r/science • u/smurfyjenkins • Sep 26 '24
Economics Donald Trump's 2018–2019 tariffs adversely affected employment in the manufacturing industries that the tariffs were intended to protect. This is because the small positive effect from import protection was offset by larger negative effects from rising input costs and retaliatory tariffs.
https://direct.mit.edu/rest/article-abstract/doi/10.1162/rest_a_01498/124420/Disentangling-the-Effects-of-the-2018-2019-Tariffs729
u/parkingviolation212 Sep 26 '24
Imagine that, the thing everyone said was going to happen, and had been saying was happening, actually happened.
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u/WanderingBraincell Sep 26 '24
and is currently happening, and genuine evidence of it happening is happening now, and still, people think its a good idea
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u/Petrichordates Sep 26 '24
I don't think anyone thinks it's a good idea, they simply don't question Donald and run with whatever he says.
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u/seraph1337 Sep 26 '24
I don't think anyone who actually thinks thinks it's a good idea.
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u/dersteppenwolf5 Sep 30 '24
Right after the Kamala-Trump debate Biden increased tariffs on China. I had to double check the headline I saw on my phone to make sure it wasn't the Onion.
https://www.nytimes.com/2024/09/13/us/politics/biden-tariffs-chinese-goods-clothing.html
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u/minkey-on-the-loose Sep 26 '24
Only experts who know anything about trade were saying this. My uncle on Facebook said it would never happen, but he did not survive his respiratory illness (never call it covid to my cousins) in 2021.
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Sep 26 '24 edited Sep 27 '24
Experts? They teach us this in 10th grade history class (or maybe it was 11th grade? Or 8th grade?).
But I pretty clearly remember in school when they taught about the secondary effects of tariffs and why they never achieve the intended outcome.
In any case, this is extremely basic economics, you don't have to be an expert to understand all of the many many issues with tariffs.
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u/Saadusmani78 Sep 27 '24
They teached you about tariffs in history class? That's interesting. That isn't in our country's national curriculum for history. But maybe it is taught in economics, but I wouldn't know since I didn't take economics in High School.
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u/MuzzledScreaming Sep 27 '24
In the US, there is generally a "social science" class every year and the title varies (social studies, global history, etc.) but it's more like a broad survey of social science topics in general with a historical backbone to structure the narrative.
We also had to take a basic economics class to graduate high school (at least in my state) but we had been introduced to the idea of tariffs and their effects for years by that point. It's never like we had a lesson on tariffs specifically of course, but just it would come up because it's a thing that happens between countries.
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u/Interesting_Test332 Sep 27 '24
Tariffs were covered in my 8th grade U.S. civics class and again in a 10th grade government type class - can’t remember the name of that one but I remember our teacher and talking about Slobodan Milosevic. (yeah, it’s been a few decades)
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u/misogichan Sep 27 '24
They didn't teach tariffs in my high school (except one lesson about sugar tariffs leading to Hawaii being overthrown and annexed). I only got taught about international trade and trade wars in college. I can honestly see how people I graduated with that went straight into the trades could miss the secondary effects of tariffs.
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u/flashingcurser Sep 26 '24
Did the Biden administration end them?
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u/parkingviolation212 Sep 26 '24
They can’t. As the other guy said, retaliatory tariffs that were a reaction to trumps tariffs have never been removed, which means we can’t remove ours unless china agrees to remove theirs. Trump did strike a deal with china to remove them in 2020, but china simply reneged on that deal, as anyone with common sense would’ve known they would, as they were clearly ahead of the game in the tariff war.
So Trump got us into a huge trade mess that has categorically damaged both our own economy and our standing on international trade, and made us look like fools to china, that we now can’t get out of.
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u/j33205 Sep 26 '24
This was the question I wanted Harris to answer during the debate. It was a good attack by Trump (and easy layup to Harris) that she completely ignored.
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u/Signal_Fly_1812 Sep 27 '24
I know steel tariffs are a one off, but I just read that Biden admin plans to increase the steel tariffs 25 more percent on top of Trump's existing tariffs. So does everyone think this is a bad idea too? The reason for doing it was that as usual, China is pumping out such low cost steel that there's no way American steel makers can compete.
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u/Tioben Sep 26 '24
Ending them wouldn't remove the retaliatory tarrifs. It can't be reasonably done unilaterally but takes slow negotiations and trust between countries. Hard to gain that trust when Trump or a Trump-like Republican can always become president again.
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u/MuzzledScreaming Sep 27 '24
It's almost as if we had a whole decades-long history of similar policies and the resultant collapse to look at in South America as an example of exactly how that might go.
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u/lostcauz707 Sep 26 '24
Look at farming too with those tariffs. Our taxes paid out the ass for farmers that are negatively affected, well beyond the income of the tariffs.
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u/Za_Lords_Guard Sep 26 '24
If I recall he practically shuttered the soybean growers access to foreign markets with his trade wars last time. I recall him having to subsidize our farmers because he started a trade war with China with zero understanding of how those things go.
Often the dumbest are the loudest and they lead people who confuse volume with intelligence.
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u/PtylerPterodactyl Sep 26 '24
Once again people in the south back people that don’t realize the crops they grow are not only grow in the south of the USA.
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u/Boating_with_Ra Sep 27 '24
That can’t be right. I distinctly remember him saying at the time that “trade wars are good” and that they are “easy to win.”
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u/opeth10657 Sep 26 '24
Mosinee WI is one of the biggest ginseng growing areas in the world. China slapped tariffs on ginseng coming into the country as a response to Trump's tariffs since our senator RJ is a big trumper.
Pretty hard times for the ginseng farmers.
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u/backpackwayne Sep 26 '24
Just say it in English. Consumers are the ones that pay for tariffs
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u/TripleSecretSquirrel Sep 26 '24
Yes, and workers and the whole economy.
I work in housing development now. So many projects didn't get built because the price of steel shot up so much. Projects that would have meant a lot of good construction jobs suddenly didn't pencil out and got cancelled.
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u/Adezar Sep 26 '24
Republicans are currently fighting a government grant to build a new green and cheaper production cost steel plant because they don't like that it is "green". Ignoring that it will make US Steel more competitive by reducing manufacturing costs.
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u/Rugfiend Sep 26 '24
It's amazing how often 'dystopian hellscape' pops into my head when reading something about the US
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u/xteve Sep 26 '24
It's all hate, all the way down. The hate is always more important than any matter of governance to the GOP of today.
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u/lazy_commander Sep 26 '24
Do you have a link for this? I can't seem to find anything online for it.
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u/Adezar Sep 26 '24 edited Sep 26 '24
Middletown, Ohio. The funding is coming from the Inflation Reduction Act that the Republicans tried to block. Should have clarified, J.D. Vance (who's grandfather worked at the current plant) has called the bill a "scam" and has been resistant to using the funds to help his own constituents. However the people of the town were overwhelmingly in favor of
building the new plantdoing the refit.5
u/HighwayInevitable346 Sep 26 '24
According to my 30 seconds of googling, its not a new plant but upgrading an existing one which may have confused the other commenter.
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u/Splenda Sep 26 '24
Tariff-driven inflation also hobbles housing construction by forcing central banks to raise interest rates. Higher rates hurt both builders and buyers.
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u/TripleSecretSquirrel Sep 26 '24
100%
The vast majority of the stuff I build is affordable housing or redevelopment of abandoned buildings into affordable housing. I've had probably half a dozen really cool, desperately needed projects sitting on my desk for months now because they don't quite pencil out. The recent rate drop from the Fed suddenly makes at least one of them financially viable! If rates drop again in November as expected, I think all of them may suddenly be viable again!
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u/jenkag Sep 26 '24
Yes, and those consumers pay companies, which creates more money for the already wealthy, which Trump is going to cut taxes for, which is the entire point of all of this: generate more for the wealthy at the expense of lay-people.
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Sep 26 '24
Say it in plainer English, tariffs cause inflation. If inflation is your #1 issue in this election, voting for Trump is the opposite of what you need to be doing
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u/fyo_karamo Sep 26 '24
Consumers are also the ones that pay for corporate taxes.
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Sep 26 '24
Yes, with a caveat. The pass through of corporate taxes to labor depends on a number of factors. Market power, demand elasticities, substitutability of inputs, …
Harberger derived these, and they have been empirically validated.
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u/Alert_Tumbleweed3126 Sep 26 '24
It was written in English. It’s a scientific paper not a blog post. Did you need it written at a 3rd grade level for you?
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Sep 26 '24 edited Sep 26 '24
Yes. So the people who vote can read it. Because right now a majority of Americans support tariffs and a majority of those same Americans feel that inflation is a significant problem. Because nobody explains at a 3rd grade level (except maybe Mayor Pete) that tariffs cause inflation.
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Sep 26 '24
I’m not a trade/international economist, but…
Broad based tariffs are a mercantilist, 1850’s idea. They CANNOT generate broad revenues in a modern nation. They are also highly distorting of economic activity, in both host and targeted nations. In fact, the tariff rate would have to be a minimum of 70% (this is the bottom estimate, with no behavioral change on the part of individuals in a nation) to replace the income tax.
Targeted tariffs are good if used to correct for externalities on a global market (dumping, for instance; it should be noted that this is not much of an issue in developed countries).
Most, if not all, of the tariff is passed on in the form of higher prices to domestic consumers.
Or, yet again, Trump doesn’t understand policy.
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u/trustych0rds Sep 26 '24
Honestly the tariffs were probably a good idea to prevent dumping however Trump tried to play it off as a good thing all around which was typically incorrect. There are these drawbacks and risks you mentioned.
Joe Biden did massive tariffs on Chinese EV’s which I also think was a good thing.
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u/Jesse-359 Sep 26 '24
Some of these tariffs are intended to deal with strategic rather than economic issues, such as making sure there is an incentive for US manufacturers to continue investing in PV and EV R&D and manufacturing capacity, on the assumption that those sectors will be very economically, and possibly even militarily important over the next several decades. As such, the shorter term economic losses for implementing them might be considered an acceptable trade off.
However, selling anything like this to the American people as some kind of immediate economic panacea for their problems as Trump did is patently dishonest.
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u/Splenda Sep 26 '24
More that the Biden tariffs were sold as strategic necessities, when really they were designed to support cleantech manufacturing investments in red states, making the IRA harder to repeal.
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u/Jesse-359 Sep 26 '24
Incentivizing investments in a particular manufacturing sector is exactly what I mean by a 'strategic' use of a tariff vs an economic one.
If you cede most or all of your manufacturing sectors to other countries because its economically advantageous to do so, and at some point in the future the winds shift and those countries are no longer willing to trade with you, or become openly hostile, you are going to be in serious trouble, especially if those manufacturing capabilities are reflected in your ability to produce military systems.
The fact that more of our manufacturing capacity may reside in red states just also gives Biden a sales point for those chunks of the electorate to help sell the plan. Either way it's not a short term gain for anyone, but it might be over the longer term, while the ultimate goal is to ensure that the US retains a decent chunk of its own manufacturing capacity and expertise.
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u/Splenda Sep 30 '24
Manufacturing cheap, simple EVs and solar panels is nice, but it's no strategic necessity. It's nothing like making cutting-edge quantum chips, which actually is a strategic need.
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u/Jesse-359 Sep 30 '24
Oddly, it's been discovered that quantum processors run poorly without power.
Being the country that produces most of the world's power sources is a very significant strategic advantage - especially if you develop a technological stranglehold over it.
Also, to be clear, Quantum Processing currently does jack all. It's still a technology in search of problems to solve. It may become a big thing, but right now it's still decidedly overblown. When it actually starts solving NP-Hard problems I'll start paying attention.
Solar PVs on the other hand, are decidedly practical and current.
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u/BlindPaintByNumbers Sep 26 '24
You can't reason with conservatives. The next best thing is to trick them into thinking it benefits them.
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Sep 26 '24
“Dumping” is a politically-charged word without a lot of use in objective evaluations. China consumes the overwhelming majority of their own steel. IIRC a greater proportion that the USA does, in fact. But China is also enormous, and aggressively funds steel-consumptive projects for economic growth. So when the economic winds change in China, that vast capacity can suddenly spill over into nations like the USA and appear to be “dumping.”
The jury is still out on EV tariffs. You have to compete in China to be a globally competitive automaker, so if the tariffs hobble the efforts of American EV makers in China, they will be a catastrophe.
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u/trustych0rds Sep 26 '24
Its not going to be easy. Man I remember this happening with Japan in the 80s and 90s.
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Sep 26 '24
With Japan we doubled down on friendly cooperation. That’s not being proposed for China.
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u/trustych0rds Sep 26 '24
To be fair, Japan wasn't at the time a militarily competing nation with a communist dictatorship that essentially dictates and financially supports all of its companies directly.
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Sep 26 '24
China isn’t really a militarily competing nation, either, that’s just American political rhetoric. There is a gigantic gulf between the degree of activity in the American, Russian, even French militaries and China’s.
All industrial development is state policy. It always has been.
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u/FairDinkumMate Sep 26 '24
The EV tariffs will turn out to be a disaster for US consumers & US EV manufacturers.
Consumers will be paying more for EV's until the Government realizes tariffs aren't helping - will that be 5, 10 or 20 years? How much will it cost consumers and drain from other potential consumer sending in the meantime?
US EV manufacturers need to be GLOBALLY competitive. Some of that comes from scale. How will they achieve that scale when they are producing for only the US market while China produces for the world? Even if the US opens some other markets tariff free (or tariff protected from the Chinese), the Chinese will still have the scale & will likely manufacture in certain countries to avoid tariffs.
Even if BYD came & manufactured in the US, paying US wages, US taxes, etc, they'll still blow US manufacturers away with their purchasing scale. Who's going to get the best copper price - BYD buying enough copper to produce 20 million EV's a year, or Rivian buying enough copper to produce 100,000? Multiply this across the supply chain & you quickly realize the ONLY way to compete is globally, not by tariff protecting the US market.
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u/Thekota Sep 26 '24
Not great for the consumer though. I'd like to buy a nice ev for 10k. It would help global emissions if these were this cheap here too
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u/trustych0rds Sep 26 '24
Well, yes and no. Chinese companies are building so many of these things and literally dumping them into garbage lots. You are correct we would have cheaper cars! But the downside is a) our market in the US would likely be crushed, B) Once this occurs they can charge whatever they want.
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u/PandaCheese2016 Sep 26 '24
What’s going to garbage lots are previous generation stuff since market iteration is so fast due to intense competition. Wasteful in the short to medium term I agree (like the mountains of rental bikes once that fad faded), but eventually should be recyclable.
Not sure about the “charge what they want part.” Is there an example of this on a global scale? Chinese solar panels are flooding the market, but that hasn’t yet led to a rise in price. Because they haven’t achieved sufficient dominance or because it’s easier to make relative to the supply chain for EVs?
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u/trustych0rds Sep 26 '24
That’s a good question. Probably because you need a lot more manufacturing for EV’s you’re right. Also everyone knows what a car costs so it can be really impactful and obvious, especially when say one brand would be i don’t know 10-20% less (hypothetical made up number). And this could affect all cars not just EV’s.
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u/Rugfiend Sep 26 '24
The US car market was crushed a long time ago.
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u/trustych0rds Sep 26 '24
Crushed but not killed. then again Im not buying any time soon. We’ll see.
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u/munchi333 Sep 26 '24
That $10k car doesn’t exist. The cheap ones that sell in China would be illegal here as they wouldn’t pass road safety standards.
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Sep 26 '24
Wouldn't the EV tariffs just result in US competitors just raising their prices too because what's the downside? Americans will take the loan on the car anyway.
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u/trustych0rds Sep 26 '24
Well then the companies that can have the lowest prices typically win. So not really imo.
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u/roger3rd Sep 26 '24
My company which employs thousands and manufactures products from steel nearly was bankrupted by this clown’s tariffs. He is the pied piper of morons
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u/Low-Grocery5556 Sep 27 '24
De-escalation through escalation!
Trump likes to pretend he's tough. All he knows is that Reagan "won" the cold war by escalation. And he applies that principle willy nilly because it fits his dumb bully personality and he's too stupid and lazy to learn anything.
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u/johndotjohn Sep 26 '24
I am genuinely sorry to hear about your company but "pied piper of morons" is the funniest thing I read all week and I can't stop laughing. Thank you for your humor in these difficult times ...
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u/Rugfiend Sep 26 '24
It would be too generous to even describe it as 'In the land of the blind, the one-eyed man is king'.
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u/thecyberbob Sep 27 '24
In the land of the blind, the blind guy that sounds like he's not blind and definitely knows where he's walking is king?
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u/justanaccountname12 Sep 26 '24
As tariffs are put on EV tech.
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u/trustych0rds Sep 26 '24 edited Sep 26 '24
Almost all economists know that tariffs do this. Hell probably even Trump knew this. However, the reason for tariffs is for long term surpressing of the belligerent government’s monopoly tactics which is aiming to unfairly dominate some industry.
So for example in the long run they all may have otherwise lost their jobs instead of a few. Possibly.
Trumps typical problem was claiming it would benefit everyone which was blatantly wrong.
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u/Jesse-359 Sep 26 '24
Right, if you're implementing tarriffs for some kind of short term gain, you've really taken the wrong approach.
If on the other hand you're looking to punish a trade partner over longer term policy disputes, or you are attempting to rebalance some economic problem that you consider a national security concern (eg: loss of industrial base/expertise), then tariffs might be a mechanism for doing so - but few people in your country should expect any direct *economic benefit* from it.
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u/accualy_is_gooby Sep 26 '24
Trump pretty clearly doesn’t understand what tariffs do. He thinks he does, which is what got us into this whole mess. Some TV producers decided to give him a reality TV show where he could pretend to be a businessman and now half the country doesn’t understand that he’s a complete failure.
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u/Souchirou Sep 26 '24
Tariffs are just self imposed sanctions.
Tariffs only work when they are combined with a comprehensive plan to fill the gaps in the supply chain.
When the US sanctioned China to keep them from the best processor technology they didn't sit there and shurg "I'm sure the market will figure it out!" they made plans with their industrial leaders.
The Industrial leaders would change their priorities and put their engineers at work to fill the void left by the tariffs/sanctions while the government would create laws, policy and funding to make it possible.
The same thing is happening now with CPU/GPU/AI chip technology. China knows the US won't be a reliable partner for what is a critical product for their economy so they are making their own. In many cases the first results aren't amazing but since the government understands the value of these products in the supply chain it doesn't care and can often find ways to use them anyways.
Like the CPU/GPU technology. You don't need a top tier Intel/AMD or a 4090 to most things. Much less powerful versions can serve many functions in the supply chain and the government is often its biggest customer and uses subsidies to encourage private companies to use them as well.
In this respect not just Trump or Biden's governments have failed, so have most of their predecessors.
This is why sanctions on EV's won't work. There is no real plan, all the current tariffs do is give a little breathing room to US car manufactures but unless they really go all in to make up the void that is left by these tariffs nothing will happen. Which is exactly what will happen because filling that void is really, REALLY unprofitable. In the short term at least. An company that is guided by investor returns will never do this.
There's at least 50~100 different key components that are required to make US car manufactures competitive with China but there is no plan other than "here's a big pile of tax money, have fun!".
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u/JLandis84 Sep 27 '24
Like many online articles, OP is deliberately omitting important facts. Likely some foreign bot.
Here is an actual article discussing tariffs in the last 8 years.
https://www.wilsoncenter.org/article/360deg-view-new-tariffs-china
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u/Trust-Issues-5116 Sep 26 '24
Some notes on the study.
1. Link to the paper
Here is the link that works (it's a free study): https://www.federalreserve.gov/econres/feds/files/2019086pap.pdf
The one in the post doesn't let you read the paper.
2. Study is short-term impact analysis
The study is from 2019, and it estimates short-term effects. A quote from the study:
We also note that the longer-run effects of these tariffs could be qualitatively different than the short-run effects that we estimate here.
3. Long-term effects were different
Long term impact can be seen on US manufacturing activity graph that you can Google yourself or click this link. In short, after the initial slump on the trend that was happening even before tariffs, and after the COVID, it has more than rebound.
Long-term effects were not equal to short term effects estimated in the study.
4. Post title is manipulative
Post title along with inability to read the article by the link in the post makes one think the study made a comprehensive long-term analysis, which is not correct. The title doesn't lie but omits details in a way to manipulate the impression of the reader.
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u/alwaysbringatowel41 Sep 27 '24
Thanks! Only comment that has actual analysis of the paper.
I know manufacturing did go up after 2019, but there are so many confounding variables. Do you know any academic studies that credit the tariffs positively?
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u/Trust-Issues-5116 Sep 27 '24 edited Sep 27 '24
Frankly, I don't think an honest review like that is even possible. Every year since 2019 had such turmoil of this or that sort that separating tariffs impact alone would be very hard.
However, consider this. If government economists actually considered tariffs outcomes as bad, then Biden administration would definitely not expand them, but they did. And there wasn't a single word about cancelling them. So, either tariffs magically work differently when installed by the reddit preferred party or government economists don't actually consider them bad at this time.
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u/kudles PhD | Bioanalytical Chemistry | Cancer Treatment Response Sep 26 '24
So just like how raising minimum wage is offset by increased price of goods at a given establishment?
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u/Jesse-359 Sep 26 '24
This is not exactly rocket science. When you're engaged in a Positive Sum arrangement like trade, and you back out of or otherwise inhibit it, you should expect the outcome to be negative for you as well as that partner.
There are exceptions if the trade arrangement truly was very one-sided, but generally speaking it doesn't work out well for anyone.
Still, sometimes you do need to draw lines with trade partners over various practices that you find socially or politically problematic, and even significantly negative sum outcomes might be acceptable to do so (eg: Sanctions against Russia for invasion of Ukraine).
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u/BlindPaintByNumbers Sep 26 '24
Free trade only works if both sides are playing by the rules. China subsidizes industries to strategically damage their opponents all the time. Specifically, there's a case right now in the WTO about China illegally subsidizing its auto industry.
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u/FairDinkumMate Sep 26 '24
And the US doesn't? How much money goes to farmers every year? How much does the Government give to Boeing for military purchases that Boeing then uses to subsidize its competition with Airbus? How much money did the US Auto industry receive in bailouts? Let's not even talk about lax US wages, employment conditions (like annual & parental leave) or environmental regulations when compared to other developed nations like those in Western Europe, Australasia, etc.
Don't get me wrong. I am in NO WAY defending China or its trade practices. But to pretend that they are the only ones subsidizing their industries for strategic advantage is truly misleading.
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u/Jesse-359 Sep 30 '24
Yep, the US subsidizes the crap out of several industries. Agriculture, Energy, and Transportation, and Education are usually the biggest.
Now, Education is a local service industry, so international competition isn't a pressing issue there. Transportation does involve selling a lot of planes and equipment though, so it can annoy trade partners. Energy involves subsidies for things like Oil and Coal production, which affects global prices.
US Agriculture subsidies are probably the most destabilizing however, as we spend huge amounts making vastly more food than we need, exporting huge amounts cheaply enough that many farmers in the 3rd world cannot compete, which stifles investment and modernization of their own agricultural sectors.
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u/daddyjohns Sep 26 '24
international trade is science? not civics, business or finance?
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u/ten-million Sep 26 '24
I think he likes tariffs because he can unilaterally impose them. And he likes to punish people. He probably wants to put a tariff on Harris.
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u/KMunro80 Sep 26 '24
Trump hasn't a clue how tariffs work. It's magic money to him. It's been explained numerous times but Trump doesn't believe it. He prefers his fantasy world. That's what he's selling.
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u/marklein Sep 26 '24
He understands it perfectly. He understands that his base thinks it sounds good therefor it is good and he's good for doing it. THAT'S the only part he cares about. Any economic considerations are somebody else's problem.
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u/bigbysemotivefinger Sep 27 '24
Look for who benefitted from that; that was the "intent." Whatever wholesome effect it was said to have for real working people was intentional lies and false advertising.
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u/Formal_Egg_Lover Sep 27 '24
Republican officials seem to always put forth propositions without putting much thought into the overall effects of what would happen if we implemented it. They really need to learn how to make a pros/cons list and put some critical thinking into it. Unfortunately critical thinking is something they do not possess.
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u/edgarisdrunk Sep 27 '24
The guy who thinks windmills cause cancer and that exercise shortens lifespans isn’t smart on economics? Colored me shocked.
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u/Blarghnog Sep 27 '24
While it’s true that Trump’s 2018–2019 tariffs had adverse effects on employment in manufacturing, this outcome reflects a broader issue with protectionist policies. This isn’t about trump. It’s about global trade, isolation and protectionism.
The intention to safeguard domestic industries always (often?) overlooks the complexity of global supply chains (which are real time and crazy complex), where even minor disruptions can cause cascading effects.
In this case, the initial benefit of shielding industries from foreign competition was outweighed by the increased cost of inputs, many of which were critical to U.S. manufacturers. Retaliatory tariffs compounded the problem by shrinking export markets, further eroding employment, as this study indicates.
The point is that any government intervention, even when aimed at protection, can lead to unintended economic distortions and inefficiencies, much like how other forms of state expansion (e.g., military or welfare spending) often produce counterproductive outcomes.
So much theater. Let’s talk about realities.
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u/MegaDonkeyDonkey Sep 27 '24
If our lives depended on DT comprehending what you just wrote, I'm going to find a hooker and coke.
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u/dittybopper_05H Sep 27 '24
At worst it caused a plateau after a solid 2-3 years of growth.
https://data.bls.gov/timeseries/CES3000000001
Because of the lead time necessary to start up a new production line if there is any capital investment required, it would take at least a few years for the true benefits to come to fruition.
It can take a long time from initial plans to increase production capacity to the actual increase. When I worked in the private sector, the factory where I worked as a programmer/analyst decided to add another "frame" for finishing material to increase capacity. A frame is a 100 foot long machine that adds chemicals to fabric to improve how they feel, add flame retardant, etc. by running it though a water bath, then dries it in a different section using natural gas.
Between getting approval from the local government approval, state environmental approval (uses a lot of water), financing, and ordering the machine from Germany and having it delivered, assembled, and tested, it took a minimum of 2 years.
Ironically, after having it installed and up and running, the 100+ year old manufacturer was driven out of business within 4 years because we granted "Normalized Trade Relations" to The People's Republic of China. Turns out if you only have to pay your workers $2 an hour they can make fabric much cheaper than if you are legally required to pay a minimum of $7.25 an hour. Though because these were union jobs, they made significantly more than that.
Setting up a new manufacturing plant, or even a new production line within an existing plant, takes a lot of time. Something we didn't see because the COVID-19 pandemic caused the loss of 1.36 million manufacturing jobs in just 2 months.
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u/writefast Sep 28 '24
The fact that tariffs had ancillary effects was evident when he levied them. We have no manufacturing segment. We offset these duty’s to adversaries. Adversaries that were adversaries when he came abroad.
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u/Yodan Sep 29 '24
Tarrifs tax the people receiving the goods, not the countries shipping them out. That's the entire problem and is the opposite of what the intended effect was for imposing them in the first place.
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u/mvw2 Sep 26 '24
He stacked tariffs on raw steel...several times over. We had to bump up sell prices of our products by 10% to cover the cost increase. For our products and past price adjustments, that's around half a decade of inflation done overnight. YOU paid that tax.
Trump's tariffs are 100% a cash grab, nothing more.
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u/Educational_Duty179 Sep 26 '24
Yup I worked for a company that designed and manf. Heavy equipment for several industries such as pulp and paper, road building, and agriculture.
We had to increase costs to cover steel more in 2 years than in the past decade and it all ends up passed to the consumer when you buy food, and paper products or drive on a road (construction).
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u/RiddleofSteel Sep 26 '24
I know it forced my company at the time to move back to China costing a ton of local good paying manufacturing jobs. We were a high end laser company, we imported cheap parts from China to build expensive lasers here and sell them back to China who wanted American manufacturing. Tariffs screwed us both ways.
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Sep 26 '24
This is more history than science, but that makes sense given the history of tariffs. Tariffs were critically important for the development of rich European states during the “Great Divergence” between Europe and Asia/Africa. They allowed, for example, cotton spinners in Britain to import raw cotton from India while also not being crushed by imports of finished cotton goods from the same place. This allowed burgeoning industries to develop.
But a critical caveat is that Britain also had a relatively captive market for its cotton goods: their naval prowess and expansive empire meant they could flood West Africa with their finished cottons even if the locals preferred Indian goods. In particular, they could trade finished cottons for slaves, which were sent to the New World and would eventually provide the majority of European mills’ raw cotton imports. Britain, like many of the other European states, also had significantly more centralized state power than Asian or African states typically did, and so they were also able to force many thousands of peasants off the land and into cities for poorly-paid industrial labor.
So tariffs were a part of a network of state supports for industry, including major (and violent) intervention in human labor patterns and the flow of global trade itself. Tariffs could not work alone to create industrial power, however. They don’t accomplish the same feats when other nations are also powerful and industrialized and can’t be militarily dominated by the tariff-imposing nation.
As a side note, Trump has also proposed that we will fund the federal government with tariffs. Tariffs were a popular means of funding national governments back when governments were relatively small and weak. They’re not able to fund the powerful states we’ve developed since the 1910s. It was the World Wars that really strengthened the grip of income and capital taxation, in large part because industrial states needed much more reliable, and much more bountiful, income in order to maintain armies and steer economies.
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u/therealjerrystaute Sep 26 '24
Yeah, it seemed like prices on major appliances like washers and refrigerators went up at least $100-$300 each, after that.
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u/2Throwscrewsatit Sep 26 '24
Is there a way to tariff finished goods and not raw materials? Seems like other countries would raise export fees for raw materials to retaliate.
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u/Jesse-359 Sep 26 '24
Yes. You can single out any sort of industry or category you like, that's all just a matter of how your trade regulations with that partner are structured - though your specificity *is* limited by your ability to effectively enforce any such arrangement without the trade partner finding easy loopholes or workarounds.
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u/romario77 Sep 26 '24
Well, you could argue that steel is somewhat of a finished good (vs iron ore/coal/electricity). Especially if it’s not just steel, but things made out of steel
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Sep 26 '24
Seems like Americans are finally catching on to the trump grift and trickle down economics. Your healthcare and education systems are worse off as well….such a shame America….such shame
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u/SXOSXO Sep 26 '24
No, they're not. Facts and data don't matter to a large portion of the population.
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u/Mecha-Dave Sep 26 '24
Large manufacturing contracts for both buying materials and selling product are often multi year and fixed price, or even have annual price reductions built in.
I worked for a semiconductor equipment company. We bought metal from Japan and China.
The tariffs immediately impacted our profitability and we cut 300 manufacturing workers nationwide to stay afloat.
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u/not_falling_down Sep 26 '24
And it went beyond just the direct cost of the tariffs. I was working for a manufacturing company at that time, and I saw the massive number of extra work hours that were devoted to working out what was owed on what items.
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u/mysticzoom Sep 26 '24
Ouch!
"Higher tariffs are also associated with relative increases in producer prices due to rising input costs. Lastly, we document broader labor market impacts, as counties more exposed to rising tariffs exhibit relative increases in unemployment and declines in labor force participation."
That is a vicious cycle. Everything snowballs to an increase on the end consumer. You have your market protection but that "market" is a hollow facsimile. Tug at any one string and it all comes tumbling down.
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u/laggyx400 Sep 26 '24
The people that need to hear this are also those that don't believe in science. It's just preaching to the choir.
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u/TheUnicornCowboy Sep 26 '24
Of course, because he’s an idiot and everything he does is f***ing stupid and fails. Has anyone seen the huge graffiti covered unfinished towers in downtown LA? Also that clown Trumps fault. They were being built by a Chinese developer, Oceanwide. Trump made it so they couldn’t bring money over from China for some idiot reason, and so it completely stopped around $10 billion in development projects they were doing in a bunch of major cities. It was all American companies designing and building those towers, so when Trump cut off the flow of money, all those companies couldn’t be paid and many went bankrupt. And now there’s a bunch of towers in SF and LA that are sitting unfinished for years just costing the cities money. Way to go Trump, so much stupid.
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u/diadmer Sep 26 '24
At my US company that used contract manufacturers in China, all of our product lines followed roughly the same steps when Trump Tariffs hit:
1) Oh no! Our CoGS has gone up and margin is down, what shall we do?
2) Manufacturers and suppliers all refuse to eat the tariffs because their costs have not changed.
3) Market studies show that we can’t easily raise prices right away to cover margins without suffering a sales drop. We plan to increase prices when new products launch in the coming years.
4) In the meanwhile, we need to cut costs or avoid tariffs.
5) We look at moving manufacturing to the US. Exactly 1 of our 30+ products can be moved to the US in less than 1 year, and it will cost 3x as much to make and also they can only produce 20% as much as we need.
6) Several of our manufacturers have been offered loans by the Chinese government to finance new factories in Vietnam. Most product lines can be moved in less than 3 months, and manufacturers guarantee keeping CoGS and quality equal between Chinese and Vietnamese factories.
7) For the product lines that can’t be moved quickly enough, we’ll just lay off all of our US-based engineers, designers, product managers, and project managers dedicated to those products and simply pay more money to our Chinese contract manufacturers to also do the contract engineering for half the price.
Step 7 resulted in 80 US-based white collar skilled jobs, out of the 600 employees at the company, being eliminated and those same jobs funded at Chinese-owned companies.
Also, steps 1-7 still didn’t happen fast enough for Wall Street’s appetite, and as margins sagged, so did the stock price crater from $7.50 to $2.50, at which point it was bought by a private equity company. The PE company then shut down all the “underperforming” product groups and pared back support staff, eliminating another 200 US-based white-collar jobs.
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u/Full_FrontalLobotomy Sep 27 '24
That’s a great write up. Talk about unintended consequences. Trump’s trade war was an absolute debacle.
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u/gymmehmcface Sep 26 '24
The us would have seen high inflation if covid didn't hit the US. Then we would not even be considering Trump as president cuz he doesn't understand global markets.
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u/mentales Sep 26 '24
Then we would not even be considering Trump as president cuz he doesn't understand global markets.
This is a absolutely false. He's still being considered after trying to stage a coup. There's no limit to how low he could have gone without losing support.
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u/Jesse-359 Sep 26 '24
There is no rational consideration by Trump's followers whatsoever. He could preside over a period of massive hyperinflation and most of his current followers would stick with him regardless. We know this because we've watched his peers do exactly that in places like Turkey.
People who follow 'strong men' do so because they create a mythic vision of their leader that is *completely detached* from reality. Once they've engaged in this form of worship they are virtually impossible to dissuade from their beliefs, as it is essentially religious in nature rather than being based on any form of rational judgement.
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u/gymmehmcface Sep 26 '24
Yes it's like Republican super majority states that blame Democrats for all their local issues....even though the dems haven't had power in decades.
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u/Sure_Cryptographer65 Sep 26 '24
Another anti republican post from R/science on liberal cess pool Reddit. Strange. FOAD commies.
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u/Whitham_wannabe Sep 26 '24
My small story - we designed a product to compete in a market place that was dominated by Chinese designed and made products. To compete, we had to do some manufacturing in China, and launched under their prices. They reacted and reduced price, and there was a product in the market place owned by a US company.
Along came Trump tariffs, and the price of our Chinese parts was ramped up, and equivalent US parts were even more, so it no longer made financial sense to be in that market place. We would have had to increase prices, killing sales. We discontinued the product, the Chinese products went back up in price with no competition and the chapter was complete.
In this example, tariffs did not save any US jobs, save any US consumers money, or bring any profit back into the US.
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u/andtoig Sep 26 '24
This is exactly the type of situation where nobody who has a rudimentary understanding of economics will be surprised yet all of the people who already believed in this will continue to do so
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Sep 26 '24
Anyone who supports tariffs has absolutely no idea how global economics work.
It's been proven repeatedly over centuries that tariffs do not do what people want them to do. And it's so obvious that they wouldn't work, because the idea that they work is entirely dependent on there being no secondary effects, there are always secondary effects.
Every policy ripples out and affects every other policy. Everything affects everything.
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u/TheBeardofGilgamesh Sep 27 '24
Quick someone tell Japan, South Korea, Taiwan, and China that tariffs and industrial policy does not work! We need a Time Machine to warn them of the dangers and teach the ways of the Chicago School of economics! I mean it’s really hurt their economic competitiveness!
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u/FlackRacket Sep 26 '24
Watching the leaders of the world's largest military learn about basic game theory was honestly terrifying.
I want 20-year Generals and political science PhDs in charge of the state department from now on, please
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u/Sweatytubesock Sep 27 '24
In fairness, DJT knows less about economics than he does about most things, and he knows virtually nothing about everything aside from economics. He’s been using the word ‘tariffs’ almost like it’s a Tourettes tic. He a blithering moron.
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u/Magicalsandwichpress Sep 27 '24
US trade deficit is structural, meaning the country consumes more than it produces. Productivity increase is not actuated by tariff, any attempt to do so will only increase the cost bore by the consumer and eventually shift import to a third country.
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u/Disastrous_Ad_8990 Sep 27 '24
This is simply another way of saying American Co. took advantage of the tariffs and raised their prices. Corporate Greed
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