking the economy to increase unemployment and force the fed to lower the interest rates could make it cheaper for the government to roll over the debt in a manageable fashion.
The "intentionally tank the economy to roll over national debt at lower rates" theory completely misses how government bonds actually work. A bond is essentially a promise: you lend the government money for a specific period, and they pay you back with interest at the end. When that bond matures, it's simply paid off. There's no refinancing happening.
What people call "rolling over" debt just means the government is issuing brand new bonds to raise money to pay off the ones that are maturing. These are completely separate transactions, often with entirely different investors. The government continuously sells new bonds and pays off maturing ones as part of normal operations.
Creating a recession to somehow game this system would be spectacularly counterproductive. Tax revenue would collapse while unemployment benefits and other social spending would skyrocket, creating even larger deficits. Any minor interest savings would be dwarfed by the economic damage. Not to mention the Fed sets rates based on economic conditions, not to help government borrowing. This isn't some clever financial strategy—It's just bad economics built on a fundamental misunderstanding of how sovereign debt markets function.
The problem with this plan is that the tariffs are likely to cause inflation. (Because now prices have to include the tariffs.) In a period of inflation, people are unwilling to buy bonds of any kind, including Treasury bonds, unless they have a high interest rate. This will increase the cost of rolling over the debt, and will create even worse problems for our government.
> Breaking the system does not make anything work better except human suffering.
Maybe ask yourself why human suffering was so great that people voted to break the system..? Big tech should have paid more respect for things like housing.
Well, one theory is that Trump wants individual companies to come to him and beg for exemptions to the tariffs. This would consolidate his power: Nobody would dare to do anything that would oppose him, for fear of having their "tariff exemption" revoked.
Another theory is that Trump has some complicated plan to reduce the US's debt; again, it involves using tariffs as a "stick" to push our allies into doing what we want. Summarized here:
Trump take bribes with companies and countries for exemptions to tariffs. Trump informs insiders of upcoming market manipulations so they can exploit the falls and rises. Inflation rises in the us as companies have fewer competitors and another justification for price increases. Income inequality increases just like the last guy that said lets make america great again.
The policy indicates trade, traditional partnerships, and traditional financial metrics are less important for the administration. It is largely symbolic rather than analytically worked out - the direction is more important than the details.
This is consistent with the economy being radically altered by robotics and AI. Comparative advantage in labor costs is becoming irrelevant, so a large part of the justification for trade disappears.
Wealth is being further concentrated into those with existing assets, as the negotiating position of labor becomes weaker. It is less important to maintain partnerships when you can do everything yourself.
Recession becomes less important than pushing hard for leadership in AI. Deepseek’s model release had a huge impact on the values of leading US firms. With AI traditional measures of the economy become significantly less relevant.
I think deindustrialization is detrimental to the US. We couldn't even make masks fast enough during the covid. The YouTube video that compares the factory of GM and that of BYD's is just embarrassing. It really shows how far we've fallen. The cost of building anything, including canon shells, is through the roof because we simply don't have the supply chains. And do we really believe that we can keep innovating if we don't actually make things? It's really a pipe dream that our engineers can keep drawing boxes in their cushy offices and believe that Chinese companies won't catch up. On the other hand, it's so sad that successful people like Balaj believe that the US can never reverse the course of deindustrialization. Their reasons are the usual: the US workers are too incompetent compared to the Chinese workers. Our automation is too behind compared to China's. We have lost the know-how of building our supply chain. We may get back manufacturing, but we will lose our seigniorage of a global currency - the US dollar.
What I don't understand is that China was dirt poor 30 years ago and was not a manufacturing powerhouse even 15 years ago. It was the Taiwanese, the Japanese, and the westerners who invested heavily in China and brought them technologies and expertise and bootstrapped the massive manufacturing industries in China. The quality and professionalism of US workers used to be the envy of Chinese people. Since when rebuilding the manufacturing business has become mission impossible? Can we really keep printing money when we make so little stuff? I get that we have great service jobs, but who wants our services if we don't make anything worth servicing? Back in 1917, Allyn Young believed that London would always be the finance center of the world, but we all know what happened later.
I'm not sure if Tarrif will work in the end, but at least it can attract additional investment given that the US is the largest consumer market in the world. Combined that with deregulation (assuming it will be be successful) , at least the US has a shot to bring back the key manufacturing business. And don't we believe actions lead to information? What have we done in the past 15 years to stop our deindustrialization? At least this time our government is trying. For that, I'd like to give them benefit of doubt.
Just to play devil's advocate on de-industrialization here -- The Industrial Revolution and its consequences have been a disaster for the human race. They have greatly increased the life-expectancy of those of us who live in “advanced” countries, but they have destabilized society, have made life unfulfilling, have subjected human beings to indignities, have led to widespread psychological suffering (in the Third World to physical suffering as well) and have inflicted severe damage on the natural world. The continued development of technology will worsen the situation. It will certainly subject human beings to greater indignities and inflict greater damage on the natural world, it will probably lead to greater social disruption and psychological suffering, and it may lead to increased physical suffering even in “advanced” countries.
People's models for the world have been massively disrupted. What we knew "before" is sort of thrown out the window now. These tariffs, if they are sustained, will create massive shifts that we cannot fully comprehend. It's like a massive physics system that's just received a shock.
The best explanation I’ve seen is the so called MarALago Accord[1].
I think the core thesis is that the US dollar and the US military being so core to all trade in the world had mad the US disadvantaged in terms of trade competitiveness. The accord is a set of goals/approaches to reduce that, theeeby making the US dollar more appealing for exports, other currencies less appealing.
The downturn would come either way, we are slamming headfirst into global warming consequences, other piled up risks and closing easy access resource ceeilings.
This way though the downfall is at least controlled, comparable to landing a wounded plane instead of breaking up midair. Big Olga never believed its own bull of "infinite growth" and parallel drove plans forward to keep civilization going in pockets once the "8billion can life like kings" bubble bursts. Bill Gates microreactors come to mind.
The rest of us go to hell, aka wars, martial law and civil war, preferably without damaging the pockets and without going nuclear. THANK YOU!
Sorry , to all those that fell for fusion, mars and star trek fantasies.
Phew! Good thing we're also rolling back EPA and other regulatory controls that encourage/enforce sustainable practices. Otherwise it might have been (only an ill conceived) part of a coherent strategy.
The steelman here is: it is better for a country to have a diverse manufacturing base and a net positive balance of trade. The only way to get manufacturing happening here is to make it more profitable to manufacture here than elsewhere. The only way to do that is to make sure everyone else’s cheap stuff is much more expensive, thereby creating a possible profit margin for local manufacturing. This medicine will be hard at first. But it will create a resilient economy where foreign wealth comes in (buying our goods) and national wealth stays home (purchasing locally made goods).
You didn’t ask for counter arguments but I’m sure we will see a wide range below this comment.
A broader picture here is to say neoliberal globalization is bad in that it removes local autonomy by creating a need for peaceful trading partners. Who is it bad for, and what sort of world would be good for those people is an exercise left to the reader.
EDIT: I like the vigorous comments and zero net score on this comment. don't blame the messenger guys, this is a fair statement of the steelman. It does not represent my own views.
If this was the real reason then wouldn't we see countries matching import tariffs with export tariffs? Sharing revenues on a percentage of the flow of goods into the US 50/50 would at least be a more sustainable geopolitically. It would be a collaborative resolution in some sense.
Instead, we are seeing countries match with import tariffs in the other direction, and a deterioration of global trust.
I don't think most countries actually want to balance bilateral trade. You can get a hint of this by the fact that the calculation that the US is using right now to determine the tariff rate puts a floor of 10% tariff. If they were truly committed to balancing bilateral trade then you would have expected them to actually have added export tariffs to any countries where the US had a trade surplus. Instead they gave a 10% import tariff still. I'm not sure I've seen any explanation for this 10%.
> Instead, we are seeing countries match with import tariffs in the other direction, and a deterioration of global trust.
Right, because e.g. if Canada has no tariff on car imports and the USA has tariffs, then the logical course of action for car manufacturers is to move all of their manufacturing for Canadian-sold cars to the US, because it's more flexible to have manufacturing in the place that incurs fewer tariffs overall. Canadian import tariffs take that incentive away.
Export tariffs make more sense for resources where the manufacturing base can't be moved.
The comment you replied to didn't say that this steelman wants an "even" balance of trade, it said the steelman wants a net positive balance of trade, more exports than imports. Export tariffs discourage something that the steelman wants. The basis for "trade deficit bad" is that we're collectively sending those countries more money than they're sending back.
Not sure what you mean. Export tariffs are very rare because nearly everyone agrees that it's good for a country to export lots of stuff. The question is whether imports are also uniformly good for a country. Free trade advocates say yes (and I think they're right), "typical" protectionists say they become bad when they undercut local producers, balance-of-trade protectionists say they become bad when they exceed exports.
> everyone agrees that it's good for a country to export lots of stuff
Not if you want to avoid escalation of a trade war.
If you know that the US is pissed off because you're hoarding dollars because its the reserve currency and its causing the USD to rise too high, leading to their decline in manufacturing competitiveness, then you can solve their problem for them by adding an export tariff. It will make them more competitive. But that way, you get the revenues from the tariff rather than the US. Adding your own import tariffs makes the trade balance worse. Its like the person you're negotiating with is complaining about a knife and you decide to twist it rather than remove it. A 50/50 split of export and import tariffs would mean that both countries can take a cut, the USD can maintain reserve status, and US manufacturing can stay competitive despite a stronger dollar. The fact that noone is doing this means that either they haven't considered it or they aren't happy with this outcome(probably the latter, but you never know...)
> If you know that the US is pissed off because you're hoarding dollars because its the reserve currency and its causing the USD to rise too high
But you don’t know that! The explicit US position is that their tariffs are purely retaliatory, based on a formula they invented a few days ago which claims to compute an effective rate consisting of tariffs and non-tariff barriers. Export tariffs would make the formula as currently constructed go down, but the US would clearly see you’re juking the stats rather than actually removing trade barriers, and adjust the formula to account for it.
Perhaps you think the US is being strategically deceptive about its motivations? I do see a lot of people offer that as a “defense” of the US position, although I don’t clearly understand how this is meant to make things better. How should foreign trade negotiators know which HN commenters are telling them the real position and which ones have been taken in by the misdirection?
I think export tariffs are rare more for implementation reasons. For instance, resource royalties are relatively common, and you could theoretically structure resource royalties to apply to basically the same basket of goods, in the same amount as an export tariff.
The trouble is that no company is going to want to invest in new/expanded US manufacturing facilities that only make sense under the just announced tariff regime, unless they have confidence that this is the new normal, and won't be rescinded any time soon. Would you want to bet that current tariffs will be largely the same next week, or next year, or in 4 years time?
Totally agreed. Among the many complaints I have here, this is a big one. As long as Dems are saying "this sucks we hate it we will change it", we have a lot of uncertainty, and so it is definitely not time to build factories.
I'd contrast this with the Obama energy policy, which was a significant change in US policy toward energy independence, consistently and fairly quietly applied without generating a worldwide recession or trade war.
> it is better for a country to have a diverse manufacturing base
A country can exist and be wealthy without diverse manufacturing base.
> a net positive balance of trade
A country can have stable and growing economy with negative balance of trade, as long as certain conditions are met. In short, this country may offer something else to compensate trade deficit, i.e. there can be a price tag on military and political power.
> i.e. there can be a price tag on military and political power
And what about services the US provides? Google and Microsoft are some of the biggest companies and bring a ton of money to the US, but this doesn't seem to be included in the calculation because they don't sell physical goods.
It's interesting to see how the U.S. could make it happen though, given that there is already a shortage of labor and materials. It will be a long, long road.
I find it odd how many people continue to try and give this man the benefit of the doubt. Is it just hope? Hope that there is some grander plan and not just Trump doing stupid things that will in fact make everything worse because he's stuck in an 80s view of the world?
IMO, tariffs are bad for the economy, but could be great for workers and the middle class. Regardless, implementing them this was is absolutely nuts.
China got our manufacturing because they didn't care about pollution. Now, they've developed cleaner industrial methods and built out fantastic infrastructure (e.g. massive industrial complexes right next to shipping ports). Meanwhile, we did nothing and we're a good ten to twenty years behind assuming perfect infrastructure development starting today with tariffs that are immediately in effect.
Combine that with the fact that infrastructure development in the US costs many multiples more than other developed nations, and you have a recipe for complete failure.
Not to mention China has been going hard into green energy. Both manufacturing it and using it themselves. It's the cheapest form of energy, and as you noted: much less pollution, which has a huge economic impact.
Meanwhile, what are we doing? Apparently green energy is evil, and we're going to go all-in on domestic energy production from something that's expensive, very polluting, and finite.
> What would the best possible version of this policy look like if it were smart?
It depends extremely on what your actual goals are, but if we suppose the goal is to increase US manufacturing capacity and economic independence with minimal pain, you'd enact this on a time-table over a period of years, after building enough support across the political spectrum to make it look like this policy will be essentially, if perhaps with some occasional tweaks, be maintained across administrations for some time. You'd also probably not significantly tariff the whole world, at any point.
The biggest problem with this approach is investor confidence. It's hard to sign on the dotted line to spend billions building factories when it's difficult to say with any certainty that these tariffs will still be around by the end of the year, let alone in five years. This was doomed to be way more painful than necessary when he started flip-flopping on this over the last couple months, regardless of whether it's even fundamentally any sort of a good idea.
If the goal's to replace large portions of income tax, as has been suggested by some including by Trump, uh... the math just don't work even with a drastically smaller federal government, it's nonsense, there's no "best possible" version there.
Manufacturing is already here. US's manufacturing output is higher every year. Manufacturing jobs don't exist, and therefore cannot "come back". There is no scenario where Americans go to work in some kind of electronics or textiles sweatshop. If the result of these tariffs is "more US manufacturing" then all of that manufacturing will be automated and robotic.
Who said anything about sweatshops? You pay the minimum wage expected by law. Apple has $180bn in profits. They could surely afford to pay US workers and lose some of that profit. But everything has been dominated by greed these days.
The best (if not only) valid argument for tariffs is that they can be used to negotiate lower tariffs. Because tariffs only serve to reduce trade, which mathematically is suboptimal for economic output, and has been recognized as such by nearly every economist since David Ricardo.
Unfortunately, Donald Trump doesn't agree with that. Or his handlers don't. Not that the distinction matters anymore. The diplomatic and trade relations that we are destroying right now can't just be fixed by electing a new President. This is the US's Suez Crisis...we are no longer a world leader.
> which mathematically is suboptimal, and has been recognized as such by nearly every economist since David Ricardo.
That requires some initial assumptions that simply aren't true. Tariffs can and do serve a vital role to protect a country from one with lower standards of living (eg taken to an extreme, consider trade between county A where slavery is illegal and country B where it isn't)
> That requires some initial assumptions that simply aren't true.
There are certainly assumptions, but those assumptions are reasonable in nearly every possibly scenario the US has ever encountered.
> Tariffs can and do serve a vital role to protect a country from one with lower standards of living
Protect how? Protect them from lower priced goods? Sorry, but this "idea" originates from mercantilist thought and has been thoroughly dismantled and discredited. Even when one country is less wealthy and less productive, both countries benefit from expanded trade. This is Comparative Advantage...literally Econ 101.
Economics is a social science and has a lot of problems with things being claimed as settled science when they aren't, but this is actually one of them. You'd have a hard time finding any living economist, liberal or conservative, who would agree with you.
> (eg taken to an extreme, consider trade between county A where slavery is illegal and country B where it isn't)
I would hope that in this extreme, we wouldn't use tariffs as a tool, but rather full trade embargo. Because it stops being an economic argument, but rather a human rights argument.
Regardless, reducing or eliminating trade with nations that accept slavery would be a reduction in economic output. It would just be one with a price that we should be willing to pay.
I'd love to see any sort of human rights justification for Tariffs against Canada though.
Comparative Advantage is trivially wrong in the real world. If a potential enemy is better at making bullets than you are, you're probably still going to make bullets rather than trading for them, because if you ever come into conflict, you don't want your supply of ammunition choked. This has real world analogues in Chinese-manufactured electrical components that go into military hardware.
From a strategic perspective, the US probably needs to onshore chip manufacturing before China's chip industry reaches parity with Taiwan's. If they don't, China could effectively blockade the island and remain unaffected, while all of its competitors are. The US would lose the initiative, and have to make a reactive decision on whether or not it wants to be in a shooting war, which is a bad place to be.
Econ 101 was nice in theory when the US had no rivals. But it does now, and a country that relies on its military and technological edge as part of its economic strategy (i.e. reserve currency status, exerting soft power through global institutions that are backed up by a credible threat of violence) can't be in a position where it gets outbuilt by its competitors.
Nothing you've said invalidates comparative advantage. It is just accepting a cost (reduced economic output) in favor of some strategic advantage. It doesn't matter if its a good idea, or a moral idea, or a strategic idea, the cost is still a loss in economic output.
Sure, you can think of it as purchasing security with the cost of reduced economic output. The problem is that the benefits of autonomy, and the costs of the externalities of free trade, are difficult if not impossible to accurately value. Not only are they intangible, their true value can often only be assessed in retrospect.
> I'd love to see any sort of human rights justification for Tariffs against Canada though.
It'd probably be the opposite - Canada/EU put tariffs on the US to offset their higher standards of living and environmental considerations. But then the US should similarly do that to, say, China for the same reasons
> Sorry, but this "idea" originates from mercantilist thought and has been thoroughly dismantled and discredited. Even when one country is less wealthy and less productive, both countries benefit from expanded trade. This is Comparative Advantage...literally Econ 101.
> The best (if not only) valid argument for tariffs is that they can be used to negotiate lower tariffs.
> Unfortunately, Donald Trump doesn't agree with that.
I think most countries hit are in active negotiations to reduce or drop the tariffs. Israel has already said they're dropping their tariffs on the US and Argentina is in negotiations to do so.
You need to be careful casting aspersions like that. He did answer the question, and he showed no hate towards Donald Trump. I think it is you who are projecting.
Talking about people's "handlers" isn't serious debate. Tariffs are nothing new or exciting, there's millions of pages written arguing for and against them long before Trump became a candidate.
Intentionally cratering the economy raises unemployment, which applies downward pressure on wages, and allows entities that are cash-rich and privy to the timings of the intentional market shocks to buy up large swathes of the country for pennies on the dollar, which makes the merger of corporate and government power smoother and more easily total.
J. Paul Getty happened to be in the right place at the right time for the 1929 market crash to result in an explosion in his net worth, what’s happening here is akin to ultra wealthy individuals recreating Black Thursday with the only difference being that it has been very publicly engineered and telegraphed in advance.
That is the steelman, if you think that those things are good things.
Argument for tariffs: Make foreign made goods expensive to encourage local production. And it has worked. Usually tariffs are more focused though. For example, the US has had tariffs on trucks for a long time; as a result, most foreign automakers have US plants to build trucks/SUVs.
The main problem with the tariffs is this: the US has benefited mightily from globalism. What actually happened is that the US, being at the cutting edge of technology, outsourced mostly low paying jobs, while developing more innovative/productive industries and sold goods all across the world.
Apple's a prime example. All the difficult (read physical) and low-paying aspects of production are outsourced to Taiwan and China, meanwhile Apple employs tens of thousands of high paid engineers in the US. Ditto for all the big tech companies.
Now, globalism has negatively affected a certain segment of the population and it was definitely a mistake to ignore that (rust belt great example). But bringing manufacturing back won't fix that now that the cat's out of the bag. Engaging in a trade war will destroy a ton of high paying jobs (every multinational is going to take a sizeable revenue cut) just to bring back a small amount of low paying jobs, if any are brought back... Firms will likely build highly automated US factories.
The best possible version of this policy would be focused tariffs on specific goods you want manufactured in the US... Semiconductors, autos, steel, boats, that sort of thing.
Many countries have blanket global tariffs to make their own industries more competitive
We ignored them
Now we are doing it and yes it upsets the world order
There is no precedent where this has been beneficial for the US, but we can try again. The last time it was tried was 1930, and our fortunes vastly changed since then
The incentive is for entrepreneurially minded people to try to provide services in the US and fix the supply chain here. This theoretically means more people employed and more people able to afford the prices of things produced here. Keeps velocity of money in the economy high.
We will learn how resilient a coalition of other countries are, as they try to only trade with each other
A smarter version of this policy would be country by country and industry by industry negotiations. But, given that some countries are dropping their own blanket tariffs, and others like Vietnam already coming to the negotiating table, time will tell.
There are people (notably, Ha-Joon Chang) that have claimed that those protectionist policies have made South Korea more competitive, but I think you'd find a lot of economists disagree with that, and that South Korea become competitive in spite of those restrictions.
Keep in mind North Korea has had even stricter trade restrictions, and they don't have any functioning modern industry at all. Trade restrictions reduce export market size, insulate companies from competitive pressures, and those problems only serve to reduce capability, not increase it. Maybe there is some sort of happy medium of protectionist policies, but I've never seen any sort of framework for understanding how you could derive where that happy medium lies.
If trade restrictions only ever made countries more competitive, we wouldn't use them as a punishment.
I don't think steelmanning an argument works if the argument is made in bad faith. Steelmanning should be about trying to understand legitimate reasons for a positions, not bullshit arguments. About being fair and intellectually honest, and not about trying to act like a PR firm for the other person.
That said, if you want to make sense of the reasons behind the tariffs, I can offer a couple that would be reasons why Trump would implement tariffs.
1. While they are within his power, they are a cudgel he can use to hurt his enemies and show favoritism (and be open to bribes to get them lifted).
2. Trump has a weird obsession with tariffs, even after he lost a trade war with China in 2018 and had to bail out farmers with a bailout larger than the one to General Motors.
3. Also, as one of Trump's Wharton business school professors has stated numerous times, "Donald Trump was the dumbest goddam student I ever had."
You don't need to try and imagine why they're doing it, because Trump has said why for the last 30 years. He sees our trade deficit as as "the US being taken advantage of."
I can't steelman the case for high tariffs, but small tariffs make sense to me.
There's a trade off between economic diversity and comparative advantage, and a balance is better than being at either extreme.
A 5% cost advantage might be sufficient for a company to offshore production of medical supplies, but is that minor cost saving worthwhile versus the risk of a shortage in war or pandemic?
Automation is reducing labor cost advantages, and converging unit manufacturing costs globally, so more and more industries are falling into this "slight comparative advantage to offshoring" case.
It should be obvious that this market correction is the desired outcome for this administration and its defenders.
If there weren't so many people whose livelihood or investment portfolios benefited from free trade or government spending the economic indicators wouldn't react as badly. Punishing or disincentivizing economic activity they don't like is more important than increasing GDP or asset values.
It may seem like a weak argument because of the circular logic but that shouldn't surprise any of us.
Whether he is right or wrong, when Lighthizer was on 60 Minutes, he said they have tried everything to level the playing field, and nothing worked. So this time, there is nothing to lose.
Reports are that Trump ignored all his advisors and did what he wanted so your point isn't relevant. I haven't heard a single analyst find sense in how tariff levels were set per country - someone did notice that it appeared a very simple formula had been applied, one that has no basis in economic theory.
Go open 10 year chats for the GDP, S&P 500, etc.
There was no problem with "level playing fields."
All of this is just one man who for forty years has been obsessed with how "we" are supposedly being "taken advantage of."
The economy overall was doing fine - intense economic stratification is a problem, but overall the country's economy was productive.
Man steps in, inheriting a growing economy doing just fine...and after months of uncertainty and upheaval, in two days erases a year's worth of economic growth.
> I haven't heard a single analyst find sense in how tariff levels were set per country - someone did notice that it appeared a very simple formula had been applied, one that has no basis in economic theory.
> Man steps in, inheriting a growing economy doing just fine...and after months of uncertainty and upheaval, in two days erases a year's worth of economic growth.
1. Bring jobs back on-shore. Lots of US companies shut down factories over the last several decades and shipped jobs to Mexico and other countries. The UAW supports the tariffs.
2. Bring manufacturing back on-shore. If we have to fight a war, we need a strong manufacturing base (see #1). If it's a war with China, or with a country where China decides not to sell to us, we wouldn't have the manufacturing base to supply the war effort.
3. These are mostly reciprocal tariffs. The countries that were are putting tariffs on already have tariffs on our goods.
4. Additional treasury income.
5. Combat unfair practices like dumping.
The tariffs are not reciprocal tariffs (i.e., based on tariffs in those countries). They're set by dividing the trade deficit with that country against the total volume (and then halved). This premise can't be included in the steel man version of the argument.
EU tariffs for goods from the USA vary but based on trade volume it's effectively 1.3%. Setting a 20% tariff for all EU imports is a huge novelty unknown in recent decades. There have been higher tariffs for certain products to protect domestic industry, some of them are more than 60 years in place through.
Well, regardless of whatever you think about truly reciprocal tariffs, the Trump Tariffs are not that. They released the formula they used to calculate the levels and it has nothing to do with other countries’ trade barriers. It’s like literally trade deficit with that country divided by imports. Which is utterly unhinged, with no basis in theory or reality. But again, even if you disagree, that is not the definition of a reciprocal tariff.
A reciprocal tariff is a tax or trade restriction that one country places on another in response to similar actions taken by that country. The idea behind reciprocal tariffs is to create balance in trade between nations. If one country raises tariffs on goods from another, the affected country might respond by imposing its own tariffs on imports from the first country. This response is meant to protect local businesses, preserve jobs, and fix trade imbalances.
I think you are arguing that they aren't equal tariffs. I would agree with that. They do seem to be reciprocal though, because the countries imposed tariffs on our goods of some sort.
There may not be zero tariffs in other countries, but the amount calculated by the Trump Admin doesn't account for them. It doesn't even consider them. It's as simple as "trade deficit by total volume". Unless you assume that, absent tariffs, trade would always be perfectly balanced (it won't be), then the difference is structural realities (such as certain climates growing things that can't be grown in the US).
They aren't reciprocal tariffs because the other countries don't have anything like comparable tariffs in place already.
Why should corporations respond to all of this by taking a lot of risk and invest in capital? The tariffs aren't based on any sort of sound strategy, just one poorly educated person's black and white, simplistic worldview full of insecurity.
They change practically by the hour; first they're on, then they're off, then they're on, then they change, thne they're bigger than anyone expected.
That doesn't make companies say "well, let's expand!" It makes them hunker down. Kill off the least profitable products, cut overhead, etc.
There's time needed to build the necessary manufacturing, train a workforce, etc.
There's prices skyrocketing when suddenly American manufacturers have less competition.
There's also the plunge in sales of goods we sell to other countries.
This is the sort of thing you change over a generation. Not in a day, year, or even four years.
You can't just snap your fingers and say "you'll buy all your CNC machines from AMERICAN companies!" - even if we had enough manufacturing capacity, where are you going to get the workers from, particularly as literacy and education levels have been falling, and the whole education system is getting torn up?
...and where are you going to get all the semiconductors from?
The US famously had to buy titanium for the SR-71 from Russia through shell companies because the US lacked the mining capacity, the refining capacity, and know-how.
>Why should corporations respond to all of this by taking a lot of risk and invest in capital?
They would invest domestically to evade the tariffs. They invested heavily in Mexico since NAFTA to increase profits, the tariffs (hopefully) make it more profitable to manufacture domestically.
>The tariffs aren't based on any sort of sound strategy, just one poorly educated person's black and white, simplistic worldview full of insecurity.
I'm not going to reply to that since it is an emotional argument.
>They change practically by the hour; first they're on, then they're off, then they're on, then they change, thne they're bigger than anyone expected.
I agree it should have been much more predictable and steady. I suspect the fluctuation is due to the countries in question capitulated to what Trump wanted (higher security at the border, removed tariffs on US goods, allowing the CIA to hunt down cartels in Mexico, etc)
>That doesn't make companies say "well, let's expand!" It makes them hunker down. Kill off the least profitable products, cut overhead, etc.
Not expand, relocate. Relocate building new factories with US labor on US soil, run by US workers.
>There's time needed to build the necessary manufacturing, train a workforce, etc.
Agree.
>There's prices skyrocketing when suddenly American manufacturers have less competition.
Short term yes, but tariffs are deflationary long term in advanced economies.
>There's also the plunge in sales of goods we sell to other countries.
This is the sort of thing you change over a generation. Not in a day, year, or even four years.
I agree it's very agressive. I don't recall any politicians trying to get manufacturing on shore in earnest in my lifetime (and I'm old), but I'm happy to see an attempt. Drive anywhere down main street in middle America, you'll see a lot of boarded up ghost towns that used to be propserous. Lobbyists spend a lot of money to keep their clients' costs down by using cheap offshore labor. Their clients are of course corporations.
>You can't just snap your fingers and say "you'll buy all your CNC machines from AMERICAN companies!" -
You can offer price incentives. If US CNC machines are $100K and Chinese are $110K with tariffs, they will buy US CNC machines.
>even if we had enough manufacturing capacity, where are you going to get the workers from, particularly as literacy and education levels have been falling, and the whole education system is getting torn up?
Many of these jobs don't require a college degree. On the job training used to be an effective way to do this. It's not going to be easy, but it's possible. There are plenty of people in middle America looking for work.
>...and where are you going to get all the semiconductors from?
The US famously had to buy titanium for the SR-71 from Russia through shell companies because the US lacked the mining capacity, the refining capacity, and know-how.
Well if China invades Taiwan, which they have been promising to do and did with Hong Kong, we won't have any modern semiconductors. The US economy and military can't survive without modern semiconductors. TSMC (Taiwan) and Intel just made a deal where TSMC will run Intel's fabs in the US using their manufacturing expertise.
There are definitely long term upsides to this if the tariffs stay intact and there are long term upsides if other countries remove tariffs on us. It's certainly rewiring the global trade network, hopefully in our favor. We have one ace up our sleeve, we have the largest market in the world by 2x. That's a lot of negotiating power.
The problem with every third-party rationalisation is that they’re all just wild guesses.
The administration hasn’t explained their logic and haven’t made clear plans — that’s the real problem.
The difference between science and “traditional” beliefs is that the former is not just about convincing others through force, but explaining things to others such that they’ll convince themselves.
It’s also the difference between good political leadership and a ruthless dictator.
Those statements are marketing and/or propaganda, and their logic don't match up to the actions that were taken:
- Both countries with trade surpluses and deficits were all tariffed -- therefore this is not about re-balancing trade.
- Inputs required for on-shoring were all tariffed -- therefore this isn't about bringing manufacturing on-shore.
- Both geopolitical rivals and allies were all tariffed -- therefore this isn't about defence. (Russia was specifically excluded!)
- Only "goods" were factored into the calculation, services were not, despite being the major US export, making this very unfair to countries that export goods and import services -- therefore this isn't about trade policy becoming more fair.
Etc...
Just yesterday I was debating the supposed benefits of the tariffs with a conservative friend of mine, and it was the same problem: They couldn't draw an arrow between "enact sweeping tariffs" and "... profit".
Every country for the history of the world that has enacted sweeping tariffs has suffered for it, every time.
Protectionism like this causes domestic industries to become inefficient because they don't have to compete on a level playing field against foreign products.
-- The Trump administration's answer to this is simply: "No it won't!", without any stated reason.
Blanket tariffs reduces the efficiency of on-shore businesses, because they are penalised for buying from more efficient foreign sources of inputs that can't be made locally. Here on HN people mentioned coffee, chocolate, olive oil, avocados, and other food products that require specific climates. Similar logic applies to many other inputs, such as industrial robots (Germany), lithography machines (Netherlands), rare earths (China), etc, etc...
-- The Trump administration's answer to this is simply: "No it won't!", without any stated reason.
The people behind this keep drawing a couple of circles and waving their hands while proclaiming that drawing the rest of the owl is easy.
Okay. Show me a drawing of the rest of the fucking owl.
There is no economic argument for tariffs. There are mountains of theory and empirical historical evidence that they make countries poorer.
The motivation for these tariffs are not economic or financial.
They are being used by a narcissist as a tool to force others prostate themselves on front of him. Whether foreign leaders - who will have to "kiss the ring" pleading the case for their country to get relief - or domestic CEOs who will now have join a queue to plead with Trump for exemptions for their particular sector (like the auto business CEOs have).
We've already seen it with social media CEOs who queued up to offer him money and support, we're seeing it with law firms whose very existence he has threatened by EO forcing senior partners to not only bend to his will but to humiliate themselves in doing so and we seen university presidents do similar.
The tariff stuff is a continuation and escalation of that policy.
The cost is to America's reputation, international standing and economic well-being and will be borne for decades. The benefits are ephemeral - an ego massage for DJ Trump.
The coherent endgame is to ensure a fascist takeover of America by ensuring CEOs are at the mercy of POTUS. First the political party fell, then its representatives in Congress, then judiciary. The control of political institutions and education system has been assumed.
But free trade and commerce is antithetical to fascism. Unless the dictator can assume total control, his position is untenable. The goal is to form an equivalent of CCP Politburo and Putin in the form of POTUS + small number of hand-picked techbros. You can't achieve that goal unless you control commerce.
All of this is laid out in writings of Dark Enlightenment adherents and sanitized through Project 2025. Ironically, the people who complain the most about their freedoms being destroyed because their Facebook post saying COVID is a hoax was deleted not only will willingly submit to this, but also be its key enablers.
Here's a plausible steelman argument, drawing from insights from CEA Chair Stephen Miran and a paper he authored pre-administration titled "A user's guide to restructuring a global trading system"
It is a blueprint for "tariff based upheavel". It proposes using 'unilateral U.S. tariffs as leverage' to force other countries into a new accord, dubbed by some a potential "Mar-a-Lago Accord," analogous to Bretton Woods, that would include 'coordinated currency realignments'.
Miran argued that because the strong dollar has made U.S. exports uncompetitive and fueled chronic deficits, the U.S. might need to pressure other countries to strengthen their currencies (i.e. weaken the dollar) through a trade war if necessary. Alongside this potential grand strategy, it's also argue the tariffs directly address specific issues like unfair trade practices (the 'reciprocity' argument), dumping, reliance on adversarial supply chains (national security), and aim to incentivize domestic manufacturing investment.
Elements of Miran's thinking in the paper are evident in the Administration's approach. For instance, Trump aides publicly claim they are targeting countries with "artificially devalued" currencies for tougher tariffs and the President frames tariffs as "reciprocal", a hint that the endgame is to make others lower their trade barriers or adjust currency values to balance trade.
Direct quote:
"Treasury Secretary Scott Bessent has mentioned, the US could have a “traffic light” system that divides the world into three tiers: “green” countries with shared values, aligned economic and security goals, and a willingness to cooperate on exchange rates; “yellow” or neutral countries that want to keep high tariffs and remain outside the US defense system; and “red” countries, meaning adversaries or sanctioned nations that refuse to cooperate."
I think that adds potential useful context around where we might expect countries to align and what the intent is. Or perhaps as I've seen it put more inflammatorily, there are "vassals", "neutral" and "adversaries".
One last note would be that comparisons to the 1930s Smoot-Hawley tariffs are often made but the context is fundamentally different. In the 1930s, the US was a major creditor nation with large trade surpluses and dominant manufacturing. Today it's a large debtor nation seeking to revitalize its industrial base and reduce deficits within a far more globalized system. It's not quite fair to call it protectionism (as a sole objective) and the time period doesn't generalize to today's America.
With those datapoints....
The steelman perspective is that this is less short-term theater and more a high-stakes, potentially disruptive strategy aimed at fundamentally restructuring the global trading system. The intended endgame is to reassert U.S. economic advantage, enhance national security through resilient supply chains, and better align global economic rules with U.S. interests in a changed geopolitical landscape, using U.S. market access and currency centrality as key leverage.
To be clear, this doesn't imply that I agree. I’m not convinced it’ll succeed as intended, but that’s the best-case rationale. It might be a "Hail Mary" to prevent ceding global leadership to China.. or a way to "hit reset".
Intentionally nuking stocks causes investors to retreat for safety in bonds specifically treasuries. Demand for treasuries drives the interest rates on them down. The US has to refinance $10 trillion of existing debt this year. By driving rates down it save the federal government hundreds of billions in interest payments.
He has actually reposted a video confirming this outlook.
Another angle is he is targeting China. China is in a precarious domestic economic sitaution as well. It weakens China by reducing its exports. In addition tariffs if high enough for long enough encourage local manufacturing. If we go to war with China over Taiwan, it will be very easy for China to convert existing commercial factories to produce military goods. Much harder for us as so much of our manufacturing infrastructure has lain fallow. Its not a good idea to go to war with the country that makes everything you rely on.
I'm not saying these are valid ideas or it will play out like that. I'm saying this is what admin is thinking.
Also if you feel like a read, this is a paper by Trumps leading economic advisor Stephen Miran
Thanks for this. To me, this makes more sense than some random "tariffs are bad" messaging on social media. Do you have a link to the video you mentioned above? I would like to learn more.
As an aside, for those who have 401(K) and IRA accounts in the US, the stock market plunge might be a great time to convert funds into ROTH accounts (lower taxes now, etc). At least there is a silver lining...
Here is the link. Its just a silly TikTok video discussing the point in an over the top way. The only thing important about it is that Trump reposted it.
What do you think you mean by saying 'drives interest rates down'. It seems a leap to think the fed, the entity that establishes the interest rate, will react in the way you describe.
Common misunderstanding but the fed does not set rates on treasuries (bills, notes, etc) the primary instrument the government uses to finance its debts.
Those rates are set via auctions driven by the demand for safe haven returns on investments, particularly returns when equities are risky. As demand for treasuries (safety) goes up, the rates on those same treasuries go down.
The fed sets the interbank exchange rates, these influence treasury rates but are a very different thing.
I believe people are arguing for tariffs now are mostly not arguing that tariffs are good but that the world needs to level the playing field and that the US imposing tariffs now is a way to force that to happen. The US has lost quite a bit of industrial production to China and other nations over the years and argument is that this isn't simply low Chinese wages but a variety of trade barriers and trade subsidies. The rosy scenario is that Trump imposes these measures, other nations offer concessions and the barriers are mostly lifted with trade now being more in the US' favor.
The problem with this scenario is that every nation naturally has it's own idea of what is fair and that many things that are trade barriers are around politically sensitive issues (safety and purity standards, etc). So getting other nations to immediately drop stuff isn't that easy.
The analogy is war - after a short engagement, the trade-warring nation will "come home victorious". Like regular war, this scenario often doesn't come to pass.
The real question to ask is what comes next: What will Trump do with the tariff money?
That is what's going to determine if the policy is good or bad - if he uses it to boost manufacturing in the US, add jobs, even give people a rebate, it could do good things for the US.
This doesn't directly answer the question, but global free trade has been a calamity for the middle- and working-class. It needs to be razed to the ground, and salt sowed in the fields, etc. This is one way of ending it.
Consider the case of Phil Knight of Nike. Here's what someone posted on Twitter (I don't know the account so obviously don't endorse everything, or anything else, it says):
"Knight's big "innovation" in shoe manufacturing was figuring out how to be one of the first people to flood the American market with cheaply made plastic footwear from Asia. Knight didn't make better, more durable shoes; he made cheaper ones by blowing up the native American industry.
Access to slave labor is, in the short run, a competitive advantage over skilled free labor.
In 1990, 10 years after the Nike IPO, there were 85,000 Americans employed making shoes. Today there are only 10,000 and 99% of our shoes are made overseas. The only exception is footwear for the military.
Phil Knight, however, is worth $35 billion and Nike has a market cap of $90 billion.
In other words, the good middle class wages once generated by homegrown American shoe manufacturing have been transformed by outsourcing into equities owned by a small class of investors and one insanely wealthy oligarch.
Global free trade is a way for the powerful to screw over the middle class by forcing them to compete with third world slave labor.
Yes, with high tariffs, Americans would have to pay slightly more for shoes. In return, however, they would be subsidizing good paying jobs and a decentralized industrial base in their own communities.
Global free trade, on the other hand, subsidizes massive increases in asset valuation. If you are one of the first "in on the ground floor" then you can make insane amounts of money by blowing up middle class wages by outsourcing those jobs overseas.
Libertarians and Wall Street types love to call this "capitalism" and the "free market" at work, but in reality, they are defrauding their countrymen out of the opportunity to build products themselves.
Americans are no longer able to make shoes at home. That option is not available to you. How can we call this a "free market" when it constrains our choices?
Outsourcing is 100% a government subsidy. It is a privilege, allowed by the state, to a select few citizens who figure out how to manipulate the international market to their advantage.
Phil Knight discovered the much cheaper Asian shoe market in the early 1960s because he had the money to travel abroad. His middle class neighbors making an honest living making shoes did not have that opportunity."
The middle and working class are the ones who would be paying signficantly more for shoes in this scheme. A minute fraction of them having jobs making shoes instead of the jobs they would have otherwise wouldn't balance things out.
I also take issue with the trend of describing low paying jobs as "slave labor". Absolutely nobody in vietnam is heralding these tariffs, since they don't look forward to working even worse paying jobs as a result. Free trade benefits everyone except for abstruse dilettantes online.
Sure, pay more for shoes, and have a chance at going back to a world where small towns are prosperous and thriving, people can buy homes in their 20s, quality isn't constantly declining, people aren't constantly stressed over losing their jobs because the last quarter's results 'failed to meet expectations', and families can get by with one wage-earner. All this human happiness and thriving destroyed by globalization, so creatures like Phil Knight can get very very rich.
So again, I've no idea whether the tariffs will work, and on paper I'm quite a bit poorer than I was a week ago, but the current regime must be smashed.
I support putting tariffs on foreign nations (a) to the degree a nation 'undercuts' America by exploiting foreign workers, and (b) providing the tariffs be gradually introduced so as not to cause mayhem.
Those two stipulations would preserve America's reputation as a good global citizen, and would promote better conditions in the USA and the world.
The Trump tariffs meet neither of those stipulations.
I am in the minority here. These tariffs are fairly reasonable. Here's why:
(1) The state has a compelling interest in regulating market risk tolerance. When the FED sets the risk-free interest rate, it controls the price of risk, and thereby the risk of the entire market. It is often advisable to temper the risk-eager market for long-term stability.
(2) Likewise, when the POTUS enacts tariffs, it is similarly setting the market's risk tolerance--namely against the risks concomitant of economic dependency on foreign nations.
(3) This will inoculate the economy against external supply chain shocks (at the extreme: war) by reducing our liability. It's not just consumers who are price-sensitive; given goods within a class will not be affected equally, natural price advantages will emerge, shifting demand and consumption as all levels of economy begin to price-in these tariffs.
The "economic consensus" against these tariffs just isn't real? It's exceedingly likely that the US likely will be better off because of them :)
> This will inoculate the economy against external supply chain shocks
How so? There's hardly enough unemployment and there's also no incentive towards increasing the number of immigrant workers.
Either suppliers eat the cost of the tariffs as the US administration says, or they don't and then everything becomes more expensive, but either way you have the exact same supply chain.
(1) Much like a carbon tax, when the economy becomes accountable for an externality (risk in this case, rather than carbon) it is priced in at every level, ending with consumers, whose demand is price-sensitive. Not all consumer goods of the same class will be impacted equally, creating a natural price advantage.
(2) Once the economy adjusts to these new risk-adjusted prices, POTUS can always offer clemency for specific goods and industries to respond to global supply shocks, providing a large buffer for the now-adjusted American consumer.
(3) Narrowly: it is exceedingly unlikely we won't see production onshoring in any capacity like you suggest. Economic analysis of the first-term Trump tariffs, for example, did indeed find production onshoring.
Sure there will be some onshoring, but does it make more sense to onshore or pay given: 1) the instability of Trump's decisions, see Ukraine or Canada 2) you would have less economy of scale because you wouldn't sell any of your super expensive goods outside the USA 3) if the machines you need aren't produced in America they'd have tariffs too 4) the next president could make the tariffs more favorable. You also haven't touched unemployment (or lack thereof) yet.
(And by the way, if tariffs stay, brace for deflation due to waiting until after the election in 2028).
- Tariffs are not a lever, they distort risk tolerance.
- Tariffs are crude, they are like a huge hammer hitting everyone, including allies
- Tariffs cause loss of confidence and loss of credit
To (2):
- Blanket tariffs target allies; they're isolating us and we're creating blocks polarized to us and weaning themselves off our economic output.
- Tariffs only reduce dependency if there is internal capacity, of which there is none. We'll best case shift our dependency via third-party countries
- We're concentrating our risk on fewer countries where tariffs are lower
To (3):
- We're reducing our efficiency and increasing prices, job losses are coming, productivity will stagnate. We're reducing our agility and our headroom
- Historically, autarky has lead to stagnation.
The economic consensus against these tariffs is real. It's exceedingly likely the US will destroy its economy, alienate itself and isolate itself because of them :)
About (3): This will inoculate the economy against external supply chain shocks, e.g. war.
The lead time required to set up realistic domestic production will mostly exceed this government's term. Setting up brand new supply chains doesn't happen overnight, does it?
(1) Tariffs will not affect all commodities in the same class equally, creating a natural price advantage, even at the level of consumers. While not absolute autarky, demand will continue to shift to less externally-dependent goods, which has and will continue to reduce our liability.
(2) Ideally congress would codify the tariffs to prevent that. That said, it seems the first Trump term tariffs did induce production onshoring, despite that uncertainty.
What would it take to change your mind on these tariffs?
> What would it take to change your mind on these tariffs?
If there was a positive outcome? US citizens financially better off in 4 years than they are today?
I don't think most MAGA voters would see it as a win if US was slightly less dependent on imports, but they personally are considerably worse off financially, which seems the likely outcome.
> demand will continue to shift to less externally-dependent goods, which has and will continue to reduce our liability.
The cure for this type of wishful thinking is nothing else but reality itself. Still, it’s not the premise that’s wrong here, but the argument that the US society is capable to make this type of shift. It just isn’t gonna happen.
I don't believe you or share your optimism, but I also don't want to get into an argument about it. I think it's too late to ponder if this is overall good or bad... We'll all find out either way soon enough.
If tariffs will strengthen the economy while everyone else predicts disaster, you've discovered market insight worth billions. The Dow didn't just drop 2,200 points because investors are confused, it dropped because people with serious money and expertise believe these tariffs will damage the economy. If you're right and they're wrong, there's an obvious move: bet against them and get rich.
p.s. Trump did this before in 2018-2019, giving us some hard data about the economic effects of tariffs on modern america that are guiding the economic consensus.
In the long-term. Hence "innoculation"--a prick today to prevent a serious illness tomorrow.
In the grand scheme of things, the market movement we saw in response to these tariffs is dwarfed by the sustained market downturn throughout much of 2022. Fueled by persistent inflation concerns and the FED's aggressive interest rate hikes, the S&P 500 index shed approximately 25% from its peak in January 2022 to its low in October 2022, a far more significant and prolonged decline than a single day's reaction to tariff news.
We recovered from those. We will recover from the short-term effects of these tariffs as our economy begins to price in the risk of external dependency.
* National Security - we need to be able to make or trade for what we need in the case of war. Even non-tariff economists will give you this one but it can become a slippery slope. We need some capacity to make semiconductors, some steel/aluminum, pharmaceuticals, drones, etc.
* Tank the 10-year. If people pour into treasuries, the 10-year drops and we can refinance our debt a lot cheaper.
* Force a renegotiation of unfair trade agreements.
Weak arguments (IMO):
* bring back manufacturing jobs - even if we reshore some manufacturing, it'll be at the cost of many more other jobs and that manufacturing will be highly automated. No capital appetite exists to do this. No CEO wants to do this. We don't have the infrastructure or supply chains for this.
What is very difficult to defend is the implementation even if you agree with plan. No one outside the trump bubble can really defend the on-again-off-again, inconsistent communication, or board of imaginary numbers used for these. Some float "madman theory" as part of design on renegotiations but I don't think people will make deals with 'madmen' they can't trust and instead are much more likely to build coalitions against them.
> * bring back manufacturing jobs - even if we reshore some manufacturing, it'll be at the cost of many more other jobs and that manufacturing will be highly automated. No capital appetite exists to do this. No CEO wants to do this. We don't have the infrastructure or supply chains for this.
Isn't the market sell off exactly what oligarchs would want so they could sweep in and buy what's being sold off so their portfolios expand that much more. Ultimately, leaving less available for the 99%ers when the market rebounds leaving the oligarchs that much more in control.
We hedge our bets (hence the name hedge funds) so that in market downturns, we use the profits from these weird investments that hit the green without liquidating the typical stocks. We use that money to buy the dips on regular stocks, failing businesses, and cheap real estate. Then, the market rebounds, and we still have our SPX without taking losses. You only get richer once you hit approximately $20M net worth and understand this.
Institutional investors love recessions. At my trade desk firm in Chicago (CBOE) during Covid we were each making the firm like $300k/hour scalping retails with a 20% cut.
Hmm. Millenium and Citadel are down Q1. Many hedge funds are not at all hedged, in fact many (most?) are long only these days. And even then, the uncorrelation to markets is a bit tenuous.
But glad things are going well for you in your universe.
How is this too complicated? All of the oligarchs surrounding Trump knows that if they manipulate him to their advantage, he's not bright enough to know it. So, they realize how much he loves the beautiful word "tariff", and the nudge him even further. Voila! It's win-win
This seems epistemically dubious. If Trump decided his first act as president was to cut corporate taxes instead, and stocks rallied, I bet the same people are going to complain about how "this is exactly what oligarchs want". Short of a communist revolution, what wouldn't oligarchs want?
I feel like people haven't internalized that there may not be fair another presidential election. The SAFE Act is the most Orwellian bill that is highly likely to pass and would tremendously move things in Republican's favor
> I feel like people haven't internalized that there may not be fair another presidential election.
The degree of thumbing the scales has to outweigh unpopularity of the incumbent. High voter turnout will beat any attempts of deniable cheating. Which is why unpopular dictators end up imprisoning or disqualifying their opponents , and rather than subverting the voting process. America hasn't reached "desperate dictatorship" levels yet, nor will it be there in 4 years. Extrapolating from current events, congressional Republicans are barreling towards a midterm wipe-out.
Yeah, but the schadenfreude won't last, sadly. The coming recession is essentially inevitable at this point. Q2 earnings are going to be a disaster for everyone, expect economy-wide layoffs by autumn.
Shouldn’t we be looking at percentage changes? Naturally, there would be larger point changes as the total market cap of the entire market goes up over time
Exactly right. Otherwise we have to argue that 18 of the 20 worst days in economic history happened in the last 3 years, far surpassing the crashes of 1929 or 1987.
The article has both, but then we could also look at percentage change in a time span longer than a day or shorter. Those lists are arbitrary but Trump has added to this list two days in a row.
I'm hoping the lesson we learn is "do everything possible to maintain 3 separate but co-equal branches of government"
Tariffs are supposed to be imposed by congress, not the president. The president is using a loophole (declaring a national emergency) to give himself authority to bypass congress.
It shouldn't be possible for 1 branch of government to take such drastic measures unilaterally.
The fundamental problem is that political parties (and, in particular, a two-party system) render the existing constitutional checks and balances useless. As long as you have political parties with members spanning all three branches, they are not truly separate branches.
We lived in the illusion that this wasn't the case for nearly 250 years because most of the time, elected officials have largely acted in good faith. However, the Republican party (correctly) determined that when it comes to wielding power most effectively, it's in their best interest to protect its own members in all branches rather than members in each branch thinking of themselves as independent of (or even in conflict with) the other two branches as the constitution envisions.
I'm willing to believe this administration is acting in good faith, but two things seem to contradict that, although maybe I'm wrong:
1. Why didn't they include services exported by the US in their 'tariff chart' ? The EU for example, imports a lot more US (tech amongst others) services than they export to the US. It seems disingenous
2. Why couldn't this tariff strategy be implemented in a more calculated, predictable, slow way to give everyone time to adjust, at home and abroad. What's to gain from doing it this way over the one I mentioned ?
Yeah... I would have thought that fear of Russia was way more ingrained into the American psyche. It's amazing how much they're basically bowing down to Putin
It’s beyond amazing; it’s the tell that gives the whole grift away. Conservative media bought and paid for by foreign influence money. They have sane-washed, explained away, normalized so much egregious behavior that would have ended any 10 other politicians.
> Why couldn't this tariff strategy be implemented in a more calculated, predictable, slow way to give everyone time to adjust, at home and abroad. What's to gain from doing it this way over the one I mentioned ?
To me, the more concerning detail is that they don’t have any messaging about what their strategy is, except what appears to be guessing from various members of the administration — often which is mutually exclusive with other messaging.
The real risk of all that is people are going to sit on the cash they have, unwilling to make purchases when they can’t see the risk in their future.
My wife and I want to install new flooring, but that’s off the table for us right now, until we have a better idea where this is going.
^ those decisions are disastrous for the economy en masse
yep. I liquidated my TFSA ( tax free savings account in Canada ) 2 weeks ago. 90k. Invested in risk-free 90 days GICs instead. No way I would have watched it lose 10-20% of its value in 2 weeks
I have a guess but not a solid one. The way they determined the rates on these tariffs makes no sense at all. I wish they would have just explained it instead of pushing back and insisting it was based on real existing tariff rates. They really dropped the ball on this implementation.
If I was to hazard that guess, they don't care about services, services are already a dominant US product, no one can beat us. Manufacturing is where we are weak so they went after that. They want manufacturing to come back to the US in case of a war with China over Taiwan. They also don't want counter tariffs on services as again that's our major export. What's really interesting and I could be wrong here is I dont think anyone else has actually hit the US with tariffs on those same services. Its a very calm trade war so far. But its early
See, even the way you explained it is miles above what they said. Claiming the trade balance is unjust but leaving out a major component reeks of dishonesty. How can anyone trust them ?
I don't trust them at all, I just needed them to beat the alternative.
I expect to like 60% of his policies. He has been delivering in spades for me on those. The rest is a dice game.
"your ability to ignore harm to people for your own profit"
Hey friend, not really sure why you are being passive aggressive with me?
I'm not ignoring harm to people, my wife's 401k is red. I very much dislike the panic that people are experiencing right now watching their retirement plunge.
"I don't trust them at all, I just needed them to beat the alternative"
Did you think this meant regarding his economic policies as in make money from them? I did not vote for him on the economy at all. If I see a way to hedge against what's coming, of course I will do that. Would be foolish not to.
By alternative I meant the other option for president.
If you are angry at me for that, then so be it but you don't know me, we can be civil. You are free to just not comment.
You seem like a level headed dood and we seem to agree that their current strategy is incomprehensible apparently to both supporters and non-supporters alike.
You mentioned he delivered/will deliver on roughly 60% of the things you were looking for.
Do you draw the line somewhere and say, even if I get 60% of things I want, the other 40% could be/are a real dealbreaker ?
It's a very common thing for politicians to deliver on some things that are inconsequential while pursuing their own private agenda for other things.
In my home country there's a saying about politicians: He stole, but he also delivered. The social contract is that as long as the politician does 10% common good, (usually highly visible, populist, short term stuff) he can pursue his own interests be they short term, or long term, even if they are detrimental to the society as a whole - as long as he delivered some short term results.
I voted against Trump twice before I voted for him this time and switched full republican. First time ever voting republican, always been a democrat.
"Do you draw the line somewhere and say, even if I get 60% of things I want, the other 40% could be/are a real dealbreaker"
Absolutely as soon as we fall into secret police and citizens being taken in the night and put in camps or falling out of windows, that's the line for me. He has already come close to it.
Censorship is another issue for me but that is not really his thing.
I am quite angry at the insanity with the El Salvador prisons and the man "mistakenly" taken. That's something I am watching. I did vote for him on the border though and removing people that are here illegally. So I have to temper that with the knowledge that the process is not a nice one and there is going to be violence and mistakes will be made. That is the stark reality of calling for enforcement of laws though, law is only law when backed by state sanctioned violence.
"He stole, but he also delivered" I like this and I think this aligns with my outlook. I know Trump is going to make moves to enrich himself, and I am ok with it as long as its not blatant and as long as it causes little collateral damage. I don't think this is one of those things. I think he genuinely believes that doing this with the tariffs is a good thing.
I mentioned it in another of my comments if you want to find it, on how the crashing stock market allows the government to refinance $10 trillion for lower rates. I think that's the goal here. That and rebuilding manufacturing and punishing China. I have no idea how this plays out though. Its possible he doesn't either.
Trump is a lot of things but he is not an idiot. He could not still be here if he was, he gets away with things that would sink anyone else. On top of that he has Musk and that man is also a lot of things but he is one of if not the smartest most driven man on the planet.
Trump is not a nice man, I know that but it will take a brutal man to carry out the social policies I voted for and not collapse under the constant criticism. I knew from the beginning it was a deal with the devil.
So I will watch how it plays out.
The other side was just so much more dangerous long term in my opinion. I wont go into my reasoning, this is not the place for that and it's not relevant to the conversation. Just know I am very comfortable with my vote on those grounds.
So I will remain cautiously optimistic that there is a plan and rational. Trump is Trump but there are some very capable people on the economics and finance side of the house.
At this point in the game I would vote the same way again without hesitation. It's only been 100 days though.
With all due respect, and I understand that you probably mean well, but did 2 different people write this?
You're drawing the line at things that are already happening. Legal citizens are being put into literal camps (the fact it's a modern warehouse or a Salvadorian prison doesn't make it less of a camp) solely based on their appearance.
He's blatantly making moves to enrich himself (see meme coins, tariff back and forward, etc), and unless you live under a rock, the collateral damage should be clear to you now. He's constantly lying when he speaks and I'm sure an educated person as yourself can see that.
You say the other side was more dangerous long in the long term, and although I don't like either side either, it was clear which side was still progress.
You somehow got into a mental state where you're able to trust someone to do things in good will and at the same time say that he's "not a nice man".
You support what is being done, and at the same time you say you don't understand it and you admit it's possible he doesn't either.
Please, take a second to think why billionaires of all people, would be interested in doing anything that doesn't benefit them. They're billionaires because they spent their life doing just that, they don't care about you and I.
You're clinging to the hope that maybe what they're doing somehow benefits you, but you're not even sure how that would happen.
Well, I was attempting to give you the benefit of the doubt by assuming you weren't voting for his frankly sadistic and idiotic attempts to foster hatred of minorities as a scapegoat for his and others like him, decades of mismanagement.
Yeah, turns out running the largest economy on the planet is even more complicated than setting the clock on a VCR. Who would have thought. At least they tried.
oh I think they very much know what they are doing from a directional sense. All of this is intentional. I just think they are VERY bad at the details.
He had a choice of hard landing vs soft landing. He chose hard landing — looking at history, large scale war follows failed economic war and alliances are arming up in anticipation. I hope Hegseth is ready.
Good news is most of his reserves come from Kentucky, so he won't have to worry about getting hit with tariffs. Oh, you're talking about ready for the military?
Which is to say: the market hasn't yet fully priced in the effects of the tariffs. It will continue to fall until people have accepted that the tariffs are here to stay.
After that it could level off. Or continue to fall, if there are knock-on effects that haven't yet been priced in.
(Or, I suppose, a bunch of manufacturing could spring up in the US, superior to the rest of the world, giving us whole new export markets and pushing the Dow into six figures. Let's find out!)
> (Or, I suppose, a bunch of manufacturing could spring up in the US, superior to the rest of the world, giving us whole new export markets and pushing the Dow into six figures. Let's find out!)
Didn't we find out like a century ago with the Smooth-Hawley tariffs? Do we really have to test this again, and now in the sloppiest most haphazard way?
Vietnam already approached this admin hat in hand. Remember they are all politicians and they will do what it takes to remain in power. Having a global financial meltdown is a bluff. Some countries will play the game (smaller ones) and some will not (China).
So 1 country down, 193 to go? Threatening the entire world with a financial meltdown is not a bluff, or in any way a reasonable thing to do. It's tantamount to a declaration of war, and we'd get what we deserve if the rest of the world treated it that way.
Either way, the stature and role of the US internationally has been forever altered, and not positively.
China is not playing ball, but equally large India is working on announcing a Bilateral Trade Agreement (a FTA in all but name) with the US by Aug-Oct.
To put it impolitely, bullshit. Zero rational analysis comes to this conclusion.
Trump began this idiocy by attacking Canada and Mexico, the very countries he triumphantly signed his trade agreement with just five years ago. He lied -- that's what he does -- about a made up Fentanyl emergency, but it's clear the guy loves tariffs (he's been going on about this for years, and still people try to pretend that isn't what this is about...amazingly everyone just assumes that everything out of his mouth is a lie). Outside of oil and gas the US has (or rather had) a massive trade surplus with Canada, but oh well that's a thing of the past now and will never return.
Then he attacked everyone else.
He did the same thing in term one. He could easily have gotten everyone onboard with strategies to contain or slow China, but instead he pushed everyone else away. He had adults in the room containing his profound sabotage of the US the first time, but this time he's going to speedrun the country to dissolution.
I get that the Trump faithful are desperately trying to do the 4D chess thing now. It will never work. The clown has no idea what he is doing, and has build such a cult no one can tell him how profoundly stupid he is. His treasury secretary is likely to quit in days.
While I have no doubt that Vietnam went calling, facing devastating tariffs, the "hat in hand" bit is uproarious.
What do you think Vietnam will offer?
It has negligible tariffs on US goods. It exports a lot to the US because it has very cheap labour, because it's a poor country. It is in no position to buy more from the US. There is no universe where it's going to even remotely close that trade deficit.
So what, in your rose-coloured view, do you think they are offering up?
I mean, everyone realizes this is a hilarious cope regardless. Trump declared, with utter absolutism, that the tariffs are not going anywhere and there is no way to negotiate them. That his "ERS" would net trillions and balance the budget. But wait...now it was really a masterful negotiating strategy?
I mean, Trump could have said "here's the tariffs we have estimate based upon a current analysis", and if isn't remediated in a month we'll stagger in "reciprocal" tariffs. That isn't what he did. Instead he did the stupidest thing imaginable, which is what we see today. So yes, when he has to backtrack because it was the most catastrophic self-destruction in history, feel good that a super poor country came "hat in hand".
The deal he is going to offer to countries like Vietnam is to be part of a "club" of countries with special relationship with the US, and that will include accepting to tie up their currencies to the dollar and buying exclusively US weapons for their defense.
They seem absurd to people using their common sense. Trump is not normal, this is his 5th grade understanding of how tariffs work. All these people saying "we should live through the pain". But why? This is inflicted not some outside market crash, it is deliberate destruction of the economy, I can't figure out any other reason that because of Russian kompromat on Trump.
Create a subsidiary in Toronto, Canada that owns a boat and rent a mailbox in Rochester NY?
Lots of jokes flying around about how the new business opportunity is smuggling. Sure it was booze back in the day, but hey meeting market demand is a thing.
For one example, you'll pay tariffs on everything you import to do the manufacturing, from lithography machines to FOUPs. Equipment costs are the majority of wafer cost in a modern fab, so this is pretty significant.
Generally the BOM cost of most hardware is much smaller than the labor cost of assembly. That's why company shipped their semiconductors to low labor cost countries and re-imported finished goods.
That said, if the US does enter a depression then the cost of labor in the US will plummet as people compete for jobs which may? change that ratio in favor of manufacturing in the US. That is rumored to be the "big secret" behind these stupid moves but frankly the folks who believe that are not seeing what I'm seeing I guess.
If the cost of labor plummets I wonder if it will accelerate the timeline for AI, automation, and robotics.
I gave this a shot at home a month ago by cutting my kids off from toys online and getting them a 3D printer. They have already printed more toys than the cost of the printer. The only problem is that the printer was manufactured in China.
I don't see that happening. I reason to it this way;
In 2024, $15 BILLION dollars was invested in AI startups, and a record $250 BILLION dollars by established companies (nVidia/Microsoft/Google/Facebook/Apple)
I don't believe that AI making any meaningful progress on the "timeline" will occur just because you throw even more money at it.
Define go back to normal. Will it go up from where we are? Sure. Will it immediately return to its former highs, unlikely, the US government has now proven to be a lot more unpredictable and risky than the previous prices assumed. Will it eventually inch its way back to the highs, probably.
The United States has burned trust and credibility that can never be recovered. Its collapse into a pariah state like North Korea or Russia, cut off from diplomatic ties and trade and left by most of the world to decompose into an irrelevant husk is inevitable. The market will adapt, likely after years of global depression, with China and Europe competing to become the new global hegemon. The normal that existed prior to Trump, like all those jobs he promised, is never coming back.
If you see a Trump supporter, be sure to thank them.
This is a bit of hyperbole. Market will normalize, the most extreme case which even the biggest critics of Trump argue, will be recession. Even that's a probability and not a certainty. How are you predicting Depression (global no less)?
"Plus, I'm gonna declare that we're already in a secret war with a gang from Venezuela, and use that to kidnap latino-looking people off the streets, and if we find non-citizens--even if they're legally allowed to be here--I'll send them a gulag I rented from the dictator of El Salvador... So don't be mean to me."
"Oh, and you know that funding that Congresse passed a law to use somewhere in your state? You'll need to do a few things for me first..."
My imagined normal government advisor-sort who's just (figuratively) awoken from a 20-year coma and is attempting to approach this situation, initially, as a normal interaction with a normal President is the one drinking and hitting the crack pipe by the end. I tried not to over-burden it with formatting, but may have gone too light and made that unclear.
You missed the really brilliant part: using tariffs to force unskilled and low-skilled jobs back onshore while simultaneously mass-deporting most of the unskilled labour force.
Can someone explain how tariffs aren’t both a tax and inflation, all rolled in to one? These are two of the most toxic words in politics and yet those most allergic to them are relatively quiet.
The uncertainty of what will happen 2-3 weeks or 2-3 months (or 2-3 years) from now is causing a lot of people to react very negatively to this, regardless of their personal politics.
No this is because of trump and a few people he picked to agree with him, mostly from the failed Heritage Foundation. They only got a fraction of their project 2025 goals finished by trump so now they want to punish us all with suicidal economic action because they have a cache of money and gold and can weather it. Trump could have been pro business, kill of regulatory state, reduce some of the size of military obligations and government entitlement programs. Instead he pushed the economy off a ledge.
Does anybody want this? Increasing costs and financial chaos aren't good for anyone. Congress needs to do their job and fix this: revoke (or amend) the "emergency" economic powers that allowed Trump to do this in the first place. I realize that is unlikely to happen.
Yes they are incredibly popular amongst cartels and shady characters with import/export business, as Trump just handed them the largest geo-arbitrage payday of their lives.
Trump and the Republican Party have forcibly assumed control of the federal government, dismantled it, voided every function of the Constitution and replaced people critical to the functioning of global affairs with morons and lunatics. The economic and social and international underpinnings of the planet have been detonated on purpose so the remaining pieces can be reordered for their exclusive benefit.
This is just the beginning, and I can’t wait to see even more threads here trying to rationalize why this is all Good, Actually before a thread discussing the end of Pax Americana gets killfiled by an Altman acolyte.
What's especially interesting is that the market already had tariffs priced in, yet what Trump announced was SO bad that the markets have dropped another 10%...
My European friends and family are amused... China is going to take the US' place in the world economy, Europe will become more self-sufficient and innovative, the US turning mercantilist will simply reduce their influence in the global marketplace... There's not much the world truly NEEDS from the US... Stuff like semiconductors were outsourced long ago, ASML and TSMC are the most important companies in that equation, neither are American.
I didn't understand put options until this month. Today I bought puts w/ 1 or 2-week expirations on virtually all of the top 20 companies (by size) that were at their 52-week high. Didn't matter that I never had heard of some of them (AWK is a water company?), made gains on everything. My only mistake was not betting against Phillip Morris, thinking that people will probably want to vape/smoke even more during this crisis, but nope, they fell 7% too.
Obviously it can't be that easy, but seems like the market still thinks Trump might just do a complete 180? I guess he's done so multiple times the last two months, but those threats/alarms seem like dry runs from which he's crafted his current policy.
It can be that easy, but you are gambling. If the market turns for whatever reason, then all your positions go near to zero.
They’re options, they can go all the way to zero, not “near to zero” (which is what happens to the majority of options contracts regardless). That said, with options you leverage a lot more shares than buying outright, so the risk can be smaller. And if OP has any sense, they’ve unloaded those positions already and made some serious bank.
only reason I wrote near to zero, is because if I left it at zero, someone else would have chimed in about something pedantic about how there is still theta to decay
specifically because OP bought 1 to 2 week expirations, so a market reversal at the other end of the weekend won't set them to zero
The wealthier you are, the more flexibility you have in your purchasing decisions as well. It’s easier to accelerate or delay a big purchase to save 30% when it’s not something you need to live, or can’t afford to jump on a purchase last minute.
First of all, I don’t like Trump. I’ve voted blue all my life. Having said that, Trump is the only one willing to play ball with the Chinese. And the US national debt is not sustainable at this level. Something has to break in order to bring down servicing costs. I am not saying this is the right way to do all this. Far from it. But we do have a huge debt problem in this country and Chinese corps do not play by the rules (ie IP is nonexistent).
This could go wrong in so many ways and eventually undermine US strength while boosting Chinese global influence even further.
He’s (rather Bessent) literally crashing the economy in order to force the Fed to lower the rates. To be fair, a soft landing was a pipe dream. Bessent has a long history of talking about this type of reckoning.
"Setting the building on fire was and in turn the entire blockthe only way to address the creaky floors". There's no Trump masterplan here (or anywhere else) than the sanewashing of his bs by his fanbois.
> Trump is the only one willing to play ball with the Chinese
Biden was also willing to do so. For example, he put a 100% tariff on electric cars.
> But we do have a huge debt problem in this country.
Which is largely Trump's fault. He increased the debt by $8T versus Biden's $5T, and people costing his promises on the campaign trail concluded that his promises would increase the debt at twice the rate that Harris's promises would have.
I agree with you. It’s definitely a big portion of the debt. However, Fed rate at current level is not sustainable. You can do the math and it simply would not work in the very near future. So you either let that play out or do something stupid like this. Not saying I have a better solution. No one does.
Yeah I went 100% to cash about 5 days ago. Jobs report came in ok, I think Trump is enjoying the side effect of forcing the fed to lower rates to stave off recession. On the other hand the market is super emotional right now and not making sense. I’m out until the dust settles. I have to admit, it’s nice to see Wall Street twist in the wind when they’ve been running the show for so long.
Remember the financial crisis when Bush (R) wrote them a $800B check and Obama (D) delivered it hat in hand? Suck it wall st.
Meh, I shorted the Dow a couple months ago, I was early but its paying off now in gangbusters. He has been shouting what he was going to do for months now, free money
China retaliates with Tarries hmmm dont Family Dollar Dollar General dont they have a lot of Chinese stuff? Well guess who if frequenting those stores more and more As inflation hits harder, middle-class shoppers gravitate to dollar stores
Dollar stores have traditionally served low-income and rural shoppers who have few options to stock up on what they need — but the pandemic is changing that. https://www.nbcnews.com/business/business-news/inflation-hit...
I have very little understanding of geopolitics or economics, so these tariffs don't make sense to me, and they don't seem to make sense to most people.
What’s the best steelman argument for them?
I’ve read a bit of Peter Navarro and others who support this line of thinking, but I’m trying to understand: is there a coherent endgame here that benefits the country long-term, or is this just short-term political theater dressed up as strategy?
What would the best possible version of this policy look like if it were smart?
The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local, and have become increasingly unaffordable in recent decades even as economic numbers have gone up.
The question that really matters to most people is, "What will these tariffs do to the prices of these things that actually matter?" And that it actually rather hard to predict.
The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear. It may be that global trade makes certain classes of society very very wealthy, while not necessarily being such a positive for the middle class.
It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers. The economists who have told us since Reagan that this is inefficient and stupid might be ... wrong.
> The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
> It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers. The economists who have told us since Reagan that this is inefficient and stupid might be ... wrong.
You are quite wrong there with all of those three points.
#1. a lot of food items come from Mexico, South America, Asia also. Housing material from Canada and China. A lot of meds come from Asia especially India. Majority of Stationary is manufactured in China as well.
#2. Russia is struggling with economy. But remember it has a lot of help from China, Iran, N Korea, and India. That offset a lot of sanctions. Europe is still buying gas from them.
#3. I’ve to remind you this - China exports in trillions.
#1. Total US food imports are about $200B. That's about 10% of US household spending on food, measured by supermarket plus restaurant sales ($800B + $1T).
#2. It's hard to know what's going on in Russia.
#3. High exports don't disprove GP's claim about "state economic planning and market barriers". In fact, they prove the success of those policies and help China maintain a $1T trade surplus, the very opposite of the US's situation.
One thing to note when comparing imports to spending. Import numbers are based on the commercial invoice value (i.e., how much it cost to produce) while spending is based on the sale price. So it's an...apples and oranges comparison. But I agree with the broader point that a lot of what we eat is produced here (especially meat).
>One thing to note when comparing imports to spending. Import numbers are based on the commercial invoice value (i.e., how much it cost to produce) while spending is based on the sale price. So it's an...apples and oranges comparison.
The context of this is the impact of tariffs on households' budget, and in that context, invoice value is fine, because that's the value on which tariffs are applied. 30% tariffs don't mean all foods go up 30%, it means it goes up by 6% (20% of 30%).
Why would you include restaurants in household food spending rather than something like entertainment?
About 25-33% of resturant sales are the cost of food. So you can break out the total spent on food pretty easily.
> That's about 10% of US household spending on food
Isn't ~10% spending on food like a historical best of any country ever?
I'm confused what this means? I think OP meant that 10% of the _spending on food_ is imported, so 90% of the household spending on food is from domestic markets.
> were also the economists who claimed that sanctions would destroy the Russian economy.
This is _very much_ up for debate. It's been a couple of years since Russia went completely dark on publishing key numbers on their economy. [This was three years ago.](https://www.youtube.com/watch?v=ZRgS6gpiMX0). They had a large war chest ready before they went to war (part of which has been frozen in the west), and there are a lot of signs that they are on their last stretch before things go really bad for them.
Predicting _when_ things go bad is very difficult, so I do not hold that against said economists. The most telling sign is that the first thing the Russians ask for is for sanctions relief before any peace negotiations.
>The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
They didn’t have the opposite effect. They were ineffective in general, because Russia has large trade partners not aligned with the West and it has been preparing for it, optimizing the government apparatus for 20 years (financial bloc for 30 years). There are plenty of A-players (head of central bank, minister of finance etc), working industrial policy and digitalized processes, and they can make decisions very fast both politically and bureaucratically.
Prices will very likely go up for products that are not 100% local. Some resources for end products are currently mostly imported. The new tarifs also affect resources and unfinished products.
New trade routes and spinning up local production will take time (likely longer five years) so the consumer will pay a price. Question is how high it will be.
To purely imported goods (a lot of tech for example): cost will go up substantially.
To Russia: They are currently in a war economy. You will likely not really see a collapse coming until it is to late. Banks have been forced to give far to cheap loans to the arms industry complex which are unlikely to ever pay them back. This partially masks the true cost of the war.
Let's so how this proceeds.
Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
If an investment is profitable with 30% tariffs, but not at 10% tariffs, the risk of changing policy means your profitable investment has a risk of being unprofitable, and thus you are less likely to invest in it.
The current administration does not understand that. I think of American mask producers as an example of how you cloud get really screwed
> Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
That seems backwards. A trade deficit (more goods coming into the country) should be balanced by a capital outflow (money leaving the country). We've sustained that for decades by printing more money and sending it around the world.
Some people think that's a good deal, because we get real stuff in exchange for money we create for nothing. But what will have left when other countries no longer want our money?
Edit: As the comment below points out, I should technically ask what happens when they no longer want U.S. government debt?
Money in this context is just a representation of value. You presume the money for foreign goods is leaving the USA when we import the goods, but that is actually not necessarily the case.
Make no mistake, these countries are getting something in return for the extra goods and services they give to us. It is not for free. One of the big things trade to China to make up this deficit is an investment in the US government (treasury notes) or assets. That is, they are taking the dollars they get and then parking it in the US as investment . The deficit is they're choosing us to invest in rather than themselves!
>The U.S. trade balance has been in a deficit position since the 1970s. This means that the total value of imported goods has been greater than the total value of exported goods. This means the U.S. is a “debtor” nation, running a merchandise trade deficit. However, the merchandise trade deficit refers only to imports and exports of goods and services. It shows that imports are greater than exports, hence the “deficit.” But, think about it for a minute, why does the world keep giving us goods, without getting goods from us in return? Is this a good deal or what? Well, clearly, this can’t be the whole story.
>What is happening is that the people from whom we buy goods abroad are taking our dollars investing in the U.S. economy. They may buy U.S. government debt (securities issued by the U.S. government to finance past federal budget deficits) or other assets in the U.S. For example, they may invest in U.S. companies.
https://www.csun.edu/sites/default/files/macro10_0.pdf
Trump is ha-ha-only-serious joking about a third term and has said that, if people voted for him, they'd never have to vote again. So... in case of Emperor Trump, the tariffs wouldn't go away. I wonder if somebody is already working out how to tell "the economy" about that without being too obvious about the seriousness of his third term plan.
Biden kept Trump’s first term tariffs, so there is no guarantee they will go away.
And many other countries, e.g. Canada, won’t just make up with the US after Trump is gone.
> The main issue I see is that in 3.5 or possible 1.5 years, a new president ( or laws passed through congress ) will just vacate all Trump executive orders, tariffs in included. So that $100 million you invested in a new factory that is 3/4 built? Sorry, tariffs are gone and now you are out $100 mil. Why would any corp assume that risk?
If I were to be as generous as possible, I might say that's why Trump is being so chaotic with the tariffs? If you turn everyone against us and no one is willing to trade with us, it may force people's hand to build locally and then 4 years from now, there's still no appetite to resume our normal trade patterns.
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
It is somewhat unclear to me that sanctions had the opposite effect to destroying Russian economy.
Does that mean it is doing great? I don't think so.
> The things that dominate middle class budgets: food [...] have become increasingly unaffordable in recent decades
I tried finding some number to corroborate your claims.
The proportion of food in the American budget has decreased from ~17% to ~13% between the 60's and now. In fact, it has decreased a lot for "at home food" and increased slightly for "dining out food"[1]. Food seems cheaper than ever - on average. The current price of a calorie sufficient diet is now roughly $0.44/day in the US [2] that sounds very low. Between the 60's and today; the average daily supply of calories per person has increased from ~3000 kcal to ~3800 kcal [3]. People eat more than ever - on average.
[1] https://www.ers.usda.gov/data-products/chart-gallery/chart-d... [2] https://ourworldindata.org/grapher/cost-calorie-sufficient-d... [3] https://ourworldindata.org/grapher/daily-per-capita-caloric-...
I really wanna believe you, but aren't you just looking at the past with rose tainted glasses. And if you are young; aren't you making up a past that doesn't even exist ?
Over the period since the 1960s, look at education, medicine, housing, not food.
For food prices, look at the most recent 5-year timescale, where price increases are reported to be on the order of 30% for American consumers. [1]
[1] https://www.nerdwallet.com/article/finance/price-of-food
Yes, that's how proportion works; if thighs like food take a smaller portion of spending, some other things will take a bigger share.
GP comment is cited food as the first item; and decades (not 5 year) as the reference timeframe, so I focused on that. I am sure that by cherry picking both items and timeframe (look at food but only over 5 year; education but only since the 60's; telecommunication but only since the price hike of last week) you can paint a different story, but that's not the point here.
The average inflation-adjusted annual tuition for a 4-year degree has gone from $2843 to $10,892 between 1969 and 2023 in 2023-dollars. [1]
Healthcare spending per capita has gone from $2,151 to $14,570 in the same period in 2023-dollars. [2]
The inflation-adjusted home price index has more than doubled over that period. [3]
Real wages have remained fairly stagnant over these same decades. [4]
[1] https://educationdata.org/average-cost-of-college-by-year
[2] https://www.healthsystemtracker.org/chart-collection/u-s-spe...
[3] https://cdn-0.inflationdata.com/articles/wp-content/uploads/...
[4] https://www.epi.org/publication/charting-wage-stagnation/
Those things that are highly local have been dominating middle class budgets because foreign stuff like clothes has gotten so cheap. That's a good thing -- if you spend less money on some things you have more money for others. If you make the foreign stuff expensive, the local stuff will less dominate budgets as they destroy those budgets.
And labor shifts from activities where we have comparative advantage (highly skilled labor) to things where we have less comparative advantage (low skilled labor).
So now you have a lower skill low pay job and paying more than before.
I cannot make sense of it other than as a few others posted here that Trump is preparing for war and wants to soften the blow of the interruption to international trade by making sure we are more prepared for isolation.
> The economists who claim that tariffs will harm normal Americans were also the economists who claimed that sanctions would destroy the Russian economy.
Nobody can predict the future, least of all economists. Having said that I think economists were not wrong on the headwinds that Russian economy would face. They just failed to account for extraordinary measures that dictatorship could take.
And even with said measures there had been a steady deterioration of the economic situation... The real question is what is the state of their mineral (cough gold cough) production rates and reserves. They might just be able to buy their way out of the current situationship.
Food is not entirely local. CA gets majority of fruits from Mexico, Peru, Chile etc. Olive, Sunflower, and other oils are imported. Many spices are imported. Lumber tariffs will impact housing and repairs. Any thing with semi-conductors will be expensive: routers, modems, tablets, phones.
Middle class expenses may arise around 5-10% at the very least.
To add some perspective, the most expensive component of modern farming is fetilizers. Things such as Nitrogen, Phosphate and Potash.
America depends on other countries to supply some part of these materials (like Potash from Canada).
I'm not sure the assertion "food is entirely local" is entirely sound, when we consider the supply chain.
Most of our potash comes from Canada, but surely the US is self-sufficient in nitrogen fertilizer (since it is made from natural gas, which is really cheap in the US) and ISTR it's being close to being self-sufficient in phosphate, too.
Maybe. But as an OSS developer, I find it cozy that even domestic food production has a certain global component. I like the image of a global community helping each other, just as we do in software projects.
I mean, if American companies had rejected Linux/Ruby/Lua because "they are foreign goods, born in Finland/Japan/Brazil", were it better?
Do US farms spend more on fertilizer than they do on fuel for tractors and other machines?
I think this is mostly accurate:
> The things that dominate middle class budgets: food, housing, medicine, education, are surprisingly local, and have become increasingly unaffordable in recent decades even as economic numbers have gone up.
Really you have to split goods into two categories, stuff that has no geographic ties(alot of these goods manufacture has been outsourced to asian countries and low wage countries) and stuff that is tied to a location, think Mexican tequila or Swiss watches.
The first category is more tied to the middle class and I could alot of the manufacturing coming back to the US due to cost. The second category cannot be made in the US and buyers will bear the brunt of the cost runups.
The stuff in the first category that is going to be hit hard with tariffs is by and large big ticket items like cars and electronics, and conversely the really cheap plastic junk that is ubiquitous at dollar stores. I think the days of 50 inch flat screens for a few hundred dollars are gone. In addition cars sold in the US(US made brands and not foreign companies) have alot of their supply chain in either mexico and canada but the middle class is not buying alot of newer cars - average age of a car is reaching the longest ever due to cars jumping in cost the past few years.
I see this really hurting high income americans alot more, new cars especially European luxury are going to be quite expensive, alot of expensive wines and liquor will jump in price, jewelry and luxury handbags will also be alot more expensive.
> also the economists who claimed that sanctions would destroy the Russian economy. They had the opposite effect, for reasons that still remain somewhat unclear.
On what timeframe did they say that?
There’s a good argument they ARE working to that end, just not as fast as policymakers would like. See the RU economic weakness in September.
One can make a decent argument that the sanctions were insufficient as Russia is effectively a petrostate (now with industry on a war footing) and the sanctions largely avoided RU oil/gas. Also China took up the slack by buying whatever Russia was willing to sell, and in Russian currency which extended their runway.
Lastly, Russia predicted the sanctions as a response to their Feb 2022 invasion because similar things happened before, so they planned ahead and made themselves resilient to The US dollar financial system locking them out (the same way they made their internet resilient to foreign sovereigns potentially cutting them off.
well for the Russia sanctions, initially it did have an impact but then both people and corporations found workarounds...
for example, blocking swift does not make money transactions impossible, makes it difficult for the layman in the first a few times.
nowadays, everyone uses crypto/usdt for the transactions and realizing it is actually cheaper and faster than the swift.
for the europe, they still buy the gas even at a higher price. grounding berlin to moscow flights only benefits turkish airlines and qatar airlines as now they profit from being monopolies (connections through istanbul and dubai)
the reality is that people adapt. i am not a trump supporter, i do not agree with the tariffs but that's what trump is trying to do; force people to adapt local goods
> They had the opposite effect, for reasons that still remain somewhat unclear.
The US deindustrialized since the 70s. Russia has had 100 years to practice being an independent, self-reliant, sanctioned country. The reasons are obvious.
>It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers
How is China's own economy doing these days?
With all respect, that's not a steelman argument in favor of tarrifs. It's a stack of whatabountism fallacies. "Tariffs are Good" does not follow from "People who say Tariffs are Bad were wrong about other things". Everyone is wrong about lots of stuff. The world is hard to predict.
You don't shoot a hole in the bottom of your life raft because the person pleading with you not to was wrong about how many people it could hold.
> They had the opposite effect, for reasons that still remain somewhat unclear.
It's clear that Russia redirected most of its exports. Just look at how much oil India is now buying from Russia — before the war, it was around 5%, and now it's over 40%. They rerouted a large part of their trade, created shadow fleets, and many EU exports still end up in Russia, but through proxy countries like Kazakhstan. (You can see this in the trade statistics between the EU and former Soviet bloc countries before and after the war.)
But the situation here is entirely different. The US has placed tariffs on much of Asia, the EU, and several other regions. There's nowhere for the US to reroute trade in a way that allows it to import the same goods at the same or lower prices.
The US might reroute them through Sinaloa, and then Sonora or Chihuaha...
India is having Russia keep the rubles it gets in India and buy other stuff with it
> They had the opposite effect
The Ruble was on it's way to complete devaluation before Trump propped up the Russian economy by signaling he's willing to give them everything in exchange for nothing.
But it's also true that the west never really fully committed to the sanctions, the fact that you still had Russian oligrarchs traveling around Europe with relative ease was a pretty strong tell.
It wouldn't be this steep if he wasn't trying as hard as he can to follow through on his promises of "his own brand" of prosperity, the only way he has ever known how, unfortunately that's when massive losses have always proven the most likely outcome.
Anyone else with a proper business background would have been able to negotiate international trade agreements more favorably, including overall increases in tariffs, and if there was going to be unavoidable downward pressure it would certainly be much less than this at this point.
Plus someone with actual useful deal-making experience would have been able to maintain stability on the way to a noticeable if not shocking upturn by now, there was a lot of low-hanging fruit left over after Biden.
Why not do something with that, rather than take it out on the American people? Just because all of them didn't vote for Trump, he can't bring himself to care about the country as a whole, or average citizens hardly at all. Much less legal residents.
If the only way to "sink the liberals" makes almost everyone else go down with the ship, so be it.
>It is also notable that Chinese competitiveness has only increased as they have engaged in decades of state economic planning and market barriers.
Meanwhile in California, the high-speed rail project is not going so well. There's some serious problems in the U.S bureaucracy, especially blue states. A recent extension of a rail line in San Francisco came in at $1 billion per mile. There are huge amounts of people dependent on the government running inefficiently, vastly overpaying and taking as long as possible to complete work. As we've seen with DOGE, as soon as someone starts to dig into all that, the whole establishment dependent on that inefficiency screams bloody murder. They seem to be adept at developing flywheels where the more money they spend, the worse the problems get, and that justifies spending more money. The $300 million a year homeless budget in San Francisco is a great example of that tendency. Somehow, that needs to get fixed if we want to compete at a world standard level.
During a world war, you cannot trade with your international “enemies.”
This level of tariffs is to discourage international dependency and trade as a prelude to war. Look who does not have a tariff.
This is not good policy - leading economists have written about this [1] as “…perhaps the worst economic own goal I have seen in my lifetime.”
[1] https://www.thefp.com/p/tyler-cowen-liberation-day-was-even
This is both the most rational and most depressing take I have seen yet.
As I understand it, there is a trade embargo on Russia, so there's no trade to put a tariff on.
You’d be wrong. The US imported 3.5 billion dollars of goods from Russia in 2024, and exported 500 million dollars of goods.
https://ustr.gov/countries-regions/europe-middle-east/russia...
And recent trade data for context.
In 2018, U.S. goods imports from Russia totaled $20.9 billion, up 22.4 percent ($3.8 billion) from 2017, but down 22.1 percent from ten years ago.
I've seen some recently manufactured Russian plywood for sale in the US that would disprove that claim.
There is, and it’s much more than an unknown penguin island.
This is a great question. For me, the steelman argument is the following: Without trade barriers, the local production economy is disadvantaged. Local companies have to comply with things like environmental and labor law regulations, making it more expensive to produce things. Other countries may not have these regulations. Therefore, by institution these rules without tariffs, the net effect is a reduction of environmental and social standards, as manufacturers move to locations where they do not exist.
A strong version of the policy would thus involve directly tying tariffs to environmental and labor laws of the producing country, thus equalizing the field with the local companies. Not only would this allow for fair international competition, it would also economically incentivise the global development of good standards.
I've never understood why countries like the EU pass strict environment and labor laws and then DONT place some kind of tariff or tax on countries without those restrictions. Not only to offset making your own market less able to compete on cost, but to provide a financial incentive for the other countries to up their game on environmental and worker quality-of-life issues (if that is the overall aim).
>I've never understood why countries like the EU pass strict environment and labor laws and then DONT place some kind of tariff or tax on countries without those restrictions.
This happens all the time though? GMO are very restricted there, so farmers there can't use them. Imports are also banned.
Because those ither countries would and do lie all the zime to placate delusional western citizens . it would result in tax carousels with countries were there is no legal recourse.
There are already ways to enforce those -- for example, Democrats and US labor unions used the USMCA negotiations to enact a "facility specific rapid response mechanism" that lets the US essentially strong-arm Mexico and Mexican companies into improving collective bargaining rights within the context of the trade deal; section 307 products (created by forced labor) have been illegal since 1930 (and enforced more strictly over the past decade, given concerns about Chinese slave labor); carbon import taxes addressing environmental regulations have been proposed in Congress, but haven't been implemented yet. The government also has existing authorities under anti-dumping and countervailing duty (ADD/CVD) legislation, so long as those duties comply with American obligations under international treaties (Trump's tariffs exist outside the ADD/CVD framework, and place the US in noncompliance relative to our WTO obligations).
Trump's tariffs don't really serve any specific policy goals other than "trade is bad and everyone should buy more from us than we buy from them," which is self-evidently absurd; why are we punishing Madagascar because we buy their vanilla and they're too poor to have extensive need of our services-based economy? Beggar-thy-neighbor trade policies inevitably beggar us as well, as we're likely to find out quite soon.
There's no coherence here, the people coming up with this policy are either ignorant or incompetent to the point of malice (Navarro, AKA "Ron Vara," being the benchmark). Tariffs, when used judiciously, can help support "infant industries" where domestic investment in emerging technologies means that supply constraints are less of a concern and where there are long-run expectations of lower domestic prices through efficiencies. In some cases, targeted punitive sanctions (against dumping policies, or to enforce labor and environmental standards) make sense, but the economic evidence on efficacy is mixed.
There is somewhat of an argument that countries such as China overuse American consumption as a crutch for development, rather than stimulating domestic consumption (Xi has, to give very mild credit, proposed policies to increase domestic demand); tariffs would certainly force countries and trade blocs to focus on non-American consumption, though this is a bit like losing weight by removing the patient's esophagus.
What we're seeing here is just ridiculous, from an economic perspective. Low-cost low-margin manufacturing is not coming back to the US, absent an economic crisis that pushes down to a upper-middle-income-level state (stay tuned!), while putting tariffs on agricultural products simply ensures that consumers will pay more without a corresponding increase in domestic competition (how many pineapples does the US grow?). The "calculation" of the tariffs, such as it is, is simply a tax on comparative advantage, which is mercantilist nonsense we left behind centuries ago. There's no steelman for this; even if there were, the increase in raw material costs would make the steelman unaffordable for us both.
I can’t speak with authority, but I imagine the steelman involves something like
- US needs manufacturing capability to maintain defense capability and boost long term growth.
- tariffs result in pushing some manufacturing (and associated skill set) back to the U.S.
This would be a good argument for targeted tariffs. Less clear that it's a justification for tariffs on stuff the US just doesn't have.
US manufacturing output is at an all-time high. It doesn't feel that way because there aren't as many jobs involved. I understand you're not actually arguing this, just speculating, but, "we need to boost manufacturing capability" isn't a convincing argument.
https://fred.stlouisfed.org/series/GOMA
Hmm that is interesting. I understand this plot is showing the gross output of US manufacturing, but it strikes me that it might be the relative growth that matters, not the absolute growth — I wonder if there’s a similar plot normalized by the total world output?
If this were indeed the case, I’m not sure tariffs are the right direction to do it.
Principally, that a company would need more guarantees on their capital investment that extend beyond a single president’s term. Since tariffs can be revoked at any moment, companies will want more assurances that the long path of capital investment will be worthwhile, or else they might find themselves disadvantaged before even getting off the ground.
They would find themselves lobbying the government to hold back the free market for them within a few years time.
I did see a talk where someone was making the case that if the U.S. depends heavily on China for steel, and Taiwan for chips, then if China invades Taiwan the U.S. would very quickly be unable to wage a war with both supplies cut off. So the goal is to build some capacity for such products domestically.
They also tied that to Trump's desire to get out of Europe and deescalate the Middle East, being that if the U.S. was already stretched across Ukraine and say Iran, it would be way to stretched to also wage anything in the far east.
I'm no expert by a long way, but I can see some logic in the argument.
In what crazy worldview would these be seen as good for America? Here's one.
Hypothetically, if you perceived that the root cause of some foreign policy problems you felt were important to solve was the gap in civil liberties between your country and powerful overseas countries, you could conclude that peace could be achieved by handicapping your own country so that it regresses to match the lower standards of the foreign nations that appear to have a problem with your country and its ideologies.
.
No guarantees that this is the actual belief of the people in power, it would just satisfy your requirement.
If the best possible version of this policy were smart, it would be coupled with boosting science and education, and improving conditions for the working class, including health care. It would also include governing in good faith.
I think it's about reducing the impact of outside market forces on the US, and increasing its sovereignty in the long term, and potentially laying the groundwork for a white ethnostate that doesn't rely on immigration. The globalised world is going to be crippled by climate change, mass climate immigration, demographic instability and food security.
This avoids the demographic and, depending on your perspective cultural challenges that are coming for many countries in the future, and lets America march to its own beat. America is setting up to be a fortress and a world unto itself in an unstable world. While a lot of countries will be going through these issues in the future America is doing its hard yards now.
Still years of economic misfortune ahead in the meantime.
So basically, integrating and supporting different cultures within one country is doomed? Better to be a closed ethnostate?
That's not my thinking but it aligns with his practice, especially considering his buddy's interesting hand gestures. Caucasian people are set to become a minority in a lot of their traditional countries pretty soon, and race is potentially going to become extremely heated imo to the point of constant brazen violence. I'm most worried about what he's using all this tarrif(tax) revenue for in the proposed sovereign wealth fund.
The best possible rationalization with extremely favorable glasses is that Trump is forcing a return to US manufacturing. The best version of this would incorporate things like a scheduled increase over time to give companies time to migrate, amounts based off of things like differences in living conditions, along with minor things like congressional approval so it's actually legal at all.
However the vastly more likely reason is he's a complete fucking moron that treats all interactions as binary "winning" or "losing". A mindset that helped him bankrupt numberous companies, and now likely a country. So trade deficits are "losing" and he's retaliating with tariffs. This logic befitting a toddler completely fits everything he's demonstrated over the years.
Let's say you want to bring back semiconductor manufacturing. It seems counterproductive to start with immediate blanket tariffs that include the machines necessary to fabricate semiconductors, where no domestic alternatives exist. Yet that's exactly what's happening. Previous policies would have used long lists of exemptions, carefully crafted tariff schedules, and other policies to try and minimize collateral damage. These tariffs do not.
Like many things carried about by this administration, the charitable interpretation of the intent is harmed by the manner of implementation. Countless policies have been implemented in a rushed, haphazard, confusing, nonsensical, surprising, and inconsistent manner which makes it tough to believe they are actually well-thought-out strategic moves.
Agreed. I'm someone who likes (more or less) his policy ideas/goals but HATES (can't emphasize that enough) how badly they have been implemented!
Ref. manufacturing, any serious-scale company is not going to commit to a decade-long (or more) plan to building factories in the US with this sort of uncertainty; I'm sure a few will pay lip-service to the current POTUS but what CEO is going to commit to the long-term in a country in turmoil?
And even when this is past, those same CEO's - and their successors - will think long and hard about committing to any long-term investment in the US.
In Starcraft, the Terran Factory structure had the ability to Lift Off, fly around, and land somewhere else.
I think the obvious thing to do is for manufacturing companies to start strapping Space-X Starships to their factories. Then when the administration changes, or tariffs or taxes become more favorable in another country, they can just Lift Off and move them to the new location.
Alternatively, we could pursue a Waterworld future where all the factories float around in international waters.
All this churn is just an opportunity to think outside the box!
Semiconductor fabs are actually decently large (>20k employee) cities.
> Semiconductor fabs are actually decently large (>20k employee) cities.
Ok… Then build more pylons…
> So trade deficits are "losing" and he's retaliating with tariffs
He also puts tariffs on countries which have a deficit with the US.
But why single out Russia and North Korea for exemption?
> But why single out Russia and North Korea for exemption?
They’re not, they’ve been sanctioned to such an extent that tariffs would be meaningless…
Manufacturing is not a good argument. Manufacturing output is at all time highs.
> Manufacturing output is at all time highs.
In terms of dollars not in terms of goods.
Country is already bankrupt, he’s throwing a Hail Mary.
If he cared about the debt there wouldn’t be a 4.5T tax cut for the rich.
I think the real reason is more insidious. The purpose is to raise more tax revenue from the middle and lower classes so they can fund a massive tax cut for the billionaire class.
the most likely reason is the simplest one - he is deliberately manipulating market so that his family’s companies can benefit. He did this very transparently with crypto. Now with a larger stakes.
Corruption plain and simple. Now “lobbyists” will rush in offering him favors so that he removes some restrictions
So he shorted … the market?
Long negative beta securites, short positive betas, on margin. Sell calls on ETFs, buy puts on ETFs, etc. There's risk though because his actions are rather unorthodox and the full effects aren't known (and resulting fear can cause betas to shift drastically)
Or if the necessary capital is out of reach for margin trades or options (for his friends it isn't), buy long 3x inverse ETFs as much as you can risk.
If you expect him to play yo-yo some more, rinse and repeat buying either regular or inverse 3x ETFs as needed.
Is this happening at some scale? Surely. Is it the main purpose? Probably not. I'd expect there are easier ways for corrupt politicians and their cronies to profit.
Yes, you can short a total US market ETF. Or just exit the market and be prepared to enter when the floor is hit (impossible, unless you have outsider knowledge).
If Trump is effectively insider-trading, much of the profit would come from the flip-flopping rumors he spreads every week. To keep going, there does need to be the occasional concrete action, otherwise traders start ignoring the rumors.
Yes. It's probably a combination between "have to do something about China; this is something" and "now I can move FX markets at will; time for my friends and I to enrich ourselves"
I didn’t see any other responses mention this, but a Reddit tinfoil hat argument that’s going around, which sounds more plausible than the other theories like wealth consolidation and systemic destruction of middle class, is the national debt that needs to be rolled over in the near future. Higher interest rates make it more expensive to roll over the debt and intentionally tanking the economy to increase unemployment and force the fed to lower the interest rates could make it cheaper for the government to roll over the debt in a manageable fashion.
The "intentionally tank the economy to roll over national debt at lower rates" theory completely misses how government bonds actually work. A bond is essentially a promise: you lend the government money for a specific period, and they pay you back with interest at the end. When that bond matures, it's simply paid off. There's no refinancing happening.
What people call "rolling over" debt just means the government is issuing brand new bonds to raise money to pay off the ones that are maturing. These are completely separate transactions, often with entirely different investors. The government continuously sells new bonds and pays off maturing ones as part of normal operations.
Creating a recession to somehow game this system would be spectacularly counterproductive. Tax revenue would collapse while unemployment benefits and other social spending would skyrocket, creating even larger deficits. Any minor interest savings would be dwarfed by the economic damage. Not to mention the Fed sets rates based on economic conditions, not to help government borrowing. This isn't some clever financial strategy—It's just bad economics built on a fundamental misunderstanding of how sovereign debt markets function.
The problem with this plan is that the tariffs are likely to cause inflation. (Because now prices have to include the tariffs.) In a period of inflation, people are unwilling to buy bonds of any kind, including Treasury bonds, unless they have a high interest rate. This will increase the cost of rolling over the debt, and will create even worse problems for our government.
Bingo. Breaking the system does not make anything work better except human suffering.
> Breaking the system does not make anything work better except human suffering.
Maybe ask yourself why human suffering was so great that people voted to break the system..? Big tech should have paid more respect for things like housing.
Well, one theory is that Trump wants individual companies to come to him and beg for exemptions to the tariffs. This would consolidate his power: Nobody would dare to do anything that would oppose him, for fear of having their "tariff exemption" revoked.
Another theory is that Trump has some complicated plan to reduce the US's debt; again, it involves using tariffs as a "stick" to push our allies into doing what we want. Summarized here:
https://www.youtube.com/watch?v=090CqPrw_AE
Trump take bribes with companies and countries for exemptions to tariffs. Trump informs insiders of upcoming market manipulations so they can exploit the falls and rises. Inflation rises in the us as companies have fewer competitors and another justification for price increases. Income inequality increases just like the last guy that said lets make america great again.
AI centric argument:
The policy indicates trade, traditional partnerships, and traditional financial metrics are less important for the administration. It is largely symbolic rather than analytically worked out - the direction is more important than the details.
This is consistent with the economy being radically altered by robotics and AI. Comparative advantage in labor costs is becoming irrelevant, so a large part of the justification for trade disappears.
Wealth is being further concentrated into those with existing assets, as the negotiating position of labor becomes weaker. It is less important to maintain partnerships when you can do everything yourself.
Recession becomes less important than pushing hard for leadership in AI. Deepseek’s model release had a huge impact on the values of leading US firms. With AI traditional measures of the economy become significantly less relevant.
It's a very interesting take as a steelman, but not a credible actual reasoning given the source of the policy.
I think deindustrialization is detrimental to the US. We couldn't even make masks fast enough during the covid. The YouTube video that compares the factory of GM and that of BYD's is just embarrassing. It really shows how far we've fallen. The cost of building anything, including canon shells, is through the roof because we simply don't have the supply chains. And do we really believe that we can keep innovating if we don't actually make things? It's really a pipe dream that our engineers can keep drawing boxes in their cushy offices and believe that Chinese companies won't catch up. On the other hand, it's so sad that successful people like Balaj believe that the US can never reverse the course of deindustrialization. Their reasons are the usual: the US workers are too incompetent compared to the Chinese workers. Our automation is too behind compared to China's. We have lost the know-how of building our supply chain. We may get back manufacturing, but we will lose our seigniorage of a global currency - the US dollar.
What I don't understand is that China was dirt poor 30 years ago and was not a manufacturing powerhouse even 15 years ago. It was the Taiwanese, the Japanese, and the westerners who invested heavily in China and brought them technologies and expertise and bootstrapped the massive manufacturing industries in China. The quality and professionalism of US workers used to be the envy of Chinese people. Since when rebuilding the manufacturing business has become mission impossible? Can we really keep printing money when we make so little stuff? I get that we have great service jobs, but who wants our services if we don't make anything worth servicing? Back in 1917, Allyn Young believed that London would always be the finance center of the world, but we all know what happened later.
I'm not sure if Tarrif will work in the end, but at least it can attract additional investment given that the US is the largest consumer market in the world. Combined that with deregulation (assuming it will be be successful) , at least the US has a shot to bring back the key manufacturing business. And don't we believe actions lead to information? What have we done in the past 15 years to stop our deindustrialization? At least this time our government is trying. For that, I'd like to give them benefit of doubt.
Just to play devil's advocate on de-industrialization here -- The Industrial Revolution and its consequences have been a disaster for the human race. They have greatly increased the life-expectancy of those of us who live in “advanced” countries, but they have destabilized society, have made life unfulfilling, have subjected human beings to indignities, have led to widespread psychological suffering (in the Third World to physical suffering as well) and have inflicted severe damage on the natural world. The continued development of technology will worsen the situation. It will certainly subject human beings to greater indignities and inflict greater damage on the natural world, it will probably lead to greater social disruption and psychological suffering, and it may lead to increased physical suffering even in “advanced” countries.
People's models for the world have been massively disrupted. What we knew "before" is sort of thrown out the window now. These tariffs, if they are sustained, will create massive shifts that we cannot fully comprehend. It's like a massive physics system that's just received a shock.
The best explanation I’ve seen is the so called MarALago Accord[1]. I think the core thesis is that the US dollar and the US military being so core to all trade in the world had mad the US disadvantaged in terms of trade competitiveness. The accord is a set of goals/approaches to reduce that, theeeby making the US dollar more appealing for exports, other currencies less appealing.
[1] https://en.m.wikipedia.org/wiki/Foreign_policy_of_the_second...
The downturn would come either way, we are slamming headfirst into global warming consequences, other piled up risks and closing easy access resource ceeilings.
This way though the downfall is at least controlled, comparable to landing a wounded plane instead of breaking up midair. Big Olga never believed its own bull of "infinite growth" and parallel drove plans forward to keep civilization going in pockets once the "8billion can life like kings" bubble bursts. Bill Gates microreactors come to mind.
The rest of us go to hell, aka wars, martial law and civil war, preferably without damaging the pockets and without going nuclear. THANK YOU!
Sorry , to all those that fell for fusion, mars and star trek fantasies.
Phew! Good thing we're also rolling back EPA and other regulatory controls that encourage/enforce sustainable practices. Otherwise it might have been (only an ill conceived) part of a coherent strategy.
The steelman here is: it is better for a country to have a diverse manufacturing base and a net positive balance of trade. The only way to get manufacturing happening here is to make it more profitable to manufacture here than elsewhere. The only way to do that is to make sure everyone else’s cheap stuff is much more expensive, thereby creating a possible profit margin for local manufacturing. This medicine will be hard at first. But it will create a resilient economy where foreign wealth comes in (buying our goods) and national wealth stays home (purchasing locally made goods).
You didn’t ask for counter arguments but I’m sure we will see a wide range below this comment.
A broader picture here is to say neoliberal globalization is bad in that it removes local autonomy by creating a need for peaceful trading partners. Who is it bad for, and what sort of world would be good for those people is an exercise left to the reader.
EDIT: I like the vigorous comments and zero net score on this comment. don't blame the messenger guys, this is a fair statement of the steelman. It does not represent my own views.
If this was the real reason then wouldn't we see countries matching import tariffs with export tariffs? Sharing revenues on a percentage of the flow of goods into the US 50/50 would at least be a more sustainable geopolitically. It would be a collaborative resolution in some sense.
Instead, we are seeing countries match with import tariffs in the other direction, and a deterioration of global trust.
I don't think most countries actually want to balance bilateral trade. You can get a hint of this by the fact that the calculation that the US is using right now to determine the tariff rate puts a floor of 10% tariff. If they were truly committed to balancing bilateral trade then you would have expected them to actually have added export tariffs to any countries where the US had a trade surplus. Instead they gave a 10% import tariff still. I'm not sure I've seen any explanation for this 10%.
> Instead, we are seeing countries match with import tariffs in the other direction, and a deterioration of global trust.
Right, because e.g. if Canada has no tariff on car imports and the USA has tariffs, then the logical course of action for car manufacturers is to move all of their manufacturing for Canadian-sold cars to the US, because it's more flexible to have manufacturing in the place that incurs fewer tariffs overall. Canadian import tariffs take that incentive away.
Export tariffs make more sense for resources where the manufacturing base can't be moved.
The comment you replied to didn't say that this steelman wants an "even" balance of trade, it said the steelman wants a net positive balance of trade, more exports than imports. Export tariffs discourage something that the steelman wants. The basis for "trade deficit bad" is that we're collectively sending those countries more money than they're sending back.
> I'm not sure I've seen any explanation for this 10%.
So the orange idiot can make a "deal".
Not sure what you mean. Export tariffs are very rare because nearly everyone agrees that it's good for a country to export lots of stuff. The question is whether imports are also uniformly good for a country. Free trade advocates say yes (and I think they're right), "typical" protectionists say they become bad when they undercut local producers, balance-of-trade protectionists say they become bad when they exceed exports.
> everyone agrees that it's good for a country to export lots of stuff
Not if you want to avoid escalation of a trade war.
If you know that the US is pissed off because you're hoarding dollars because its the reserve currency and its causing the USD to rise too high, leading to their decline in manufacturing competitiveness, then you can solve their problem for them by adding an export tariff. It will make them more competitive. But that way, you get the revenues from the tariff rather than the US. Adding your own import tariffs makes the trade balance worse. Its like the person you're negotiating with is complaining about a knife and you decide to twist it rather than remove it. A 50/50 split of export and import tariffs would mean that both countries can take a cut, the USD can maintain reserve status, and US manufacturing can stay competitive despite a stronger dollar. The fact that noone is doing this means that either they haven't considered it or they aren't happy with this outcome(probably the latter, but you never know...)
> If you know that the US is pissed off because you're hoarding dollars because its the reserve currency and its causing the USD to rise too high
But you don’t know that! The explicit US position is that their tariffs are purely retaliatory, based on a formula they invented a few days ago which claims to compute an effective rate consisting of tariffs and non-tariff barriers. Export tariffs would make the formula as currently constructed go down, but the US would clearly see you’re juking the stats rather than actually removing trade barriers, and adjust the formula to account for it.
Perhaps you think the US is being strategically deceptive about its motivations? I do see a lot of people offer that as a “defense” of the US position, although I don’t clearly understand how this is meant to make things better. How should foreign trade negotiators know which HN commenters are telling them the real position and which ones have been taken in by the misdirection?
I think export tariffs are rare more for implementation reasons. For instance, resource royalties are relatively common, and you could theoretically structure resource royalties to apply to basically the same basket of goods, in the same amount as an export tariff.
The trouble is that no company is going to want to invest in new/expanded US manufacturing facilities that only make sense under the just announced tariff regime, unless they have confidence that this is the new normal, and won't be rescinded any time soon. Would you want to bet that current tariffs will be largely the same next week, or next year, or in 4 years time?
If none would, then why was it already starting?
https://www.investing.com/news/politics-news/investment-comm...
Totally agreed. Among the many complaints I have here, this is a big one. As long as Dems are saying "this sucks we hate it we will change it", we have a lot of uncertainty, and so it is definitely not time to build factories.
I'd contrast this with the Obama energy policy, which was a significant change in US policy toward energy independence, consistently and fairly quietly applied without generating a worldwide recession or trade war.
Some counterarguments:
> it is better for a country to have a diverse manufacturing base
A country can exist and be wealthy without diverse manufacturing base.
> a net positive balance of trade
A country can have stable and growing economy with negative balance of trade, as long as certain conditions are met. In short, this country may offer something else to compensate trade deficit, i.e. there can be a price tag on military and political power.
>A country can exist and be wealthy without diverse manufacturing base.
This theory has yet to be tested in a peer war.
> i.e. there can be a price tag on military and political power
And what about services the US provides? Google and Microsoft are some of the biggest companies and bring a ton of money to the US, but this doesn't seem to be included in the calculation because they don't sell physical goods.
> bring a ton of money to the US
Are they? Or do they keep their profits overseas?
That's the long-term theory, yeah.
It's interesting to see how the U.S. could make it happen though, given that there is already a shortage of labor and materials. It will be a long, long road.
I find it odd how many people continue to try and give this man the benefit of the doubt. Is it just hope? Hope that there is some grander plan and not just Trump doing stupid things that will in fact make everything worse because he's stuck in an 80s view of the world?
this video had a few good points
https://www.youtube.com/watch?v=1ts5wJ6OfzA
I don't know if this will answer your question, but the last episode of the Planet Money podcast addressed tariffs:
https://www.npr.org/2025/04/02/1242229719/planet-money-the-c...
IMO, tariffs are bad for the economy, but could be great for workers and the middle class. Regardless, implementing them this was is absolutely nuts.
China got our manufacturing because they didn't care about pollution. Now, they've developed cleaner industrial methods and built out fantastic infrastructure (e.g. massive industrial complexes right next to shipping ports). Meanwhile, we did nothing and we're a good ten to twenty years behind assuming perfect infrastructure development starting today with tariffs that are immediately in effect.
Combine that with the fact that infrastructure development in the US costs many multiples more than other developed nations, and you have a recipe for complete failure.
Not to mention China has been going hard into green energy. Both manufacturing it and using it themselves. It's the cheapest form of energy, and as you noted: much less pollution, which has a huge economic impact.
Meanwhile, what are we doing? Apparently green energy is evil, and we're going to go all-in on domestic energy production from something that's expensive, very polluting, and finite.
> What would the best possible version of this policy look like if it were smart?
It depends extremely on what your actual goals are, but if we suppose the goal is to increase US manufacturing capacity and economic independence with minimal pain, you'd enact this on a time-table over a period of years, after building enough support across the political spectrum to make it look like this policy will be essentially, if perhaps with some occasional tweaks, be maintained across administrations for some time. You'd also probably not significantly tariff the whole world, at any point.
The biggest problem with this approach is investor confidence. It's hard to sign on the dotted line to spend billions building factories when it's difficult to say with any certainty that these tariffs will still be around by the end of the year, let alone in five years. This was doomed to be way more painful than necessary when he started flip-flopping on this over the last couple months, regardless of whether it's even fundamentally any sort of a good idea.
If the goal's to replace large portions of income tax, as has been suggested by some including by Trump, uh... the math just don't work even with a drastically smaller federal government, it's nonsense, there's no "best possible" version there.
Here is a write up on the forecasted tariff impact, from the team that makes investment decisions at Wells Fargo.
https://drive.google.com/file/d/1Gk7TTyAYgyvvoP6szjV7J5wjjkC...
This doesn’t address the OP’s questions.
In theory companies like Apple could bring manufacturing back to US.
Manufacturing is already here. US's manufacturing output is higher every year. Manufacturing jobs don't exist, and therefore cannot "come back". There is no scenario where Americans go to work in some kind of electronics or textiles sweatshop. If the result of these tariffs is "more US manufacturing" then all of that manufacturing will be automated and robotic.
Who said anything about sweatshops? You pay the minimum wage expected by law. Apple has $180bn in profits. They could surely afford to pay US workers and lose some of that profit. But everything has been dominated by greed these days.
The best (if not only) valid argument for tariffs is that they can be used to negotiate lower tariffs. Because tariffs only serve to reduce trade, which mathematically is suboptimal for economic output, and has been recognized as such by nearly every economist since David Ricardo.
Unfortunately, Donald Trump doesn't agree with that. Or his handlers don't. Not that the distinction matters anymore. The diplomatic and trade relations that we are destroying right now can't just be fixed by electing a new President. This is the US's Suez Crisis...we are no longer a world leader.
> which mathematically is suboptimal, and has been recognized as such by nearly every economist since David Ricardo.
That requires some initial assumptions that simply aren't true. Tariffs can and do serve a vital role to protect a country from one with lower standards of living (eg taken to an extreme, consider trade between county A where slavery is illegal and country B where it isn't)
> That requires some initial assumptions that simply aren't true.
There are certainly assumptions, but those assumptions are reasonable in nearly every possibly scenario the US has ever encountered.
> Tariffs can and do serve a vital role to protect a country from one with lower standards of living
Protect how? Protect them from lower priced goods? Sorry, but this "idea" originates from mercantilist thought and has been thoroughly dismantled and discredited. Even when one country is less wealthy and less productive, both countries benefit from expanded trade. This is Comparative Advantage...literally Econ 101.
Economics is a social science and has a lot of problems with things being claimed as settled science when they aren't, but this is actually one of them. You'd have a hard time finding any living economist, liberal or conservative, who would agree with you.
> (eg taken to an extreme, consider trade between county A where slavery is illegal and country B where it isn't)
I would hope that in this extreme, we wouldn't use tariffs as a tool, but rather full trade embargo. Because it stops being an economic argument, but rather a human rights argument.
Regardless, reducing or eliminating trade with nations that accept slavery would be a reduction in economic output. It would just be one with a price that we should be willing to pay.
I'd love to see any sort of human rights justification for Tariffs against Canada though.
Comparative Advantage is trivially wrong in the real world. If a potential enemy is better at making bullets than you are, you're probably still going to make bullets rather than trading for them, because if you ever come into conflict, you don't want your supply of ammunition choked. This has real world analogues in Chinese-manufactured electrical components that go into military hardware.
From a strategic perspective, the US probably needs to onshore chip manufacturing before China's chip industry reaches parity with Taiwan's. If they don't, China could effectively blockade the island and remain unaffected, while all of its competitors are. The US would lose the initiative, and have to make a reactive decision on whether or not it wants to be in a shooting war, which is a bad place to be.
Econ 101 was nice in theory when the US had no rivals. But it does now, and a country that relies on its military and technological edge as part of its economic strategy (i.e. reserve currency status, exerting soft power through global institutions that are backed up by a credible threat of violence) can't be in a position where it gets outbuilt by its competitors.
Nothing you've said invalidates comparative advantage. It is just accepting a cost (reduced economic output) in favor of some strategic advantage. It doesn't matter if its a good idea, or a moral idea, or a strategic idea, the cost is still a loss in economic output.
Sure, you can think of it as purchasing security with the cost of reduced economic output. The problem is that the benefits of autonomy, and the costs of the externalities of free trade, are difficult if not impossible to accurately value. Not only are they intangible, their true value can often only be assessed in retrospect.
> I'd love to see any sort of human rights justification for Tariffs against Canada though.
It'd probably be the opposite - Canada/EU put tariffs on the US to offset their higher standards of living and environmental considerations. But then the US should similarly do that to, say, China for the same reasons
> Sorry, but this "idea" originates from mercantilist thought and has been thoroughly dismantled and discredited. Even when one country is less wealthy and less productive, both countries benefit from expanded trade. This is Comparative Advantage...literally Econ 101.
https://www.thesling.org/the-failed-assumptions-of-free-trad...
Unfortunately for econ 101, just like the spherical cow in physics 101, reality is different and more complicated
> The best (if not only) valid argument for tariffs is that they can be used to negotiate lower tariffs.
> Unfortunately, Donald Trump doesn't agree with that.
I think most countries hit are in active negotiations to reduce or drop the tariffs. Israel has already said they're dropping their tariffs on the US and Argentina is in negotiations to do so.
[flagged]
You need to be careful casting aspersions like that. He did answer the question, and he showed no hate towards Donald Trump. I think it is you who are projecting.
Talking about people's "handlers" isn't serious debate. Tariffs are nothing new or exciting, there's millions of pages written arguing for and against them long before Trump became a candidate.
Not much written for them being implemented like this, though.
Trump is wrecking the US at the behest of Putin, directly or indirectly doesn't really matter.
Hence he didn't put tariffs on Russia.
> Hence he didn't put tariffs on Russia.
He’s maintaining crippling sanctions on Russia…
Intentionally cratering the economy raises unemployment, which applies downward pressure on wages, and allows entities that are cash-rich and privy to the timings of the intentional market shocks to buy up large swathes of the country for pennies on the dollar, which makes the merger of corporate and government power smoother and more easily total.
J. Paul Getty happened to be in the right place at the right time for the 1929 market crash to result in an explosion in his net worth, what’s happening here is akin to ultra wealthy individuals recreating Black Thursday with the only difference being that it has been very publicly engineered and telegraphed in advance.
That is the steelman, if you think that those things are good things.
Argument for tariffs: Make foreign made goods expensive to encourage local production. And it has worked. Usually tariffs are more focused though. For example, the US has had tariffs on trucks for a long time; as a result, most foreign automakers have US plants to build trucks/SUVs.
The main problem with the tariffs is this: the US has benefited mightily from globalism. What actually happened is that the US, being at the cutting edge of technology, outsourced mostly low paying jobs, while developing more innovative/productive industries and sold goods all across the world.
Apple's a prime example. All the difficult (read physical) and low-paying aspects of production are outsourced to Taiwan and China, meanwhile Apple employs tens of thousands of high paid engineers in the US. Ditto for all the big tech companies.
Now, globalism has negatively affected a certain segment of the population and it was definitely a mistake to ignore that (rust belt great example). But bringing manufacturing back won't fix that now that the cat's out of the bag. Engaging in a trade war will destroy a ton of high paying jobs (every multinational is going to take a sizeable revenue cut) just to bring back a small amount of low paying jobs, if any are brought back... Firms will likely build highly automated US factories.
The best possible version of this policy would be focused tariffs on specific goods you want manufactured in the US... Semiconductors, autos, steel, boats, that sort of thing.
Many countries have blanket global tariffs to make their own industries more competitive
We ignored them
Now we are doing it and yes it upsets the world order
There is no precedent where this has been beneficial for the US, but we can try again. The last time it was tried was 1930, and our fortunes vastly changed since then
The incentive is for entrepreneurially minded people to try to provide services in the US and fix the supply chain here. This theoretically means more people employed and more people able to afford the prices of things produced here. Keeps velocity of money in the economy high.
We will learn how resilient a coalition of other countries are, as they try to only trade with each other
A smarter version of this policy would be country by country and industry by industry negotiations. But, given that some countries are dropping their own blanket tariffs, and others like Vietnam already coming to the negotiating table, time will tell.
There are people (notably, Ha-Joon Chang) that have claimed that those protectionist policies have made South Korea more competitive, but I think you'd find a lot of economists disagree with that, and that South Korea become competitive in spite of those restrictions.
Keep in mind North Korea has had even stricter trade restrictions, and they don't have any functioning modern industry at all. Trade restrictions reduce export market size, insulate companies from competitive pressures, and those problems only serve to reduce capability, not increase it. Maybe there is some sort of happy medium of protectionist policies, but I've never seen any sort of framework for understanding how you could derive where that happy medium lies.
If trade restrictions only ever made countries more competitive, we wouldn't use them as a punishment.
> Vietnam already coming to the negotiating table, time will tell.
Oh wow you got a developing country to agree to lower their tariffs on their fairly minor import capacity from the US.
Seems like the way things have been going up to 3 days ago has been pretty great for the US, our economy has been growing faster and doing well!
I don't think steelmanning an argument works if the argument is made in bad faith. Steelmanning should be about trying to understand legitimate reasons for a positions, not bullshit arguments. About being fair and intellectually honest, and not about trying to act like a PR firm for the other person.
That said, if you want to make sense of the reasons behind the tariffs, I can offer a couple that would be reasons why Trump would implement tariffs.
1. While they are within his power, they are a cudgel he can use to hurt his enemies and show favoritism (and be open to bribes to get them lifted).
2. Trump has a weird obsession with tariffs, even after he lost a trade war with China in 2018 and had to bail out farmers with a bailout larger than the one to General Motors.
3. Also, as one of Trump's Wharton business school professors has stated numerous times, "Donald Trump was the dumbest goddam student I ever had."
You don't need to try and imagine why they're doing it, because Trump has said why for the last 30 years. He sees our trade deficit as as "the US being taken advantage of."
I can't steelman the case for high tariffs, but small tariffs make sense to me.
There's a trade off between economic diversity and comparative advantage, and a balance is better than being at either extreme.
A 5% cost advantage might be sufficient for a company to offshore production of medical supplies, but is that minor cost saving worthwhile versus the risk of a shortage in war or pandemic?
Automation is reducing labor cost advantages, and converging unit manufacturing costs globally, so more and more industries are falling into this "slight comparative advantage to offshoring" case.
It should be obvious that this market correction is the desired outcome for this administration and its defenders.
If there weren't so many people whose livelihood or investment portfolios benefited from free trade or government spending the economic indicators wouldn't react as badly. Punishing or disincentivizing economic activity they don't like is more important than increasing GDP or asset values.
It may seem like a weak argument because of the circular logic but that shouldn't surprise any of us.
Whether he is right or wrong, when Lighthizer was on 60 Minutes, he said they have tried everything to level the playing field, and nothing worked. So this time, there is nothing to lose.
It is a very good interview and discussion.
https://youtu.be/KwUG2bOHqFA?si=DKm2Y_I53Qdfuh-b
If you want to make a level playing field have FTAs or impose tariffs on just those countries.
But to impose them on 60+ countries at once for arbitrary reasons makes absolutely no sense.
Reports are that Trump ignored all his advisors and did what he wanted so your point isn't relevant. I haven't heard a single analyst find sense in how tariff levels were set per country - someone did notice that it appeared a very simple formula had been applied, one that has no basis in economic theory.
Go open 10 year chats for the GDP, S&P 500, etc.
There was no problem with "level playing fields."
All of this is just one man who for forty years has been obsessed with how "we" are supposedly being "taken advantage of."
The economy overall was doing fine - intense economic stratification is a problem, but overall the country's economy was productive.
Man steps in, inheriting a growing economy doing just fine...and after months of uncertainty and upheaval, in two days erases a year's worth of economic growth.
> I haven't heard a single analyst find sense in how tariff levels were set per country - someone did notice that it appeared a very simple formula had been applied, one that has no basis in economic theory.
I find it funny people keep talking about someone figuring out it out when they actually published it, including the reasoning with references at the bottom: https://ustr.gov/issue-areas/reciprocal-tariff-calculations
> Man steps in, inheriting a growing economy doing just fine...and after months of uncertainty and upheaval, in two days erases a year's worth of economic growth.
He'll never get away with it a third time!
The steel man argument is:
https://uaw.org/tariffs-mark-beginning-of-victory-for-autowo... https://www.youtube.com/watch?v=R2lTMdlWDuk https://www.cnn.com/2024/03/28/business/china-goods-exports-...The tariffs are not reciprocal tariffs (i.e., based on tariffs in those countries). They're set by dividing the trade deficit with that country against the total volume (and then halved). This premise can't be included in the steel man version of the argument.
Are you arguing that those countries don't impose tariffs on our goods, or you don't like the method of calculation?
EU tariffs for goods from the USA vary but based on trade volume it's effectively 1.3%. Setting a 20% tariff for all EU imports is a huge novelty unknown in recent decades. There have been higher tariffs for certain products to protect domestic industry, some of them are more than 60 years in place through.
Well, regardless of whatever you think about truly reciprocal tariffs, the Trump Tariffs are not that. They released the formula they used to calculate the levels and it has nothing to do with other countries’ trade barriers. It’s like literally trade deficit with that country divided by imports. Which is utterly unhinged, with no basis in theory or reality. But again, even if you disagree, that is not the definition of a reciprocal tariff.
A reciprocal tariff is a tax or trade restriction that one country places on another in response to similar actions taken by that country. The idea behind reciprocal tariffs is to create balance in trade between nations. If one country raises tariffs on goods from another, the affected country might respond by imposing its own tariffs on imports from the first country. This response is meant to protect local businesses, preserve jobs, and fix trade imbalances.
https://economictimes.indiatimes.com/definition/reciprocal-t...
I think you are arguing that they aren't equal tariffs. I would agree with that. They do seem to be reciprocal though, because the countries imposed tariffs on our goods of some sort.
There may not be zero tariffs in other countries, but the amount calculated by the Trump Admin doesn't account for them. It doesn't even consider them. It's as simple as "trade deficit by total volume". Unless you assume that, absent tariffs, trade would always be perfectly balanced (it won't be), then the difference is structural realities (such as certain climates growing things that can't be grown in the US).
They aren't reciprocal tariffs because the other countries don't have anything like comparable tariffs in place already.
Why should corporations respond to all of this by taking a lot of risk and invest in capital? The tariffs aren't based on any sort of sound strategy, just one poorly educated person's black and white, simplistic worldview full of insecurity.
They change practically by the hour; first they're on, then they're off, then they're on, then they change, thne they're bigger than anyone expected.
That doesn't make companies say "well, let's expand!" It makes them hunker down. Kill off the least profitable products, cut overhead, etc.
There's time needed to build the necessary manufacturing, train a workforce, etc.
There's prices skyrocketing when suddenly American manufacturers have less competition.
There's also the plunge in sales of goods we sell to other countries.
This is the sort of thing you change over a generation. Not in a day, year, or even four years.
You can't just snap your fingers and say "you'll buy all your CNC machines from AMERICAN companies!" - even if we had enough manufacturing capacity, where are you going to get the workers from, particularly as literacy and education levels have been falling, and the whole education system is getting torn up?
...and where are you going to get all the semiconductors from?
The US famously had to buy titanium for the SR-71 from Russia through shell companies because the US lacked the mining capacity, the refining capacity, and know-how.
>Why should corporations respond to all of this by taking a lot of risk and invest in capital?
They would invest domestically to evade the tariffs. They invested heavily in Mexico since NAFTA to increase profits, the tariffs (hopefully) make it more profitable to manufacture domestically.
>The tariffs aren't based on any sort of sound strategy, just one poorly educated person's black and white, simplistic worldview full of insecurity.
I'm not going to reply to that since it is an emotional argument.
>They change practically by the hour; first they're on, then they're off, then they're on, then they change, thne they're bigger than anyone expected.
I agree it should have been much more predictable and steady. I suspect the fluctuation is due to the countries in question capitulated to what Trump wanted (higher security at the border, removed tariffs on US goods, allowing the CIA to hunt down cartels in Mexico, etc)
>That doesn't make companies say "well, let's expand!" It makes them hunker down. Kill off the least profitable products, cut overhead, etc.
Not expand, relocate. Relocate building new factories with US labor on US soil, run by US workers.
>There's time needed to build the necessary manufacturing, train a workforce, etc.
Agree.
>There's prices skyrocketing when suddenly American manufacturers have less competition.
Short term yes, but tariffs are deflationary long term in advanced economies.
https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-9396.00...
>There's also the plunge in sales of goods we sell to other countries. This is the sort of thing you change over a generation. Not in a day, year, or even four years.
I agree it's very agressive. I don't recall any politicians trying to get manufacturing on shore in earnest in my lifetime (and I'm old), but I'm happy to see an attempt. Drive anywhere down main street in middle America, you'll see a lot of boarded up ghost towns that used to be propserous. Lobbyists spend a lot of money to keep their clients' costs down by using cheap offshore labor. Their clients are of course corporations.
>You can't just snap your fingers and say "you'll buy all your CNC machines from AMERICAN companies!" -
You can offer price incentives. If US CNC machines are $100K and Chinese are $110K with tariffs, they will buy US CNC machines.
>even if we had enough manufacturing capacity, where are you going to get the workers from, particularly as literacy and education levels have been falling, and the whole education system is getting torn up?
Many of these jobs don't require a college degree. On the job training used to be an effective way to do this. It's not going to be easy, but it's possible. There are plenty of people in middle America looking for work.
>...and where are you going to get all the semiconductors from? The US famously had to buy titanium for the SR-71 from Russia through shell companies because the US lacked the mining capacity, the refining capacity, and know-how.
Well if China invades Taiwan, which they have been promising to do and did with Hong Kong, we won't have any modern semiconductors. The US economy and military can't survive without modern semiconductors. TSMC (Taiwan) and Intel just made a deal where TSMC will run Intel's fabs in the US using their manufacturing expertise.
https://www.tomshardware.com/tech-industry/intel-and-tsmc-ag...
There are definitely long term upsides to this if the tariffs stay intact and there are long term upsides if other countries remove tariffs on us. It's certainly rewiring the global trade network, hopefully in our favor. We have one ace up our sleeve, we have the largest market in the world by 2x. That's a lot of negotiating power.
The problem with every third-party rationalisation is that they’re all just wild guesses.
The administration hasn’t explained their logic and haven’t made clear plans — that’s the real problem.
The difference between science and “traditional” beliefs is that the former is not just about convincing others through force, but explaining things to others such that they’ll convince themselves.
It’s also the difference between good political leadership and a ruthless dictator.
One needs only words, the other needs violence.
https://www.whitehouse.gov/fact-sheets/2025/04/report-to-the...
https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-pr...
https://www.whitehouse.gov/presidential-actions/2025/04/regu...
Those statements are marketing and/or propaganda, and their logic don't match up to the actions that were taken:
- Both countries with trade surpluses and deficits were all tariffed -- therefore this is not about re-balancing trade.
- Inputs required for on-shoring were all tariffed -- therefore this isn't about bringing manufacturing on-shore.
- Both geopolitical rivals and allies were all tariffed -- therefore this isn't about defence. (Russia was specifically excluded!)
- Only "goods" were factored into the calculation, services were not, despite being the major US export, making this very unfair to countries that export goods and import services -- therefore this isn't about trade policy becoming more fair.
Etc...
Just yesterday I was debating the supposed benefits of the tariffs with a conservative friend of mine, and it was the same problem: They couldn't draw an arrow between "enact sweeping tariffs" and "... profit".
Every country for the history of the world that has enacted sweeping tariffs has suffered for it, every time.
Protectionism like this causes domestic industries to become inefficient because they don't have to compete on a level playing field against foreign products.
-- The Trump administration's answer to this is simply: "No it won't!", without any stated reason.
Blanket tariffs reduces the efficiency of on-shore businesses, because they are penalised for buying from more efficient foreign sources of inputs that can't be made locally. Here on HN people mentioned coffee, chocolate, olive oil, avocados, and other food products that require specific climates. Similar logic applies to many other inputs, such as industrial robots (Germany), lithography machines (Netherlands), rare earths (China), etc, etc...
-- The Trump administration's answer to this is simply: "No it won't!", without any stated reason.
The people behind this keep drawing a couple of circles and waving their hands while proclaiming that drawing the rest of the owl is easy.
Okay. Show me a drawing of the rest of the fucking owl.
There is no economic argument for tariffs. There are mountains of theory and empirical historical evidence that they make countries poorer.
The motivation for these tariffs are not economic or financial.
They are being used by a narcissist as a tool to force others prostate themselves on front of him. Whether foreign leaders - who will have to "kiss the ring" pleading the case for their country to get relief - or domestic CEOs who will now have join a queue to plead with Trump for exemptions for their particular sector (like the auto business CEOs have).
We've already seen it with social media CEOs who queued up to offer him money and support, we're seeing it with law firms whose very existence he has threatened by EO forcing senior partners to not only bend to his will but to humiliate themselves in doing so and we seen university presidents do similar.
The tariff stuff is a continuation and escalation of that policy.
The cost is to America's reputation, international standing and economic well-being and will be borne for decades. The benefits are ephemeral - an ego massage for DJ Trump.
The coherent endgame is to ensure a fascist takeover of America by ensuring CEOs are at the mercy of POTUS. First the political party fell, then its representatives in Congress, then judiciary. The control of political institutions and education system has been assumed.
But free trade and commerce is antithetical to fascism. Unless the dictator can assume total control, his position is untenable. The goal is to form an equivalent of CCP Politburo and Putin in the form of POTUS + small number of hand-picked techbros. You can't achieve that goal unless you control commerce.
All of this is laid out in writings of Dark Enlightenment adherents and sanitized through Project 2025. Ironically, the people who complain the most about their freedoms being destroyed because their Facebook post saying COVID is a hoax was deleted not only will willingly submit to this, but also be its key enablers.
Here's a plausible steelman argument, drawing from insights from CEA Chair Stephen Miran and a paper he authored pre-administration titled "A user's guide to restructuring a global trading system"
https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...
It is a blueprint for "tariff based upheavel". It proposes using 'unilateral U.S. tariffs as leverage' to force other countries into a new accord, dubbed by some a potential "Mar-a-Lago Accord," analogous to Bretton Woods, that would include 'coordinated currency realignments'.
Miran argued that because the strong dollar has made U.S. exports uncompetitive and fueled chronic deficits, the U.S. might need to pressure other countries to strengthen their currencies (i.e. weaken the dollar) through a trade war if necessary. Alongside this potential grand strategy, it's also argue the tariffs directly address specific issues like unfair trade practices (the 'reciprocity' argument), dumping, reliance on adversarial supply chains (national security), and aim to incentivize domestic manufacturing investment.
Elements of Miran's thinking in the paper are evident in the Administration's approach. For instance, Trump aides publicly claim they are targeting countries with "artificially devalued" currencies for tougher tariffs and the President frames tariffs as "reciprocal", a hint that the endgame is to make others lower their trade barriers or adjust currency values to balance trade.
This strategic thinking appears connected to the 'traffic light' system mentioned by Treasury Secretary Scott Bessent.. https://instituteofgeoeconomics.org/en/research/2025040302/
Direct quote: "Treasury Secretary Scott Bessent has mentioned, the US could have a “traffic light” system that divides the world into three tiers: “green” countries with shared values, aligned economic and security goals, and a willingness to cooperate on exchange rates; “yellow” or neutral countries that want to keep high tariffs and remain outside the US defense system; and “red” countries, meaning adversaries or sanctioned nations that refuse to cooperate."
I think that adds potential useful context around where we might expect countries to align and what the intent is. Or perhaps as I've seen it put more inflammatorily, there are "vassals", "neutral" and "adversaries".
One last note would be that comparisons to the 1930s Smoot-Hawley tariffs are often made but the context is fundamentally different. In the 1930s, the US was a major creditor nation with large trade surpluses and dominant manufacturing. Today it's a large debtor nation seeking to revitalize its industrial base and reduce deficits within a far more globalized system. It's not quite fair to call it protectionism (as a sole objective) and the time period doesn't generalize to today's America.
With those datapoints....
The steelman perspective is that this is less short-term theater and more a high-stakes, potentially disruptive strategy aimed at fundamentally restructuring the global trading system. The intended endgame is to reassert U.S. economic advantage, enhance national security through resilient supply chains, and better align global economic rules with U.S. interests in a changed geopolitical landscape, using U.S. market access and currency centrality as key leverage.
To be clear, this doesn't imply that I agree. I’m not convinced it’ll succeed as intended, but that’s the best-case rationale. It might be a "Hail Mary" to prevent ceding global leadership to China.. or a way to "hit reset".
Intentionally nuking stocks causes investors to retreat for safety in bonds specifically treasuries. Demand for treasuries drives the interest rates on them down. The US has to refinance $10 trillion of existing debt this year. By driving rates down it save the federal government hundreds of billions in interest payments.
He has actually reposted a video confirming this outlook.
Another angle is he is targeting China. China is in a precarious domestic economic sitaution as well. It weakens China by reducing its exports. In addition tariffs if high enough for long enough encourage local manufacturing. If we go to war with China over Taiwan, it will be very easy for China to convert existing commercial factories to produce military goods. Much harder for us as so much of our manufacturing infrastructure has lain fallow. Its not a good idea to go to war with the country that makes everything you rely on.
I'm not saying these are valid ideas or it will play out like that. I'm saying this is what admin is thinking.
Also if you feel like a read, this is a paper by Trumps leading economic advisor Stephen Miran
https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...
Thanks for this. To me, this makes more sense than some random "tariffs are bad" messaging on social media. Do you have a link to the video you mentioned above? I would like to learn more.
As an aside, for those who have 401(K) and IRA accounts in the US, the stock market plunge might be a great time to convert funds into ROTH accounts (lower taxes now, etc). At least there is a silver lining...
Here is the link. Its just a silly TikTok video discussing the point in an over the top way. The only thing important about it is that Trump reposted it.
https://x.com/americapapabear/status/1907947224090423367?s=1...
What do you think you mean by saying 'drives interest rates down'. It seems a leap to think the fed, the entity that establishes the interest rate, will react in the way you describe.
Common misunderstanding but the fed does not set rates on treasuries (bills, notes, etc) the primary instrument the government uses to finance its debts.
Those rates are set via auctions driven by the demand for safe haven returns on investments, particularly returns when equities are risky. As demand for treasuries (safety) goes up, the rates on those same treasuries go down.
The fed sets the interbank exchange rates, these influence treasury rates but are a very different thing.
I believe people are arguing for tariffs now are mostly not arguing that tariffs are good but that the world needs to level the playing field and that the US imposing tariffs now is a way to force that to happen. The US has lost quite a bit of industrial production to China and other nations over the years and argument is that this isn't simply low Chinese wages but a variety of trade barriers and trade subsidies. The rosy scenario is that Trump imposes these measures, other nations offer concessions and the barriers are mostly lifted with trade now being more in the US' favor.
The problem with this scenario is that every nation naturally has it's own idea of what is fair and that many things that are trade barriers are around politically sensitive issues (safety and purity standards, etc). So getting other nations to immediately drop stuff isn't that easy.
The analogy is war - after a short engagement, the trade-warring nation will "come home victorious". Like regular war, this scenario often doesn't come to pass.
The real question to ask is what comes next: What will Trump do with the tariff money?
That is what's going to determine if the policy is good or bad - if he uses it to boost manufacturing in the US, add jobs, even give people a rebate, it could do good things for the US.
This doesn't directly answer the question, but global free trade has been a calamity for the middle- and working-class. It needs to be razed to the ground, and salt sowed in the fields, etc. This is one way of ending it.
Consider the case of Phil Knight of Nike. Here's what someone posted on Twitter (I don't know the account so obviously don't endorse everything, or anything else, it says):
"Knight's big "innovation" in shoe manufacturing was figuring out how to be one of the first people to flood the American market with cheaply made plastic footwear from Asia. Knight didn't make better, more durable shoes; he made cheaper ones by blowing up the native American industry.
Access to slave labor is, in the short run, a competitive advantage over skilled free labor.
In 1990, 10 years after the Nike IPO, there were 85,000 Americans employed making shoes. Today there are only 10,000 and 99% of our shoes are made overseas. The only exception is footwear for the military.
Phil Knight, however, is worth $35 billion and Nike has a market cap of $90 billion.
In other words, the good middle class wages once generated by homegrown American shoe manufacturing have been transformed by outsourcing into equities owned by a small class of investors and one insanely wealthy oligarch.
Global free trade is a way for the powerful to screw over the middle class by forcing them to compete with third world slave labor.
Yes, with high tariffs, Americans would have to pay slightly more for shoes. In return, however, they would be subsidizing good paying jobs and a decentralized industrial base in their own communities.
Global free trade, on the other hand, subsidizes massive increases in asset valuation. If you are one of the first "in on the ground floor" then you can make insane amounts of money by blowing up middle class wages by outsourcing those jobs overseas.
Libertarians and Wall Street types love to call this "capitalism" and the "free market" at work, but in reality, they are defrauding their countrymen out of the opportunity to build products themselves.
Americans are no longer able to make shoes at home. That option is not available to you. How can we call this a "free market" when it constrains our choices?
Outsourcing is 100% a government subsidy. It is a privilege, allowed by the state, to a select few citizens who figure out how to manipulate the international market to their advantage.
Phil Knight discovered the much cheaper Asian shoe market in the early 1960s because he had the money to travel abroad. His middle class neighbors making an honest living making shoes did not have that opportunity."
The middle and working class are the ones who would be paying signficantly more for shoes in this scheme. A minute fraction of them having jobs making shoes instead of the jobs they would have otherwise wouldn't balance things out.
I also take issue with the trend of describing low paying jobs as "slave labor". Absolutely nobody in vietnam is heralding these tariffs, since they don't look forward to working even worse paying jobs as a result. Free trade benefits everyone except for abstruse dilettantes online.
Sure, pay more for shoes, and have a chance at going back to a world where small towns are prosperous and thriving, people can buy homes in their 20s, quality isn't constantly declining, people aren't constantly stressed over losing their jobs because the last quarter's results 'failed to meet expectations', and families can get by with one wage-earner. All this human happiness and thriving destroyed by globalization, so creatures like Phil Knight can get very very rich.
So again, I've no idea whether the tariffs will work, and on paper I'm quite a bit poorer than I was a week ago, but the current regime must be smashed.
I support putting tariffs on foreign nations (a) to the degree a nation 'undercuts' America by exploiting foreign workers, and (b) providing the tariffs be gradually introduced so as not to cause mayhem.
Those two stipulations would preserve America's reputation as a good global citizen, and would promote better conditions in the USA and the world.
The Trump tariffs meet neither of those stipulations.
I am in the minority here. These tariffs are fairly reasonable. Here's why:
(1) The state has a compelling interest in regulating market risk tolerance. When the FED sets the risk-free interest rate, it controls the price of risk, and thereby the risk of the entire market. It is often advisable to temper the risk-eager market for long-term stability.
(2) Likewise, when the POTUS enacts tariffs, it is similarly setting the market's risk tolerance--namely against the risks concomitant of economic dependency on foreign nations.
(3) This will inoculate the economy against external supply chain shocks (at the extreme: war) by reducing our liability. It's not just consumers who are price-sensitive; given goods within a class will not be affected equally, natural price advantages will emerge, shifting demand and consumption as all levels of economy begin to price-in these tariffs.
The "economic consensus" against these tariffs just isn't real? It's exceedingly likely that the US likely will be better off because of them :)
> This will inoculate the economy against external supply chain shocks
How so? There's hardly enough unemployment and there's also no incentive towards increasing the number of immigrant workers.
Either suppliers eat the cost of the tariffs as the US administration says, or they don't and then everything becomes more expensive, but either way you have the exact same supply chain.
Thanks for the question. Three reasons:
(1) Much like a carbon tax, when the economy becomes accountable for an externality (risk in this case, rather than carbon) it is priced in at every level, ending with consumers, whose demand is price-sensitive. Not all consumer goods of the same class will be impacted equally, creating a natural price advantage.
(2) Once the economy adjusts to these new risk-adjusted prices, POTUS can always offer clemency for specific goods and industries to respond to global supply shocks, providing a large buffer for the now-adjusted American consumer.
(3) Narrowly: it is exceedingly unlikely we won't see production onshoring in any capacity like you suggest. Economic analysis of the first-term Trump tariffs, for example, did indeed find production onshoring.
Sure there will be some onshoring, but does it make more sense to onshore or pay given: 1) the instability of Trump's decisions, see Ukraine or Canada 2) you would have less economy of scale because you wouldn't sell any of your super expensive goods outside the USA 3) if the machines you need aren't produced in America they'd have tariffs too 4) the next president could make the tariffs more favorable. You also haven't touched unemployment (or lack thereof) yet.
(And by the way, if tariffs stay, brace for deflation due to waiting until after the election in 2028).
I mean, they generated the tariff schedule using ChatGPT. What could go wrong?
https://www.newsweek.com/donald-trump-tariffs-chatgpt-205520...
Original clip is here [1]. This likely isn't real, though if ChatGPT were used, I suppose it worked out this time :>
[1]: https://www.tiktok.com/@destinygnome/video/74891340165247337...
To (1):
- Tariffs are not a lever, they distort risk tolerance.
- Tariffs are crude, they are like a huge hammer hitting everyone, including allies
- Tariffs cause loss of confidence and loss of credit
To (2):
- Blanket tariffs target allies; they're isolating us and we're creating blocks polarized to us and weaning themselves off our economic output.
- Tariffs only reduce dependency if there is internal capacity, of which there is none. We'll best case shift our dependency via third-party countries
- We're concentrating our risk on fewer countries where tariffs are lower
To (3):
- We're reducing our efficiency and increasing prices, job losses are coming, productivity will stagnate. We're reducing our agility and our headroom
- Historically, autarky has lead to stagnation.
The economic consensus against these tariffs is real. It's exceedingly likely the US will destroy its economy, alienate itself and isolate itself because of them :)
About (3): This will inoculate the economy against external supply chain shocks, e.g. war.
The lead time required to set up realistic domestic production will mostly exceed this government's term. Setting up brand new supply chains doesn't happen overnight, does it?
Correct; it doesn't. However,
(1) Tariffs will not affect all commodities in the same class equally, creating a natural price advantage, even at the level of consumers. While not absolute autarky, demand will continue to shift to less externally-dependent goods, which has and will continue to reduce our liability.
(2) Ideally congress would codify the tariffs to prevent that. That said, it seems the first Trump term tariffs did induce production onshoring, despite that uncertainty.
What would it take to change your mind on these tariffs?
> What would it take to change your mind on these tariffs?
If there was a positive outcome? US citizens financially better off in 4 years than they are today?
I don't think most MAGA voters would see it as a win if US was slightly less dependent on imports, but they personally are considerably worse off financially, which seems the likely outcome.
> demand will continue to shift to less externally-dependent goods, which has and will continue to reduce our liability.
The cure for this type of wishful thinking is nothing else but reality itself. Still, it’s not the premise that’s wrong here, but the argument that the US society is capable to make this type of shift. It just isn’t gonna happen.
I don't believe you or share your optimism, but I also don't want to get into an argument about it. I think it's too late to ponder if this is overall good or bad... We'll all find out either way soon enough.
If tariffs will strengthen the economy while everyone else predicts disaster, you've discovered market insight worth billions. The Dow didn't just drop 2,200 points because investors are confused, it dropped because people with serious money and expertise believe these tariffs will damage the economy. If you're right and they're wrong, there's an obvious move: bet against them and get rich.
p.s. Trump did this before in 2018-2019, giving us some hard data about the economic effects of tariffs on modern america that are guiding the economic consensus.
In the long-term. Hence "innoculation"--a prick today to prevent a serious illness tomorrow.
In the grand scheme of things, the market movement we saw in response to these tariffs is dwarfed by the sustained market downturn throughout much of 2022. Fueled by persistent inflation concerns and the FED's aggressive interest rate hikes, the S&P 500 index shed approximately 25% from its peak in January 2022 to its low in October 2022, a far more significant and prolonged decline than a single day's reaction to tariff news.
We recovered from those. We will recover from the short-term effects of these tariffs as our economy begins to price in the risk of external dependency.
This must be one of those multi stage inoculations where the prick keeps coming back.
The most credible arguments (IMO) are:
* National Security - we need to be able to make or trade for what we need in the case of war. Even non-tariff economists will give you this one but it can become a slippery slope. We need some capacity to make semiconductors, some steel/aluminum, pharmaceuticals, drones, etc.
* Tank the 10-year. If people pour into treasuries, the 10-year drops and we can refinance our debt a lot cheaper.
* Force a renegotiation of unfair trade agreements.
Weak arguments (IMO):
* bring back manufacturing jobs - even if we reshore some manufacturing, it'll be at the cost of many more other jobs and that manufacturing will be highly automated. No capital appetite exists to do this. No CEO wants to do this. We don't have the infrastructure or supply chains for this.
What is very difficult to defend is the implementation even if you agree with plan. No one outside the trump bubble can really defend the on-again-off-again, inconsistent communication, or board of imaginary numbers used for these. Some float "madman theory" as part of design on renegotiations but I don't think people will make deals with 'madmen' they can't trust and instead are much more likely to build coalitions against them.
> * bring back manufacturing jobs - even if we reshore some manufacturing, it'll be at the cost of many more other jobs and that manufacturing will be highly automated. No capital appetite exists to do this. No CEO wants to do this. We don't have the infrastructure or supply chains for this.
Except it already started: https://www.investing.com/news/politics-news/investment-comm...
Hoping the VC bros are enjoying what they sowed.
IPOs already getting pulled, M&A market dead, market selloff, inflation persisting (soon to rise), probable max tax brackets to rise, etc.
Isn't the market sell off exactly what oligarchs would want so they could sweep in and buy what's being sold off so their portfolios expand that much more. Ultimately, leaving less available for the 99%ers when the market rebounds leaving the oligarchs that much more in control.
It’s not bouncing back this time. The entire world has a distrust of the US that’s probably going to last a generation.
Their "money" is actually shares too, so when market crashes, they get poorer. So probably not in their benefit.
The opposite is true.
We hedge our bets (hence the name hedge funds) so that in market downturns, we use the profits from these weird investments that hit the green without liquidating the typical stocks. We use that money to buy the dips on regular stocks, failing businesses, and cheap real estate. Then, the market rebounds, and we still have our SPX without taking losses. You only get richer once you hit approximately $20M net worth and understand this.
Institutional investors love recessions. At my trade desk firm in Chicago (CBOE) during Covid we were each making the firm like $300k/hour scalping retails with a 20% cut.
Hmm. Millenium and Citadel are down Q1. Many hedge funds are not at all hedged, in fact many (most?) are long only these days. And even then, the uncorrelation to markets is a bit tenuous.
But glad things are going well for you in your universe.
Please reread my comment, slowly.
And perhaps Google about hedge funds a bit to understand how they make money. Of course most are down now...
The whole point is not all hedge funds are supposed to outperform SPY, hence the name "hedge." They make money on fees.
As usual one man is ultra prepared for this.
Buffet has been sitting on a massive pile of cash for some time now...
Not really. Too complicated. Trump is not a complicated man.
Also if you are wealthy you have more money in the market than sitting in cash, so crashes hurt more than help you.
That's generally not true. Crashes hurt everybody, but rich people making a killing during the recovery.
How is this too complicated? All of the oligarchs surrounding Trump knows that if they manipulate him to their advantage, he's not bright enough to know it. So, they realize how much he loves the beautiful word "tariff", and the nudge him even further. Voila! It's win-win
This seems epistemically dubious. If Trump decided his first act as president was to cut corporate taxes instead, and stocks rallied, I bet the same people are going to complain about how "this is exactly what oligarchs want". Short of a communist revolution, what wouldn't oligarchs want?
VC bros want a recession so they can buy everything for cheap. I'm sure they are very very happy right now. Pay attention to REITs.
They may get that in the short term, but also get higher taxes and a CFPB-on-steroids oversight agency over the next couple of election cycles.
I feel like people haven't internalized that there may not be fair another presidential election. The SAFE Act is the most Orwellian bill that is highly likely to pass and would tremendously move things in Republican's favor
> I feel like people haven't internalized that there may not be fair another presidential election.
The degree of thumbing the scales has to outweigh unpopularity of the incumbent. High voter turnout will beat any attempts of deniable cheating. Which is why unpopular dictators end up imprisoning or disqualifying their opponents , and rather than subverting the voting process. America hasn't reached "desperate dictatorship" levels yet, nor will it be there in 4 years. Extrapolating from current events, congressional Republicans are barreling towards a midterm wipe-out.
I looked this up and it seems like something from 2008 about mortgages? Can you explain why this important?
Yeah, but the schadenfreude won't last, sadly. The coming recession is essentially inevitable at this point. Q2 earnings are going to be a disaster for everyone, expect economy-wide layoffs by autumn.
Wikipedia has a list for this, point-wise today was #3 pushing yesterday down to #6. https://en.wikipedia.org/wiki/List_of_largest_daily_changes_...
Shouldn’t we be looking at percentage changes? Naturally, there would be larger point changes as the total market cap of the entire market goes up over time
Exactly right. Otherwise we have to argue that 18 of the 20 worst days in economic history happened in the last 3 years, far surpassing the crashes of 1929 or 1987.
I agree. Sorted by percentage: 2025-04-04 is #7 (−5.50%) and 2025-04-03 is #12 (−3.98%)
It’s 6th (yesterday) and 7th (today) by rate.
Only within the table of 20 largest point drops. Neither even makes the table of 20 largest percentage drops (which is above).
This metric will be irrelevant shortly. Better to start looking at weekly, monthly, annual declines. No doubt it will soon make this page: https://en.wikipedia.org/wiki/List_of_stock_market_crashes_a...
As a price-weighted measure, even a percentage drop is not that comparable over time.
The article has both, but then we could also look at percentage change in a time span longer than a day or shorter. Those lists are arbitrary but Trump has added to this list two days in a row.
for derivatives traders, points is good enough, given how options prices are calculated
but yeah, it is a red herring in an industry that’s obsessed with hyperbolic phrasing
Incredible. Trump is in office for 9 of the top 10 single-day point losses.
I know % losses are far more relevant, but it's still baffling the support this guy gets.
Incompetence has a price
Yeah Americans are going to learn that the hard way, if they haven't already
I'm hoping the lesson we learn is "do everything possible to maintain 3 separate but co-equal branches of government"
Tariffs are supposed to be imposed by congress, not the president. The president is using a loophole (declaring a national emergency) to give himself authority to bypass congress.
It shouldn't be possible for 1 branch of government to take such drastic measures unilaterally.
The fundamental problem is that political parties (and, in particular, a two-party system) render the existing constitutional checks and balances useless. As long as you have political parties with members spanning all three branches, they are not truly separate branches.
We lived in the illusion that this wasn't the case for nearly 250 years because most of the time, elected officials have largely acted in good faith. However, the Republican party (correctly) determined that when it comes to wielding power most effectively, it's in their best interest to protect its own members in all branches rather than members in each branch thinking of themselves as independent of (or even in conflict with) the other two branches as the constitution envisions.
Ah yes, the government has famously been only competent up to this point
We didn’t know how good we had it!
I'm willing to believe this administration is acting in good faith, but two things seem to contradict that, although maybe I'm wrong:
1. Why didn't they include services exported by the US in their 'tariff chart' ? The EU for example, imports a lot more US (tech amongst others) services than they export to the US. It seems disingenous
2. Why couldn't this tariff strategy be implemented in a more calculated, predictable, slow way to give everyone time to adjust, at home and abroad. What's to gain from doing it this way over the one I mentioned ?
With what I’ve seen I don’t believe the administration is acting in good faith. Everything about their behavior suggests otherwise.
What makes you think a twice impeached president who incited an insurrection would act in good faith?
Perhaps we should entertain the simplest explanation: the administration is utterly out of its depth.
Incompetent leader and a coterie of overconfident personalities with no depth or expertise. The fallout is predictable.
3. Why was Russia uniquely exempt from tariffs?
Yeah... I would have thought that fear of Russia was way more ingrained into the American psyche. It's amazing how much they're basically bowing down to Putin
It’s beyond amazing; it’s the tell that gives the whole grift away. Conservative media bought and paid for by foreign influence money. They have sane-washed, explained away, normalized so much egregious behavior that would have ended any 10 other politicians.
They are not acting in good faith. We have a “burn it all” mentality at the highest level of government.
> Why couldn't this tariff strategy be implemented in a more calculated, predictable, slow way to give everyone time to adjust, at home and abroad. What's to gain from doing it this way over the one I mentioned ?
To me, the more concerning detail is that they don’t have any messaging about what their strategy is, except what appears to be guessing from various members of the administration — often which is mutually exclusive with other messaging.
The real risk of all that is people are going to sit on the cash they have, unwilling to make purchases when they can’t see the risk in their future.
My wife and I want to install new flooring, but that’s off the table for us right now, until we have a better idea where this is going.
^ those decisions are disastrous for the economy en masse
yep. I liquidated my TFSA ( tax free savings account in Canada ) 2 weeks ago. 90k. Invested in risk-free 90 days GICs instead. No way I would have watched it lose 10-20% of its value in 2 weeks
> I'm willing to believe this administration is acting in good faith,
There's a difference between nonpartisanship and ignorance.
I voted for Trump, I think they have very large aspirational ideas. I think they have a very shallow bench to implement the low level details.
They are also just terrible at communication, needlessly aggressive and bombastic
alright, can you try and answer #1 for me ? Why weren't services included in that chart ?
I have a guess but not a solid one. The way they determined the rates on these tariffs makes no sense at all. I wish they would have just explained it instead of pushing back and insisting it was based on real existing tariff rates. They really dropped the ball on this implementation.
If I was to hazard that guess, they don't care about services, services are already a dominant US product, no one can beat us. Manufacturing is where we are weak so they went after that. They want manufacturing to come back to the US in case of a war with China over Taiwan. They also don't want counter tariffs on services as again that's our major export. What's really interesting and I could be wrong here is I dont think anyone else has actually hit the US with tariffs on those same services. Its a very calm trade war so far. But its early
The rates were likely a bad GPT prompt. I wish I was joking.
https://www.theverge.com/news/642620/trump-tariffs-formula-a...
Maybe Ai really is going to be the end of us
See, even the way you explained it is miles above what they said. Claiming the trade balance is unjust but leaving out a major component reeks of dishonesty. How can anyone trust them ?
I don't trust them at all, I just needed them to beat the alternative. I expect to like 60% of his policies. He has been delivering in spades for me on those. The rest is a dice game.
I admire your ability to ignore harm to people for your own profit. What are some policies that I too could profit from?
Maybe investing in currently-sanctioned Russian companies? Odds of Russian sanctions being removed are better than even, IMO.
"your ability to ignore harm to people for your own profit" Hey friend, not really sure why you are being passive aggressive with me? I'm not ignoring harm to people, my wife's 401k is red. I very much dislike the panic that people are experiencing right now watching their retirement plunge.
"I don't trust them at all, I just needed them to beat the alternative" Did you think this meant regarding his economic policies as in make money from them? I did not vote for him on the economy at all. If I see a way to hedge against what's coming, of course I will do that. Would be foolish not to.
By alternative I meant the other option for president. If you are angry at me for that, then so be it but you don't know me, we can be civil. You are free to just not comment.
You seem like a level headed dood and we seem to agree that their current strategy is incomprehensible apparently to both supporters and non-supporters alike.
You mentioned he delivered/will deliver on roughly 60% of the things you were looking for.
Do you draw the line somewhere and say, even if I get 60% of things I want, the other 40% could be/are a real dealbreaker ?
It's a very common thing for politicians to deliver on some things that are inconsequential while pursuing their own private agenda for other things.
In my home country there's a saying about politicians: He stole, but he also delivered. The social contract is that as long as the politician does 10% common good, (usually highly visible, populist, short term stuff) he can pursue his own interests be they short term, or long term, even if they are detrimental to the society as a whole - as long as he delivered some short term results.
I voted against Trump twice before I voted for him this time and switched full republican. First time ever voting republican, always been a democrat.
"Do you draw the line somewhere and say, even if I get 60% of things I want, the other 40% could be/are a real dealbreaker"
Absolutely as soon as we fall into secret police and citizens being taken in the night and put in camps or falling out of windows, that's the line for me. He has already come close to it. Censorship is another issue for me but that is not really his thing.
I am quite angry at the insanity with the El Salvador prisons and the man "mistakenly" taken. That's something I am watching. I did vote for him on the border though and removing people that are here illegally. So I have to temper that with the knowledge that the process is not a nice one and there is going to be violence and mistakes will be made. That is the stark reality of calling for enforcement of laws though, law is only law when backed by state sanctioned violence.
"He stole, but he also delivered" I like this and I think this aligns with my outlook. I know Trump is going to make moves to enrich himself, and I am ok with it as long as its not blatant and as long as it causes little collateral damage. I don't think this is one of those things. I think he genuinely believes that doing this with the tariffs is a good thing.
I mentioned it in another of my comments if you want to find it, on how the crashing stock market allows the government to refinance $10 trillion for lower rates. I think that's the goal here. That and rebuilding manufacturing and punishing China. I have no idea how this plays out though. Its possible he doesn't either.
Trump is a lot of things but he is not an idiot. He could not still be here if he was, he gets away with things that would sink anyone else. On top of that he has Musk and that man is also a lot of things but he is one of if not the smartest most driven man on the planet.
Trump is not a nice man, I know that but it will take a brutal man to carry out the social policies I voted for and not collapse under the constant criticism. I knew from the beginning it was a deal with the devil.
So I will watch how it plays out.
The other side was just so much more dangerous long term in my opinion. I wont go into my reasoning, this is not the place for that and it's not relevant to the conversation. Just know I am very comfortable with my vote on those grounds.
So I will remain cautiously optimistic that there is a plan and rational. Trump is Trump but there are some very capable people on the economics and finance side of the house.
At this point in the game I would vote the same way again without hesitation. It's only been 100 days though.
With all due respect, and I understand that you probably mean well, but did 2 different people write this?
You're drawing the line at things that are already happening. Legal citizens are being put into literal camps (the fact it's a modern warehouse or a Salvadorian prison doesn't make it less of a camp) solely based on their appearance.
He's blatantly making moves to enrich himself (see meme coins, tariff back and forward, etc), and unless you live under a rock, the collateral damage should be clear to you now. He's constantly lying when he speaks and I'm sure an educated person as yourself can see that.
You say the other side was more dangerous long in the long term, and although I don't like either side either, it was clear which side was still progress.
You somehow got into a mental state where you're able to trust someone to do things in good will and at the same time say that he's "not a nice man".
You support what is being done, and at the same time you say you don't understand it and you admit it's possible he doesn't either.
Please, take a second to think why billionaires of all people, would be interested in doing anything that doesn't benefit them. They're billionaires because they spent their life doing just that, they don't care about you and I.
You're clinging to the hope that maybe what they're doing somehow benefits you, but you're not even sure how that would happen.
Well, I was attempting to give you the benefit of the doubt by assuming you weren't voting for his frankly sadistic and idiotic attempts to foster hatred of minorities as a scapegoat for his and others like him, decades of mismanagement.
Friend perhaps we can save the accusations of racism for Reddit
Yeah, turns out running the largest economy on the planet is even more complicated than setting the clock on a VCR. Who would have thought. At least they tried.
oh I think they very much know what they are doing from a directional sense. All of this is intentional. I just think they are VERY bad at the details.
[dead]
He had a choice of hard landing vs soft landing. He chose hard landing — looking at history, large scale war follows failed economic war and alliances are arming up in anticipation. I hope Hegseth is ready.
Good news is most of his reserves come from Kentucky, so he won't have to worry about getting hit with tariffs. Oh, you're talking about ready for the military?
Wow. Who would have thought that international trade policy written in crayon could go this wrong. Shocked.
The reason it is not a real market crash yet is the uncertainties around those tariffs, as they seem too absurd to be kept as announced.
And I believe this is a correct analysis, but I also think that Trump is over playing his hand and miscalculating the reactions of the world at large.
We are going to see a lot more chaos and weird moves during the coming weeks, but I am not optimist about the final outcome.
Which is to say: the market hasn't yet fully priced in the effects of the tariffs. It will continue to fall until people have accepted that the tariffs are here to stay.
After that it could level off. Or continue to fall, if there are knock-on effects that haven't yet been priced in.
(Or, I suppose, a bunch of manufacturing could spring up in the US, superior to the rest of the world, giving us whole new export markets and pushing the Dow into six figures. Let's find out!)
> (Or, I suppose, a bunch of manufacturing could spring up in the US, superior to the rest of the world, giving us whole new export markets and pushing the Dow into six figures. Let's find out!)
Didn't we find out like a century ago with the Smooth-Hawley tariffs? Do we really have to test this again, and now in the sloppiest most haphazard way?
We appear to be intent on repeating a lot of old mistakes. So we're gonna find out.
Vietnam already approached this admin hat in hand. Remember they are all politicians and they will do what it takes to remain in power. Having a global financial meltdown is a bluff. Some countries will play the game (smaller ones) and some will not (China).
So 1 country down, 193 to go? Threatening the entire world with a financial meltdown is not a bluff, or in any way a reasonable thing to do. It's tantamount to a declaration of war, and we'd get what we deserve if the rest of the world treated it that way.
Either way, the stature and role of the US internationally has been forever altered, and not positively.
> So 1 country down, 193 to go
One of America's largest trading partners (6th largest import market) so there's that.
Furthermore, India is also working on announcing a Bilateral Trade Agreement with the US before the QUAD Summit in October (https://www.bloomberg.com/news/articles/2025-04-03/trump-pil...)
Other large countries also have delegations in the midst of negotiations already - like SK (https://www.bloomberg.com/news/articles/2025-04-03/south-kor...).
The EU has also started negotiating (https://www.bloomberg.com/news/articles/2025-04-04/eu-begins...)
And Canada and Mexico remain under NAFTA/USMCA.
Tl;dr - most of America's largest trading partners are in the midst of negotiations or exempt.
Right, so we can get some concessions from Vietnam, but completely get cut off from Europe and China. Great trade.
EU is negotiating an off-ramp (https://www.bloomberg.com/news/articles/2025-04-04/eu-begins...)
China is not playing ball, but equally large India is working on announcing a Bilateral Trade Agreement (a FTA in all but name) with the US by Aug-Oct.
I'm thinking China not playing the game is a much bigger deal than countries like Vietnam bending the knee.
China is the real target, others tariffs are mostly a smoke screen and considered a potentially beneficial side effect.
>China is the real target,
To put it impolitely, bullshit. Zero rational analysis comes to this conclusion.
Trump began this idiocy by attacking Canada and Mexico, the very countries he triumphantly signed his trade agreement with just five years ago. He lied -- that's what he does -- about a made up Fentanyl emergency, but it's clear the guy loves tariffs (he's been going on about this for years, and still people try to pretend that isn't what this is about...amazingly everyone just assumes that everything out of his mouth is a lie). Outside of oil and gas the US has (or rather had) a massive trade surplus with Canada, but oh well that's a thing of the past now and will never return.
Then he attacked everyone else.
He did the same thing in term one. He could easily have gotten everyone onboard with strategies to contain or slow China, but instead he pushed everyone else away. He had adults in the room containing his profound sabotage of the US the first time, but this time he's going to speedrun the country to dissolution.
I get that the Trump faithful are desperately trying to do the 4D chess thing now. It will never work. The clown has no idea what he is doing, and has build such a cult no one can tell him how profoundly stupid he is. His treasury secretary is likely to quit in days.
I am not a Trump fan (pretty much the opposite) and you are right that this strategy is dumb is very likely to fail spectacularly.
But I maintain that the real core thing behind this chaos is about China.
While I have no doubt that Vietnam went calling, facing devastating tariffs, the "hat in hand" bit is uproarious.
What do you think Vietnam will offer?
It has negligible tariffs on US goods. It exports a lot to the US because it has very cheap labour, because it's a poor country. It is in no position to buy more from the US. There is no universe where it's going to even remotely close that trade deficit.
So what, in your rose-coloured view, do you think they are offering up?
I mean, everyone realizes this is a hilarious cope regardless. Trump declared, with utter absolutism, that the tariffs are not going anywhere and there is no way to negotiate them. That his "ERS" would net trillions and balance the budget. But wait...now it was really a masterful negotiating strategy?
I mean, Trump could have said "here's the tariffs we have estimate based upon a current analysis", and if isn't remediated in a month we'll stagger in "reciprocal" tariffs. That isn't what he did. Instead he did the stupidest thing imaginable, which is what we see today. So yes, when he has to backtrack because it was the most catastrophic self-destruction in history, feel good that a super poor country came "hat in hand".
The deal he is going to offer to countries like Vietnam is to be part of a "club" of countries with special relationship with the US, and that will include accepting to tie up their currencies to the dollar and buying exclusively US weapons for their defense.
They seem absurd to people using their common sense. Trump is not normal, this is his 5th grade understanding of how tariffs work. All these people saying "we should live through the pain". But why? This is inflicted not some outside market crash, it is deliberate destruction of the economy, I can't figure out any other reason that because of Russian kompromat on Trump.
> We are going to see a lot more chaos and weird moves during the coming ~weeks~ YEARS
Fixed that for you. It’s horrifying isn’t it?
If I wanted to source semiconductors from the US to avoid tariffs, how would I go about doing that?
Don’t micron, intel, and GF have US fabs?
Create a subsidiary in Toronto, Canada that owns a boat and rent a mailbox in Rochester NY?
Lots of jokes flying around about how the new business opportunity is smuggling. Sure it was booze back in the day, but hey meeting market demand is a thing.
You're still going to be paying the higher price so does it matter?
Why do you say that?
Because the components are going to become more expensive?
Because the US labor is more expensive?
Do you know how it breaks down?
Because those exvluded from tarifs will take the tatiffed competition sticker price -1$ to milkvtheir good fortune ?
money on the table for patriotism ?
For one example, you'll pay tariffs on everything you import to do the manufacturing, from lithography machines to FOUPs. Equipment costs are the majority of wafer cost in a modern fab, so this is pretty significant.
Generally the BOM cost of most hardware is much smaller than the labor cost of assembly. That's why company shipped their semiconductors to low labor cost countries and re-imported finished goods.
That said, if the US does enter a depression then the cost of labor in the US will plummet as people compete for jobs which may? change that ratio in favor of manufacturing in the US. That is rumored to be the "big secret" behind these stupid moves but frankly the folks who believe that are not seeing what I'm seeing I guess.
If the cost of labor plummets I wonder if it will accelerate the timeline for AI, automation, and robotics.
I gave this a shot at home a month ago by cutting my kids off from toys online and getting them a 3D printer. They have already printed more toys than the cost of the printer. The only problem is that the printer was manufactured in China.
I don't see that happening. I reason to it this way;
In 2024, $15 BILLION dollars was invested in AI startups, and a record $250 BILLION dollars by established companies (nVidia/Microsoft/Google/Facebook/Apple)
I don't believe that AI making any meaningful progress on the "timeline" will occur just because you throw even more money at it.
Not really. Take an iPhone. The component costs are around $500 while the assembly costs are probably about $30-$50.
Because the components are going to become more expensive?
Of course.
Do you think you're the only one who wants to source US semiconductor parts?
It's supply and demand. Along with some good ole fashioned profiteering.
But I thought semiconductor manufacturing was high margin?
Aren't semiconductors exempt from the tariffs?
Say hypothetically the Tarrifs are all reversed on Monday, does the market go back to normal?
Seems doubtful. Trust is earned slowly but spent quickly.
The current US government is a circus full of unqualified yes-people - the only thing that stops losing even more is to disband the circus.
Define go back to normal. Will it go up from where we are? Sure. Will it immediately return to its former highs, unlikely, the US government has now proven to be a lot more unpredictable and risky than the previous prices assumed. Will it eventually inch its way back to the highs, probably.
No, why would it?
The United States has burned trust and credibility that can never be recovered. Its collapse into a pariah state like North Korea or Russia, cut off from diplomatic ties and trade and left by most of the world to decompose into an irrelevant husk is inevitable. The market will adapt, likely after years of global depression, with China and Europe competing to become the new global hegemon. The normal that existed prior to Trump, like all those jobs he promised, is never coming back.
If you see a Trump supporter, be sure to thank them.
This is a bit of hyperbole. Market will normalize, the most extreme case which even the biggest critics of Trump argue, will be recession. Even that's a probability and not a certainty. How are you predicting Depression (global no less)?
Speaking as one of the biggest Trump critics.
Who would have thought ...
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"Plus, I'm gonna declare that we're already in a secret war with a gang from Venezuela, and use that to kidnap latino-looking people off the streets, and if we find non-citizens--even if they're legally allowed to be here--I'll send them a gulag I rented from the dictator of El Salvador... So don't be mean to me."
"Oh, and you know that funding that Congresse passed a law to use somewhere in your state? You'll need to do a few things for me first..."
He's never had alcohol due to a family with addiction problems, that's my understanding anyway. I kinda see your point though.
My imagined normal government advisor-sort who's just (figuratively) awoken from a 20-year coma and is attempting to approach this situation, initially, as a normal interaction with a normal President is the one drinking and hitting the crack pipe by the end. I tried not to over-burden it with formatting, but may have gone too light and made that unclear.
The drinker in that story is the OP, coping with the barrage of bad ideas.
Pretty sure it's the unnamed guy that's doing the drinking in this scenario. No idea how you worked it out the other way.
The alcohol pouring is by the narrator in the vignette, not by Trump
Oh, and science? Education? Fuck 'em.
I mean to be fair this was the campaign promise, not like a random decision post election. He’s implementing exactly what he said he would.
You missed the really brilliant part: using tariffs to force unskilled and low-skilled jobs back onshore while simultaneously mass-deporting most of the unskilled labour force.
Well you know, officer, I was going towards the brothel in order to get away from the brothel....
Who knew the ghost of Christmas past for Trump was actually Marion Barry
Can someone explain how tariffs aren’t both a tax and inflation, all rolled in to one? These are two of the most toxic words in politics and yet those most allergic to them are relatively quiet.
Because it was never actually about principles.
Ultimately a large number of people identify with Trump. So when he says he inherited an awful economy and the tariffs are the cure, they believe him
Not inflation because it's a one time price increase. Inflation is the rate of change.
The "inflation rate" is the rate of change. Price being higher than they were in the past is inflation.
Are these tariffs even popular in the US?
No.
The uncertainty of what will happen 2-3 weeks or 2-3 months (or 2-3 years) from now is causing a lot of people to react very negatively to this, regardless of their personal politics.
No this is because of trump and a few people he picked to agree with him, mostly from the failed Heritage Foundation. They only got a fraction of their project 2025 goals finished by trump so now they want to punish us all with suicidal economic action because they have a cache of money and gold and can weather it. Trump could have been pro business, kill of regulatory state, reduce some of the size of military obligations and government entitlement programs. Instead he pushed the economy off a ledge.
From polls, a good half disapproves, while a third approves. The remaining sixth or so is undecided.
Does anybody want this? Increasing costs and financial chaos aren't good for anyone. Congress needs to do their job and fix this: revoke (or amend) the "emergency" economic powers that allowed Trump to do this in the first place. I realize that is unlikely to happen.
Yes they are incredibly popular amongst cartels and shady characters with import/export business, as Trump just handed them the largest geo-arbitrage payday of their lives.
> of their lives
You mean "this week."
It'll get rewritten by then.
By the way, in US do federal and local governments give a preference to locally manufactured products in government purchases?
The federal government does. It was signed into law in 1933[1].
[1]https://en.wikipedia.org/wiki/Buy_American_Act
Anecdotally, most federal vehicle seem to be from national brands. State and local government there doesn't seem to be much a consistent policy.
Related earlier:
Dow Slides Another 1k Points. Nasdaq on Pace to Enter Bear Market
https://news.ycombinator.com/item?id=43582292
Stocks have now declined to where they were about a year ago. The Shiller ratio is at 31.3.
Stocks have done very well and have been at historically high prices. There is still much room to fall.
Trump and the Republican Party have forcibly assumed control of the federal government, dismantled it, voided every function of the Constitution and replaced people critical to the functioning of global affairs with morons and lunatics. The economic and social and international underpinnings of the planet have been detonated on purpose so the remaining pieces can be reordered for their exclusive benefit.
This is just the beginning, and I can’t wait to see even more threads here trying to rationalize why this is all Good, Actually before a thread discussing the end of Pax Americana gets killfiled by an Altman acolyte.
What's especially interesting is that the market already had tariffs priced in, yet what Trump announced was SO bad that the markets have dropped another 10%...
My European friends and family are amused... China is going to take the US' place in the world economy, Europe will become more self-sufficient and innovative, the US turning mercantilist will simply reduce their influence in the global marketplace... There's not much the world truly NEEDS from the US... Stuff like semiconductors were outsourced long ago, ASML and TSMC are the most important companies in that equation, neither are American.
I didn't understand put options until this month. Today I bought puts w/ 1 or 2-week expirations on virtually all of the top 20 companies (by size) that were at their 52-week high. Didn't matter that I never had heard of some of them (AWK is a water company?), made gains on everything. My only mistake was not betting against Phillip Morris, thinking that people will probably want to vape/smoke even more during this crisis, but nope, they fell 7% too.
Obviously it can't be that easy, but seems like the market still thinks Trump might just do a complete 180? I guess he's done so multiple times the last two months, but those threats/alarms seem like dry runs from which he's crafted his current policy.
> made gains on everything
Just remember you didn't make gains until you sell those puts. If you made a lucky bet and won, sell!
Oh I sold them before the market was closed. I’m just looking for something to distract myself while “line go down” on my 401k.
301k
It can be that easy, but you are gambling. If the market turns for whatever reason, then all your positions go near to zero.
Countries acquiesce
Or Jerome Powell does an emergency rate cut like the President keeps demanding
Or Trump acquiesces
Or everyone just decides they oversold everything
enjoy the volatility, the first hit is free
It can be that easy, but you are gambling. If the market turns for whatever reason, then all your positions go near to zero.
They’re options, they can go all the way to zero, not “near to zero” (which is what happens to the majority of options contracts regardless). That said, with options you leverage a lot more shares than buying outright, so the risk can be smaller. And if OP has any sense, they’ve unloaded those positions already and made some serious bank.
> And if OP has any sense, they’ve unloaded those positions already and made some serious bank.
Absolutely not, I am a coward and only buying options around the $50-range and selling out for +$20 to +$100.
only reason I wrote near to zero, is because if I left it at zero, someone else would have chimed in about something pedantic about how there is still theta to decay
specifically because OP bought 1 to 2 week expirations, so a market reversal at the other end of the weekend won't set them to zero
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Something like 60% of consumer spending is by the top 5% of income earners.
This is actually a tax on the rich. And they won't care about higher prices.
It's a tax on everyone. You eat, don't you? Wear clothes? Drive a car?
Rich people will pay more for their food too, but they can afford to - they are rich.
> This is actually a tax on the rich
Nope, it's a tax on everyone. Rich people will pay more of it, but non rich people will be harder hit as % of income. Same as sales tax/VAT.
The wealthier you are, the more flexibility you have in your purchasing decisions as well. It’s easier to accelerate or delay a big purchase to save 30% when it’s not something you need to live, or can’t afford to jump on a purchase last minute.
First of all, I don’t like Trump. I’ve voted blue all my life. Having said that, Trump is the only one willing to play ball with the Chinese. And the US national debt is not sustainable at this level. Something has to break in order to bring down servicing costs. I am not saying this is the right way to do all this. Far from it. But we do have a huge debt problem in this country and Chinese corps do not play by the rules (ie IP is nonexistent).
This could go wrong in so many ways and eventually undermine US strength while boosting Chinese global influence even further.
So this is the wrong way but will still address the deficit? How exactly will this address the deficit?
He’s (rather Bessent) literally crashing the economy in order to force the Fed to lower the rates. To be fair, a soft landing was a pipe dream. Bessent has a long history of talking about this type of reckoning.
"Setting the building on fire was and in turn the entire blockthe only way to address the creaky floors". There's no Trump masterplan here (or anywhere else) than the sanewashing of his bs by his fanbois.
> Trump is the only one willing to play ball with the Chinese
Biden was also willing to do so. For example, he put a 100% tariff on electric cars.
> But we do have a huge debt problem in this country.
Which is largely Trump's fault. He increased the debt by $8T versus Biden's $5T, and people costing his promises on the campaign trail concluded that his promises would increase the debt at twice the rate that Harris's promises would have.
I agree with you. It’s definitely a big portion of the debt. However, Fed rate at current level is not sustainable. You can do the math and it simply would not work in the very near future. So you either let that play out or do something stupid like this. Not saying I have a better solution. No one does.
Be gready when others are fearful, glad to see everyone on this thread is the greatest hedge fund manager of all time selling and shorting, happy days
Another more apt saying in this case: don't catch a falling knife...
Yeah I went 100% to cash about 5 days ago. Jobs report came in ok, I think Trump is enjoying the side effect of forcing the fed to lower rates to stave off recession. On the other hand the market is super emotional right now and not making sense. I’m out until the dust settles. I have to admit, it’s nice to see Wall Street twist in the wind when they’ve been running the show for so long.
Remember the financial crisis when Bush (R) wrote them a $800B check and Obama (D) delivered it hat in hand? Suck it wall st.
Meh, I shorted the Dow a couple months ago, I was early but its paying off now in gangbusters. He has been shouting what he was going to do for months now, free money
Three plus more years of this too. Fortunes will be made.
China retaliates with Tarries hmmm dont Family Dollar Dollar General dont they have a lot of Chinese stuff? Well guess who if frequenting those stores more and more As inflation hits harder, middle-class shoppers gravitate to dollar stores Dollar stores have traditionally served low-income and rural shoppers who have few options to stock up on what they need — but the pandemic is changing that. https://www.nbcnews.com/business/business-news/inflation-hit...