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help re tariffs, please

Rincewind

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I think this is the correct place for this thread, though I did wonder about starting it in US Politics!


I just saw this article on CNBC - https://www.msn.com/en-us/money/mar...riffs-report-finds/ar-BBLTdif?ocid=spartandhp

So - the US is making loads of money from tariffs apparently.

Maybe I'm misunderstanding.

There's a picture of a ship from Italy and the cargo had $1.4 million in tariffs due - so the cargo was $1.4 million more expensive. According to a Trump tweet this extra money is a good thing.

However - I thought it was the US company that ordered the goods that was paying the extra $1.4 million, and subsequently the people who buy whatever the products that are made?

So - aren't these wonderful tariffs a tax on US companies and consumers?

Color me puzzled!
 
Rincewind said:
I think this is the correct place for this thread, though I did wonder about starting it in US Politics!


I just saw this article on CNBC - https://www.msn.com/en-us/money/mar...riffs-report-finds/ar-BBLTdif?ocid=spartandhp

So - the US is making loads of money from tariffs apparently.

Maybe I'm misunderstanding.

There's a picture of a ship from Italy and the cargo had $1.4 million in tariffs due - so the cargo was $1.4 million more expensive. According to a Trump tweet this extra money is a good thing.

However - I thought it was the US company that ordered the goods that was paying the extra $1.4 million, and subsequently the people who buy whatever the products that are made?

So - aren't these wonderful tariffs a tax on US companies and consumers?

Color me puzzled!
Click to expand...


When the cost is simply passed on to the consumers then it isn't a tax on the companies.

Tariffs are generally aimed to protect certain businesses, industries, or sectors ot the economy. Their cost to the economy as a whole isn't usually a significant consideration.

There can be arguments made to the effect that protecting certain sectors of the economy will have benefits in other areas, such as national defense, which justify the cost to the overall economy. But these arguments, although common, frequently do not withstand close scrutiny.
 
Rincewind said:
So - aren't these wonderful tariffs a tax on US companies and consumers?
Click to expand...
Yes. Whether they achieve their stated aim of protecting American industries is the part that is up for debate.

Startz said:
The article is poorly written. The U.S. government collected more money, not the country. In other words, they raised taxes.
Click to expand...


From the article:
Tariff payments are collected by the U.S. Customs and Border Patrol and go directly into the Treasury's general coffers.
Click to expand...
 
While the article did say the money goes to the government, it also said "CRS says the new tariffs could reap the U.S. some $7.5 billion." That's all meant by not well written.
 
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quadraginta said:
Tariffs are generally aimed to protect certain businesses, industries, or sectors of the economy. Their cost to the economy as a whole isn't usually a significant consideration.
Click to expand...


Tariffs are almost always uneconomical. If they did make economic sense, the government wouldn't need to impose them. The invisible hand would sort everything out.
 
Loss Leader said:
Tariffs are almost always uneconomical. If they did make economic sense, the government wouldn't need to impose them. The invisible hand would sort everything out.
Click to expand...

Indeed. In the 1980s Australia had tariff barriers miles high, protecting the jobs of many thousands of textile, clothing and other workers but absolutely smothering the economy. When the barriers were swept away by the great Hawke and Keating governments there was short term pain, but the economy has been rocket powered since and we are now the world’s 13th largest economy.

Tariffs are stupid.
 
lionking said:
Indeed. In the 1980s Australia had tariff barriers miles high, protecting the jobs of many thousands of textile, clothing and other workers but absolutely smothering the economy. When the barriers were swept away by the great Hawke and Keating governments there was short term pain, but the economy has been rocket powered since and we are now the world’s 13th largest economy.

Tariffs are stupid.
Click to expand...
That sounds like post hoc ergo propter hoc to me. Paul Keating did a lot more than just destroy the textile industry. Australia may have appeared to have recovered from the Keating legacy but it has come at a cost: record levels of debt.
 
Rincewind said:
I think this is the correct place for this thread, though I did wonder about starting it in US Politics!


I just saw this article on CNBC - https://www.msn.com/en-us/money/mar...riffs-report-finds/ar-BBLTdif?ocid=spartandhp

So - the US is making loads of money from tariffs apparently.

Maybe I'm misunderstanding.

There's a picture of a ship from Italy and the cargo had $1.4 million in tariffs due - so the cargo was $1.4 million more expensive. According to a Trump tweet this extra money is a good thing.

However - I thought it was the US company that ordered the goods that was paying the extra $1.4 million, and subsequently the people who buy whatever the products that are made?

So - aren't these wonderful tariffs a tax on US companies and consumers?

Color me puzzled!
Click to expand...

Absolutely, provided one thing--that the cargo could still be sold for $1.4 million more on the US market. If, for example, there is an American company that makes the product and charges only a small amount more than the Italian company, then somebody (either the importer or the company making the product in Italy) will have to eat part of the tariff.

That said, I think tariffs are generally a bad idea, for the exact reasons you mentioned. They are a tax on Americans on the cheaper goods they could be getting from overseas. They are pernicious because the winners in the tariff wars (local companies providing the same goods) are well known and concentrated within a particular industry, while the losers are largely unknown and diffuse throughout society; that is to say that we have some winners who are obvious and the losers less obvious. Guess what? In a situation like that the winners have a strong incentive to try to keep the tariffs in place, while the losers don't even know they have lost.

This is the one area where I have consistently disagreed with Trump; I think he's every bit the idiot people say he is everywhere else on trade. Having said that I could hope that he's just saber-rattling to negotiate a better deal. But I don't get that feeling; if anything this is a core issue with him like the Wall.
 
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In a fair trade scenario, tariffs and/or quotas only make sense to prevent bad-faith players from grabbing market share, say, someone stealing IP and not paying royalties. However, in any case of unfair practices, better to use WTO rulings for sanctioned relief, thus avoiding tit-for-tat emotional trade wars, a la Trump and Turkey.
 
Local businesses "protected" by new tariffs will immediately raise their prices to just under their external competitors, to maximise profits. That gets passed on to the local consumers to pay. So tariffs actually raise local prices as well as import prices. This tends to dampen trade generally. The consumer loses and the tax man wins both ways.
 
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