Prominent members of the administration and Democrats in Congress have also been wailing about tariff-induced price-raising collusion or even "greedflation." So, many larger businesses are probably pondering the political blowback that might come from booking near-term windfall profits by pricing at opportunity cost.
A very thought provoking article. Thank-you for sharing it. I am watching the ranchers here in southern Arizona explain their issues with the tariffs and President's Trump desire to but beef from Argentina. Also, my farmer friends in the Midwest are taking a beating over tariffs with China. (China is not buying American soybeans) Just because prices haven't raised yet, doesn't mean that they won't. (Also, thank you for allowing me to comment many authors on substack hide comments behind their paywall. Just my humble opinion, hope I haven't upset anyone. )
Niall is heavily invested in Trump being successful just as he was heavily invested in Bush/Cheney. So had Biden or Kamala forced Netanyahu to agree to a ceasefire at Qatar’s behest Niall and Bari Weiss would have flipped out…but they have no choice to pretend Trump got some great deal forcing the release of 1900 Hamas terrorists!!
There is a world of difference between doing mindless, self-serving bidding of whoever by Biden or Kamala and delivering Israel’s eternal dream: recognition of its right to exist by the Arab League.
“Experts” on the left proclaimed this outcome as impossible just a short while ago. Just as they proclaimed anything similar to Abrahams Accords; America’s energy independence; …; returning bodies of American service members, who lost their lives in Korea.
Show us anything comparable by Biden, Bush & Co. Allowing Putin to gain 20% of worldwide uranium in exchange for $138 mln donation to the personal foundation (Uranium One) does not count.
Obama made America energy independent and Biden made America energy dominant. The Abraham Accords failed to keep Israel safe…but they were made possible by fracking and LNG. Fracking is what changed the Middle East and not Kushner…he was willing to start taking money from Qatar as well as MBS.
You are living in the world of make-believe virtual unreality. I am sure you can provide data substantiating your FALSE claims on Obama/Biden records.
As for Abraham’s Accords, everything has a purpose. Purpose of Abraham’s Accords was NOT to make/keep Israel safe. It created a stage for the Israel’s dream of its right to exist recognised by the majority of Arab/Muslim nations. The latest agreement accomplished this goal/dream.
I agree the Abraham Accords cut Palestinians out of the equation which is why they grew desperate and attacked on 10/7. Israel is much safer now than they were on October 6 but October 7 happened and it happened because of the Abraham Accords. All I know is the Trump/Kushner families have made out bandits thanks to their dealings with Qatar and MBS…but 10/7 happened and Trump hasn’t given any money back! 😆
You keep accumulating points by bringing up irrelevant issues and names, especially Kushner and Trump. I am sure, you will have no problem to substantiate every FALSE political point you are making.
My company costed our inventory at replacement cost and would charge prices on a margin computation upon notification in advance of the actual cost change taking effect for a nice arbitrage. My guess is your CEOs company is doing the same thing, whether they know it (or will admit it) or not.
I think everyone down here in the trenches understands that tariffs will make foreign goods more expensive. I buy a fair amount of hobbyist-type robotics and micro-controllers to feed my electronics addiction and benefited tremendously from the de minimis provisions. I suspect those prices will go up significantly next year and I may have to go into an addiction treatment program. However, I don't think economists like yourself have even begun to factor in just how much pain the ordinary American is willing to endure to level the trade playing field with our foreign markets and rehome a lot of the industry that went away when everything got outsourced to 'everywhere but here'. We can do with a bit less, but just the thought of shafting the uni-party elites who have been selling our country to the lowest bidder for decades would offset a lot of the pain
I think you are right that about 50% of Americans will not care that there is a one-time jump in retail prices --- willing to take the pain, as you say. But good economists always ask, "and then what"? Quick on the heels of the entirely noticeable uptick in retail prices will be the midterm elections.
Willingness to pay is not the same thing as ability to pay. How long will it be before rising prices convert to "vote the scoundrels out"? Many of the same 50% of Americans who are willing to tighten their belts to re-shore retail goods are people who cannot afford another 10%-15% jump in retail prices.
Oh, by the way. Where is the money from the jump in prices going? It's going into the coffers of the U.S. Treasury. What will the government do with that money? Anything and everything except what the payers of the tax would have done with it.
One of the reasons cited for Democrats losing in November 2024 was Biden's inflation, which was below 3% for the last six months before the election, and below 4% since June 2023. People have long memories of even that low inflation. I have vague memories of the LBJ/Nixon inflation and my mother grumping about the continual price rises at the grocery store.
I do not believe Trump's 2025 inflation will be forgotten by November 2026. Trump barely won 2024 in spite of himself and the worst opposition candidate I can remember, the Democrats seem to be going out of their way to look even more out of touch, and Trump seems to be doing his best to make the Democrats despise him as much as possible. I have no idea what will happen in November 2026 or 2028.
I have no idea of the future either; the future, she is uncertain. I agree that people tend to vote their pocketbooks. I am an economist; I do not blame Trump for inflation. The POTUS has absolutely nothing to do with inflation; can't cause it, can't stop it.
The government, meaning the US citizen, is going to end up paying to build a ballroom on the east side of the Whitehouse that has just been demolished.
One of the things you miss completely is the reality the consumer controls the price they pay and whether they absorb any of the tariff.
Allow me to use a real world, personal example: I love Canadian maple syrup on my pancakes. It is decadent.
I have 3 young granddaughters who are smitten w my pancakes and my favorite Canadian made syrup.
Alas, the price of my favorite Canadian maple syrup — delicious elixir — increased rather dramatically.
Confronting that painful economic reality, I researched domestic maple syrups.
The consensus — based on focus group taste testing by me and the granddaughters — was that one Vermont syrup and one Minnesota maple syrup were both superior to my original Canadian favorite.
Both of the domestic maple syrups were less expensive and one provided free shipping.
These tariffs are not a prison sentence. The consumer gets to determine what, if anything, they absorb of any tariffs.
I could have used Canadian lumber, lumber futures, sawmill capacity utilization rates but I figured you’d be more likely to understand pancakes and maple syrup.
Probably because they don’t have access to Canadian lumber which I am told is better than American lumber? I don’t know.
But you are right, my smarmy comment deserved yours.
At the risk of ‘singing into the wind’, your anecdote points to the general problem of reduced choice. Prior to tariffs, you maybe did not know about Vermont or Minnesotan maple syrup and those products are certainly very good. But now you get to choose from 2 locales rather than 3. Are you worse off? Probably not because the joy of giving pancakes to 3 granddaughters far outweighs what exactly is the syrup involved.
It’s the same in here in Canada. After Trump insulted us, we did what any good American would do, we boycotted American goods. Result: California wine sales have fallen off a cliff, Kentucky bourbon likewise, and American tourism has tanked. This has meant less choice for Canadians but Portuguese or Chilean wine is excellent, as is Canadian, Irish and Scottish whiskey, and frankly going to Europe or South America or Asia has been a truly broadening experience for many Canadians. Nevertheless, out choices are fewer.
You may not believe this but a Canadian friend of friend was driving to Seattle from Vancouver to catch a plane for a Hawaian vacation. The border guard asked him what he thought of Trump. The idiot reponded honestly and got a stamp that said “Not allowed in the USA for 4 years”. End of vacation. That is loss of choice.
If I understand economics correctly, more choice enriches product quality and reduces prices. So the tariffs, and the malignant force behind them (the ‘othering’ of foreign countries) are a bad thing economically. You don’t need to believe me, listen to Ronald Reagan in the advert sponsered by the Ontario government this weekend. Everything said in the advert was said by Reagan.
You can't honestly equate a narrowly targeted tariff on Japanese semiconductors with a 10% across the board tariff rate increase on every Canadian import because one Canadian province made an ad. That's apples to helicopters.
Reagan didn't like tariffs. He certainly didn't like them when they were broad-spectrum and untargeted relative to a specific adverse action. Ontario got the Gipper right. Trump is no Reagan.
It's nice to see that Republicans are feeling embarrassed they aren't living up to Reagan's words and legacy, at least.
I have also read that Reagan imposed the targeted tariff because the alternative was the Democratic Congress passing worse tariffs and overriding his veto.
Whatever the truth of that one tariff is, Reagan was far more free trade than Trump, and the only good to come out of the matter is that Trump thinks Reagan still matters to Republicans. Maybe the GOP recovery after Jan 20, 2029 has a better chance than I had expected.
Haha, good one. ". . . Republicans are feeling embarassed they aren't living up to Reagan's words and legacy . . . "
As a Republican and a Reagan Pioneer, I love Ronald Reagan.
As an independent thinker and a Republican I feel no compulsion to agree with 100% of what Reagan or any other Republican said.
When Reagan admitting defying the law and Congress by sending aid to the Contras I was critical of his dishonesty. If he had been Trump he would have been impeached and removed from office.
It is a wildly different world out there and for the first time we have a President who actually understands business and can wield tariffs as a weapon. I side w Trump on tariffs.
Is there any chance you could get your Canadian friend-of-a-friend to go on record to news media, and to offer such supporting evidence as is possible to verify the claim?
Your friend-of-a-friend is allegedly already out the cost of the vacation and the four years of Trump's reign of terror. He's got nothing left to lose at this point, seems to me!
We need more sunlight on these kinds of abuses where they occur. Your account is both hard to believe...yet sadly all too believable at the same time.
“At the risk of ‘singing into the wind’, your anecdote points to the general problem of reduced choice.”
But choice is NOT reduced, just more expensive. Moreover, the world is NOT limited to the two countries. If demand is still there, other countries may step in with their similar products. Perhaps we may discover that these new arrivals are not worse quality and may even be cheaper?
I view jolts to systems as a long-term beneficial event opening opportunities, unthought of before.
Perhaps big pharma makes another fortune by coming up with a cure of, if not a vaccine for TDS? (Addition to GDP)
Maple syrup is a pretty simple example, and yet....that Vermont company is paying tariffs on Canadian hydropower for their boilers and the Minnesota firm pays tariffs on imported glass and all those costs are *eventually* going to get passed to the consumer. Modern supply chains are so complex that harnessing tariff arbitrage is going to be a little trickier than just shopping around. An illusion of power, like claiming you're not a slave to the IRS because you are in charge of reporting your income.
Those boilers are fueled with natural gas they are likely getting from Canada.
Don't agree on the issue of shopping around. We are looking at a monumental effort toward re-shoring and friend shoring. That's really the story here.
Harken back to the tariff driven tsunami of foreign car brands (thirteen in total) who came to the US and developed manufacturing clusters that also attracted parts supplies due to just in time manufacturing technology.
These foreign car manufacturers make half of all cars in the domestic market and employ more than 300,000 Americans (and lots of American robots) with another 1,000,000 American workers in parts plants.
The US has 11,800 parts plants of which 5,000 are located in these foreign car manufacturing clusters. Some 2,000 are foreign owned.
With the advent of EVs, this has increased in a meaningful way.
This is one of the big payoffs of Trump's tariff policies -- new manufacturing plants i the US, re-shoring plants from China, and friend shoring to other countries.
Clearly you favor domestic manufacturing. Fine. However the economist consensus is that tariffs aren't optimal for creating this outcome. Tariffs, inacted for any goal other than revenue generation are central planning. Planned economies perform poorly. Why would this time be any different?
I favor jobs, American jobs for American workers. If a company wants to have access to the US market, have a NYSE listing, have access to the American banking system, have access to US capital, have the protection of American laws -- then make your stuff in America and employ Americans.
I am vehemently opposed to manufacturing within the borders of our economic/world order rivals and employing slave, prison, child, and underpaid labor without any regard to the environment. This is both a national security and ethical adversion.
Tariffs have several legitimate purposes:
1. Tariffs are used to protect strategic industries — industries with national security implications — such as high tech, steel, or aviation.
2. Tariffs are used to protect fledgling, startup businesses during their period of incubation and infancy, often technology related such as chips or AI.
3. Tariffs are used to punish bad actors such as China for its theft of technology, its use of slave/prison/child labor to manufacture goods, and to offset low environmental standards.
Trump has added a fourth: to initiate and modify trade and diplomatic relations with rivals. This is in addition to sanctions for other reasons.
Old boy announces a 100% tariff and the other country pays attention.
I personally would prefer mutual zero tariffs with only a 10% price of admission tariff to sell into America because we have the strongest consumer market on the planet.
What initially sparked Trump's attention was unfair, unequal, and unreasonable tariffs wherein the US imposed a vastly lower tariff on a foreign country or product line than that country imposed on US manufacturers. Simple fairness.
In addition to actual tariffs, there was the issue of non-tariffs barriers to trade and bad acts. Our largest trading partners were particularly opportunistic and predatory -- Canada, Mexico, China, the EU.
The US has had tariffs and customs duties since its founding -- they were the primary source of government funding until the enaction of the income tax -- and they have not to date impeded our growth into the best economy on the planet and will not do so now.
When you use the term "central planning" you imply a combined political and economic system which is not the case in the US.
Politically we are a Constitutional representative republic with three co-equal branches of government operated by an elected executive.
Economically we are a capitalist country wherein the means of production is privately owned and controlled.
In countries that have had central planning -- Russia, China -- they have had a single political/economic system and the means of production are substantially owned/controlled by the state and they have had widespread corruption.
You do NOT favor American jobs. That goal is incompatible with the inefficient misdirection of resources which is inevitable with central planning. Tariffs favor those inefficient domestic industries which free markets replaced with more efficient domestic industries,
If all you care about is jobs, then do you want to bring back elevator and telephoner operators? Do you want to ban ATMs and self-service gas stations and grocery store scanners? How about backhoes and excavators which replaced wheelbarrows and shovels?
Get out a map, amigo. I favor American jobs -- jobs located in the US.
Tariffs motivated foreign car manufacturers to locate manufacturing plants in the US for almost 50 years. Half of the cars made in America are made by foreign brands that hire Americans, that pay property taxes, and fund payrolls.
I favor that.
The rest of your comment is a reading comp problem.
You claim to believe that central planning leads to corruption. Yet you want the government to decide which businesses to favor and which to disparage. How is that not central planning?
I did not say that central planning "leads to corruption."
I said that countries like Russia/China that have widespread ownership of the means of production in the hands of the state have widespread corruption.
To expand on that, these countries were corrupt long before they engaged in central planning.
So far, US corporate profits (see this season's batch of earnings reports) are at all-time record highs, as is the S&P 500, and the stock markets of Japan, South Korea, Taiwan, Canada, Mexico, Europe (SXXP), Indonesia, and even Israel.
The MSCI WORLD IDX (a global equities index) struck an all-time high last week, and is up 27.7% in last 52 weeks.
So why would a global equities index rise 27.7% in last 52 weeks, and strike all-time record high?
Actually, I am wondering myself, but I think we can say, "Tariffs, schmariffs."
Tariffs are one of the hoariest totems in the Hall of Orthodox Macroeconomics, and in a perfect world, a bad idea.
A much, much bigger hit to US living standards is found in housing shortages, and the ridiculous cost of college education. Something tells me healthcare eats up too much money too, but there is only so much I can be outraged about at once.
Property zoning is probably the worst thing going in the US, followed by government involvement in healthcare.
Tariffs...relatively unimportant, and the effects will be mitigated in time.
In addition, there are huge national security issues attendant in tariffs.
Sadly, what the war in Ukraine shows, and not in theory but in fact, is that liberal democracies need the ability to produce vast amounts of war material, and to radically innovate, simultaneously.
In addition, a chilling idea is that what "free trade" has done in the last 20 years is provide resources and ability to "arm up" to the most illiberal regimes on the planet, in Beijing, Moscow and Tehran. Ugly, but true?
There are surely unpopular topics in econ departments across America.
The reality is tariffs hurt most those who can afford it most. Trump’s base is most impacted by oil & gas and USA grown food. Italian wine? Buy California. VW? Buy Tesla. Ferrari? Pay the tariff. Hermes? Pay the tariff.
Never been. Closest one is another state. I will check back in a year and re-assess. To date, easily avoiding much impact. The money printer is what is really going to set things off, not tariffs, in my opinion.
Tariffs are a sales tax. Trumps tariffs will cause jump in retail prices. If the tariffs are removed, retail prices will drop back down. But if the tariffs are not removed, the jump will remain in place.
You are correct about what economists call price inflation, which is an ongoing RISE in prices, and which is due to money creation, whether that new money is created directly by the Fed monetizing U.S. Treasury debt or is created by the banking system creating credit in excess of household saving.
JC's essay is about talking to a CEO of a "fairly large retailer." We are not talking about what some economist said. We are talking about what some CEO said. This is all about pretty simple business accounting, actually. It's not rocket science, as they say.
It's not even that complicated. Trumpies like to simultaneously Trump cut $300 billion in income taxes and raised $300 billion in tariff revenue (numbers vary all over the map) seemingly oblivious to that tariff revenue being a tax rise. I had one numbskull tell me the comparison was loony because income taxes are not spent inside the US, but externally, and I have zero idea what that even means, what with money being fungible, other than him just being another Trumpie making excuses for being ignorant.
But I digress. The simple reality is that $300 billion (or whatever the actual number is) is a tax increase which manifests in higher prices on mostly all that "cheap Chinese junk" which onshoring nuts brag about. You don't need to ask economists or CEOs or CFOs or Joe and Jane in street surveys. $300 billion higher prices on the cheapest goods is noticed every day, and those continual price rises are what sticks in people's memories.
Well, that’s what we need to know. That is $1k per person in the states. Who is paying it and for what? I imagine luxury goods equate for a material amount. Until then, all this is just people making assumptions and talking as if it impacts everyone equally. I’m very much waiting to see the impact and reaction. In the meantime, the impact on my budget is negligible. The big increase in expenses are medical and utilities. No tariff impacts felt yet. To my original point, i don’t see his base revolting just yet.
I wonder if this applies to energy? It seems as though whenever there is a supply chain event, prices go up right away for oil products. Is energy not subject to sticky prices theory?
Sticky price theory is sticky mostly in the minds of macro economists. In real world markets, prices are not sticky. Are prices sticky in financial markets? Yes, retailers are resisting raising prices ahead of Black Friday and the holidays. But accounting realities will come to bear soon enough.
Intersting that he does no want to sound critical of the President, wans to hide the effect from consumers as long a possible (unil after the elections?)
The off-term elections matter, too, in Virginia where I live. But the real test will be November 2026. If the House goes back Democratic, Trump will be the lamest duck that ever quacked. How do you spell impeach?
Democrats will still be powless to undo the illegal and exonomically daaging tariff setting, defund the lafor-force diminishing deportations or force more H1B visas, dent the growth-sapping deficit and prevent the continued appointment of MAGA federal judges. Trump’s damage will continue quacking. :)
Agree. But Trump is worse! And MUCH worse at stretching ececutive power. And worse at discouraging foreign students to come for study and hopefully to stay. And worse at scinece and technology funding.
But because his tariffs are all by executive order, there's a real chance of it being undone come January 2029, or sooner if the Supreme Court rules against him. Trump is throwing away the opportunity to get Congress to enshrine his tariffs in legislation which could be much harder to undo come 2029.
I certainly do not want his tariffs enshrined by Congress. Do you? I'm an economist. Tariffs are a selective sales tax. Why would we want selective taxes under the control of the POTUS? Why would we want a selective sales tax, period? All the economics I know augers against tariffs.
That assumes that he wants taraffis for some purpose other than just posing as “tariff man,” tokens to push around on a board. “Enshrining” them would miss the point.
Thanks for sharing. Something similar was included with the Flash US PMI increase this past week:
The survey data are consistent with the
economy expanding at a 2.5% annualized rate in October after a similar rise was signalled for the third quarter.
“However, business confidence in the outlook for the coming year has deteriorated further, and is at one of the
lowest levels seen over the past three years as companies worry about the impact of policies, most notably tariffs.
Companies are also concerned over disappointing export sales, especially in manufacturing, and factories are
seeing an unprecedented rise in unsold stock. Having bought excess inputs earlier in the year to front-run tariffs, producers are making more goods to use up these inputs but are often struggling to sell the end product to customers.
“Hence, although input costs continued to rise sharply again in October, principally reflecting the pass-through
of tariffs, average selling price inflation has cooled to the lowest since April as firms compete on price to win sales.”
Caring about whether your inventory item cost $1 or $1.50 as an input to the price you can charge is a kind of sunk cost fallacy. The widgets before and after the tariff impact remain worth exactly whatever the customers are willing to pay, which in turn depends on what alternatives customers have and what price changes your rivals will implement.
I think of tariffs as a sales tax levied on a subset of goods from a subset of places. Market distorting, sure, A Bad Thing, OK, but over time not worse for either consumers in general or producers in general than a sales tax on all stuff from anywhere.
And say the tariffs raise $xB, and sales taxes were cut by $xB. Revenue neutral for govt, cost neutral for consumers.
You just described a free lunch. There ain't no such thing. Willingness to pay is not the same thing as ability to pay. Real money is coming out of real consumer pockets and going into real U.S. Treasury bank accounts.
‘From consumers, to the Treasury’. Well, yes. Of course. Like a sales tax, in fact. Which nobody likes, but nobody thinks crazy and illegitimate, or disproved by Ricardo in 1810, or proof that the legislature is crazy, or a
free lunch.
Tell me a sales tax is bad for US consumers, and I’ll agree with you, and then I’ll tell you tariffs are bad for US consumers for the same reasons and to the same extent. But not more.
Tariffs are far less bad, for the country that has them, than a sales tax. In the short run, always. Bad for the world if it means total trade goes down, or some countries have higher trade deficits.
Today in the USA, unlike in 2000, nor 1992, is not rich enough to allow globalization so as to have a huge total trade deficit, as well as trade deficits with most trading partners. Discussion of tariffs without discussing trade balance is as biased as discussing benefits of govt spending without reference to deficits & debt. Often done, but not completely honest.
But sales taxes are not being cut. These are real price rises, and on the cheapest goods. Even if people don't buy everything on shelves, they still notice prices going up.
Consumers do indeed notice prices going up. And you are right: it’s typically consumers and not producers who pay the higher prices than otherwise that tariffs create. That’s 100% a valid and relevant criticism of the politicians who decide to create inflation, *and* decide to impose tariffs on top of sales taxes instead of whatever would be the revenue neutral replacement of [some] sales taxes.
It’s not though a valid criticism of tariffs as such, unless you have the same venom for sales taxes. Which I don’t notice much.
That’s a reasonable argument in favour of tariffs not jumping around like fleas on a hot plate, but it’s not an argument against tariffs.
Plus, think of it this way. Tariffs are easier to avoid than sales taxes. Just buy more domestic and less foreign stuff.
And here’s a point: the very fact that they are jumping like fleas suggests that the tariff-master-in-chief is not committed to tariffs as such, but is using them as tools in a non-tariff negotiation. As if the real objective is discouraging IP theft, fentanyl production, restrictive trading rules, and military buildups in the South China Sea. Food for thought!
A. I’m not arguing about Smoot-Hawley or 1800s tariffs.
B. Tariffs are impossible to avoid because they apply to inputs which no retail buyer knows anything about, unlike sales taxes, which by the way, are just as impossible to avoid.
C. Tariffs are impossible to avoid by buying domestic because the point of tariffs is to raise import prices so domestic producers can also raise prices.
D. Trump has stated three conflicting purposes of his tariffs: to block imports so domestic production can raise prices and ramp up; to replace the income tax, which requires high tariffs which would reduce imports and reduce revenue; and as leverage to get to zero tariffs around the world.
E. Anyone who believes anything Trump says is going to wear out his neck from all the swiveling. If you actually believe he “is using them as tools”, you believe the impossible. He doesn’t know what he is doing or why. He just makes it all up for the gullible to believe.
A. I’m not arguing about Smoot-Hawley or 1800s tariffs.
B. Producers know where their raw materials come from, and will make different, now rational sourcing decisions. In any event, the smaller the tariff-subject components, the smaller the impact of tariffs. It’s not all or nothing.
C. That is not the point of tariffs, but I do agree it is one of the consequences of them. But luckily, I can be relaxed, because I have not repeat not argued that tariffs are A Good Thing. I would be happy if there were no tariffs anywhere. I have simply made the claim that they are not worse for either consumers or producers alike than a sales tax.
D. It sounds like you think Trump is not committed to tariffs, but will swivel and pivot as the [perceived] need of the moment arises. Cool. We’re in agreement.
BTW, l loved his negotiating performance in Gaza! Israeli and Hamas necks remain unswivelled. You too?
Per your last article, if interest rates don’t obviously control inflation, what does empiricism say about how tariffs pass through affects inflation? By definition we’re talking about prices, so would be the empirics that tariffs drive (one off, delayed?) inflation?
What I don't understand is why the price of a product has to inflate just because a single component is more expensive. I'm not talking about dolls imported from China, but something domestic. Why does the price of a pizza increase by 15% if only the imported tomato sauce is tariffed by15%. I believe the producer is taking advantage of tariffs (or inflation) and passing higher costs through to their customers for a greater profits. I just stop buying, but not before I let a manager know that their prices are too high. Speak up, people. Let the sellers know that their prices are too high and then walk out the door.
Do you have any real-world examples of that? I have not heard anyone claiming a single input price rise translates to a finished price rise of the same magnitude.
Prominent members of the administration and Democrats in Congress have also been wailing about tariff-induced price-raising collusion or even "greedflation." So, many larger businesses are probably pondering the political blowback that might come from booking near-term windfall profits by pricing at opportunity cost.
A very thought provoking article. Thank-you for sharing it. I am watching the ranchers here in southern Arizona explain their issues with the tariffs and President's Trump desire to but beef from Argentina. Also, my farmer friends in the Midwest are taking a beating over tariffs with China. (China is not buying American soybeans) Just because prices haven't raised yet, doesn't mean that they won't. (Also, thank you for allowing me to comment many authors on substack hide comments behind their paywall. Just my humble opinion, hope I haven't upset anyone. )
It looks like your and your Midwestern friends’ second concern just was addressed: China returns to buying soybeans.
I also noticed that many naked Kings use paywall to limit opposing viewpoints.
Very useful real world perspective…afraid that Nial is ensconced in Ivory Tower and blindly relies on macro-data to construct his world view.
Niall is heavily invested in Trump being successful just as he was heavily invested in Bush/Cheney. So had Biden or Kamala forced Netanyahu to agree to a ceasefire at Qatar’s behest Niall and Bari Weiss would have flipped out…but they have no choice to pretend Trump got some great deal forcing the release of 1900 Hamas terrorists!!
There is a world of difference between doing mindless, self-serving bidding of whoever by Biden or Kamala and delivering Israel’s eternal dream: recognition of its right to exist by the Arab League.
“Experts” on the left proclaimed this outcome as impossible just a short while ago. Just as they proclaimed anything similar to Abrahams Accords; America’s energy independence; …; returning bodies of American service members, who lost their lives in Korea.
Show us anything comparable by Biden, Bush & Co. Allowing Putin to gain 20% of worldwide uranium in exchange for $138 mln donation to the personal foundation (Uranium One) does not count.
Obama made America energy independent and Biden made America energy dominant. The Abraham Accords failed to keep Israel safe…but they were made possible by fracking and LNG. Fracking is what changed the Middle East and not Kushner…he was willing to start taking money from Qatar as well as MBS.
You are living in the world of make-believe virtual unreality. I am sure you can provide data substantiating your FALSE claims on Obama/Biden records.
As for Abraham’s Accords, everything has a purpose. Purpose of Abraham’s Accords was NOT to make/keep Israel safe. It created a stage for the Israel’s dream of its right to exist recognised by the majority of Arab/Muslim nations. The latest agreement accomplished this goal/dream.
A nice try though. You get a participation medal.
I agree the Abraham Accords cut Palestinians out of the equation which is why they grew desperate and attacked on 10/7. Israel is much safer now than they were on October 6 but October 7 happened and it happened because of the Abraham Accords. All I know is the Trump/Kushner families have made out bandits thanks to their dealings with Qatar and MBS…but 10/7 happened and Trump hasn’t given any money back! 😆
You keep accumulating points by bringing up irrelevant issues and names, especially Kushner and Trump. I am sure, you will have no problem to substantiate every FALSE political point you are making.
You earned another participation medal.
My company costed our inventory at replacement cost and would charge prices on a margin computation upon notification in advance of the actual cost change taking effect for a nice arbitrage. My guess is your CEOs company is doing the same thing, whether they know it (or will admit it) or not.
I think everyone down here in the trenches understands that tariffs will make foreign goods more expensive. I buy a fair amount of hobbyist-type robotics and micro-controllers to feed my electronics addiction and benefited tremendously from the de minimis provisions. I suspect those prices will go up significantly next year and I may have to go into an addiction treatment program. However, I don't think economists like yourself have even begun to factor in just how much pain the ordinary American is willing to endure to level the trade playing field with our foreign markets and rehome a lot of the industry that went away when everything got outsourced to 'everywhere but here'. We can do with a bit less, but just the thought of shafting the uni-party elites who have been selling our country to the lowest bidder for decades would offset a lot of the pain
Well said.
I think you are right that about 50% of Americans will not care that there is a one-time jump in retail prices --- willing to take the pain, as you say. But good economists always ask, "and then what"? Quick on the heels of the entirely noticeable uptick in retail prices will be the midterm elections.
Willingness to pay is not the same thing as ability to pay. How long will it be before rising prices convert to "vote the scoundrels out"? Many of the same 50% of Americans who are willing to tighten their belts to re-shore retail goods are people who cannot afford another 10%-15% jump in retail prices.
Oh, by the way. Where is the money from the jump in prices going? It's going into the coffers of the U.S. Treasury. What will the government do with that money? Anything and everything except what the payers of the tax would have done with it.
One of the reasons cited for Democrats losing in November 2024 was Biden's inflation, which was below 3% for the last six months before the election, and below 4% since June 2023. People have long memories of even that low inflation. I have vague memories of the LBJ/Nixon inflation and my mother grumping about the continual price rises at the grocery store.
I do not believe Trump's 2025 inflation will be forgotten by November 2026. Trump barely won 2024 in spite of himself and the worst opposition candidate I can remember, the Democrats seem to be going out of their way to look even more out of touch, and Trump seems to be doing his best to make the Democrats despise him as much as possible. I have no idea what will happen in November 2026 or 2028.
I have no idea of the future either; the future, she is uncertain. I agree that people tend to vote their pocketbooks. I am an economist; I do not blame Trump for inflation. The POTUS has absolutely nothing to do with inflation; can't cause it, can't stop it.
But this POTUS’s tariffs have raised prices.
A tax will do that.
Not in the same way. Stop being so obtuse.
The government, meaning the US citizen, is going to end up paying to build a ballroom on the east side of the Whitehouse that has just been demolished.
Why do you say so? Trump says it will be financed with subscriptions.
One of the things you miss completely is the reality the consumer controls the price they pay and whether they absorb any of the tariff.
Allow me to use a real world, personal example: I love Canadian maple syrup on my pancakes. It is decadent.
I have 3 young granddaughters who are smitten w my pancakes and my favorite Canadian made syrup.
Alas, the price of my favorite Canadian maple syrup — delicious elixir — increased rather dramatically.
Confronting that painful economic reality, I researched domestic maple syrups.
The consensus — based on focus group taste testing by me and the granddaughters — was that one Vermont syrup and one Minnesota maple syrup were both superior to my original Canadian favorite.
Both of the domestic maple syrups were less expensive and one provided free shipping.
These tariffs are not a prison sentence. The consumer gets to determine what, if anything, they absorb of any tariffs.
A lovely anectode. The plural of ‘anecdote’ is not ‘data’ said the economistto the layman. (Sorry)
Wow never heard that before.
I could have used Canadian lumber, lumber futures, sawmill capacity utilization rates but I figured you’d be more likely to understand pancakes and maple syrup.
Why do economists live in such ratty houses?
Probably because they don’t have access to Canadian lumber which I am told is better than American lumber? I don’t know.
But you are right, my smarmy comment deserved yours.
At the risk of ‘singing into the wind’, your anecdote points to the general problem of reduced choice. Prior to tariffs, you maybe did not know about Vermont or Minnesotan maple syrup and those products are certainly very good. But now you get to choose from 2 locales rather than 3. Are you worse off? Probably not because the joy of giving pancakes to 3 granddaughters far outweighs what exactly is the syrup involved.
It’s the same in here in Canada. After Trump insulted us, we did what any good American would do, we boycotted American goods. Result: California wine sales have fallen off a cliff, Kentucky bourbon likewise, and American tourism has tanked. This has meant less choice for Canadians but Portuguese or Chilean wine is excellent, as is Canadian, Irish and Scottish whiskey, and frankly going to Europe or South America or Asia has been a truly broadening experience for many Canadians. Nevertheless, out choices are fewer.
You may not believe this but a Canadian friend of friend was driving to Seattle from Vancouver to catch a plane for a Hawaian vacation. The border guard asked him what he thought of Trump. The idiot reponded honestly and got a stamp that said “Not allowed in the USA for 4 years”. End of vacation. That is loss of choice.
If I understand economics correctly, more choice enriches product quality and reduces prices. So the tariffs, and the malignant force behind them (the ‘othering’ of foreign countries) are a bad thing economically. You don’t need to believe me, listen to Ronald Reagan in the advert sponsered by the Ontario government this weekend. Everything said in the advert was said by Reagan.
In my example and your rejoinder, there is no difference in the number of choices. I could still buy the Canadian syrup at the higher price.
Shame on my kneejerk snobbery for thinking the Canadian maple syrup would be better.
In the example you cite, the border guard was stupid to ask your friend's opinion and your friend was stupid to answer.
I don't drink because the stuff is poison, so I have no opinion on the wine/whiskey situation.
Gerry, I think you might be the best person in Substack.
Except they cut off the final 55 seconds where Reagan explained why he was placing a 100% tarrif on Japanese semi conductors.
So the ad actually argues for Trump's tarrif actions, not against them.
Canadians make it too easy. Do your homework, my friend. Speaking as an ex-Canadian.
You can't honestly equate a narrowly targeted tariff on Japanese semiconductors with a 10% across the board tariff rate increase on every Canadian import because one Canadian province made an ad. That's apples to helicopters.
Reagan didn't like tariffs. He certainly didn't like them when they were broad-spectrum and untargeted relative to a specific adverse action. Ontario got the Gipper right. Trump is no Reagan.
It's nice to see that Republicans are feeling embarrassed they aren't living up to Reagan's words and legacy, at least.
I have also read that Reagan imposed the targeted tariff because the alternative was the Democratic Congress passing worse tariffs and overriding his veto.
Whatever the truth of that one tariff is, Reagan was far more free trade than Trump, and the only good to come out of the matter is that Trump thinks Reagan still matters to Republicans. Maybe the GOP recovery after Jan 20, 2029 has a better chance than I had expected.
Haha, good one. ". . . Republicans are feeling embarassed they aren't living up to Reagan's words and legacy . . . "
As a Republican and a Reagan Pioneer, I love Ronald Reagan.
As an independent thinker and a Republican I feel no compulsion to agree with 100% of what Reagan or any other Republican said.
When Reagan admitting defying the law and Congress by sending aid to the Contras I was critical of his dishonesty. If he had been Trump he would have been impeached and removed from office.
It is a wildly different world out there and for the first time we have a President who actually understands business and can wield tariffs as a weapon. I side w Trump on tariffs.
Not embarassed.
Is there any chance you could get your Canadian friend-of-a-friend to go on record to news media, and to offer such supporting evidence as is possible to verify the claim?
Your friend-of-a-friend is allegedly already out the cost of the vacation and the four years of Trump's reign of terror. He's got nothing left to lose at this point, seems to me!
We need more sunlight on these kinds of abuses where they occur. Your account is both hard to believe...yet sadly all too believable at the same time.
“At the risk of ‘singing into the wind’, your anecdote points to the general problem of reduced choice.”
But choice is NOT reduced, just more expensive. Moreover, the world is NOT limited to the two countries. If demand is still there, other countries may step in with their similar products. Perhaps we may discover that these new arrivals are not worse quality and may even be cheaper?
I view jolts to systems as a long-term beneficial event opening opportunities, unthought of before.
Perhaps big pharma makes another fortune by coming up with a cure of, if not a vaccine for TDS? (Addition to GDP)
Do you seriously think that raising prices doesn't affect choices?
That's one of the dumber things I've heard recently.
It certainly does not affect the existence of choices. The choices are there. What you choose is up to you.
Maple syrup is a pretty simple example, and yet....that Vermont company is paying tariffs on Canadian hydropower for their boilers and the Minnesota firm pays tariffs on imported glass and all those costs are *eventually* going to get passed to the consumer. Modern supply chains are so complex that harnessing tariff arbitrage is going to be a little trickier than just shopping around. An illusion of power, like claiming you're not a slave to the IRS because you are in charge of reporting your income.
Those boilers are fueled with natural gas they are likely getting from Canada.
Don't agree on the issue of shopping around. We are looking at a monumental effort toward re-shoring and friend shoring. That's really the story here.
Harken back to the tariff driven tsunami of foreign car brands (thirteen in total) who came to the US and developed manufacturing clusters that also attracted parts supplies due to just in time manufacturing technology.
These foreign car manufacturers make half of all cars in the domestic market and employ more than 300,000 Americans (and lots of American robots) with another 1,000,000 American workers in parts plants.
The US has 11,800 parts plants of which 5,000 are located in these foreign car manufacturing clusters. Some 2,000 are foreign owned.
With the advent of EVs, this has increased in a meaningful way.
This is one of the big payoffs of Trump's tariff policies -- new manufacturing plants i the US, re-shoring plants from China, and friend shoring to other countries.
Clearly you favor domestic manufacturing. Fine. However the economist consensus is that tariffs aren't optimal for creating this outcome. Tariffs, inacted for any goal other than revenue generation are central planning. Planned economies perform poorly. Why would this time be any different?
I favor jobs, American jobs for American workers. If a company wants to have access to the US market, have a NYSE listing, have access to the American banking system, have access to US capital, have the protection of American laws -- then make your stuff in America and employ Americans.
I am vehemently opposed to manufacturing within the borders of our economic/world order rivals and employing slave, prison, child, and underpaid labor without any regard to the environment. This is both a national security and ethical adversion.
Tariffs have several legitimate purposes:
1. Tariffs are used to protect strategic industries — industries with national security implications — such as high tech, steel, or aviation.
2. Tariffs are used to protect fledgling, startup businesses during their period of incubation and infancy, often technology related such as chips or AI.
3. Tariffs are used to punish bad actors such as China for its theft of technology, its use of slave/prison/child labor to manufacture goods, and to offset low environmental standards.
Trump has added a fourth: to initiate and modify trade and diplomatic relations with rivals. This is in addition to sanctions for other reasons.
Old boy announces a 100% tariff and the other country pays attention.
I personally would prefer mutual zero tariffs with only a 10% price of admission tariff to sell into America because we have the strongest consumer market on the planet.
What initially sparked Trump's attention was unfair, unequal, and unreasonable tariffs wherein the US imposed a vastly lower tariff on a foreign country or product line than that country imposed on US manufacturers. Simple fairness.
In addition to actual tariffs, there was the issue of non-tariffs barriers to trade and bad acts. Our largest trading partners were particularly opportunistic and predatory -- Canada, Mexico, China, the EU.
The US has had tariffs and customs duties since its founding -- they were the primary source of government funding until the enaction of the income tax -- and they have not to date impeded our growth into the best economy on the planet and will not do so now.
When you use the term "central planning" you imply a combined political and economic system which is not the case in the US.
Politically we are a Constitutional representative republic with three co-equal branches of government operated by an elected executive.
Economically we are a capitalist country wherein the means of production is privately owned and controlled.
In countries that have had central planning -- Russia, China -- they have had a single political/economic system and the means of production are substantially owned/controlled by the state and they have had widespread corruption.
Huge differences.
You do NOT favor American jobs. That goal is incompatible with the inefficient misdirection of resources which is inevitable with central planning. Tariffs favor those inefficient domestic industries which free markets replaced with more efficient domestic industries,
If all you care about is jobs, then do you want to bring back elevator and telephoner operators? Do you want to ban ATMs and self-service gas stations and grocery store scanners? How about backhoes and excavators which replaced wheelbarrows and shovels?
Get out a map, amigo. I favor American jobs -- jobs located in the US.
Tariffs motivated foreign car manufacturers to locate manufacturing plants in the US for almost 50 years. Half of the cars made in America are made by foreign brands that hire Americans, that pay property taxes, and fund payrolls.
I favor that.
The rest of your comment is a reading comp problem.
You claim to believe that central planning leads to corruption. Yet you want the government to decide which businesses to favor and which to disparage. How is that not central planning?
I did not say that central planning "leads to corruption."
I said that countries like Russia/China that have widespread ownership of the means of production in the hands of the state have widespread corruption.
To expand on that, these countries were corrupt long before they engaged in central planning.
I favor freedom. Let me decide if I want to purchase domestic or foreign.
So far, US corporate profits (see this season's batch of earnings reports) are at all-time record highs, as is the S&P 500, and the stock markets of Japan, South Korea, Taiwan, Canada, Mexico, Europe (SXXP), Indonesia, and even Israel.
The MSCI WORLD IDX (a global equities index) struck an all-time high last week, and is up 27.7% in last 52 weeks.
So why would a global equities index rise 27.7% in last 52 weeks, and strike all-time record high?
Actually, I am wondering myself, but I think we can say, "Tariffs, schmariffs."
Tariffs are one of the hoariest totems in the Hall of Orthodox Macroeconomics, and in a perfect world, a bad idea.
A much, much bigger hit to US living standards is found in housing shortages, and the ridiculous cost of college education. Something tells me healthcare eats up too much money too, but there is only so much I can be outraged about at once.
Government is reportedly the largest purchaser of health care (I guess because of Medicare?) and you know how frugal the government is.
Property zoning is probably the worst thing going in the US, followed by government involvement in healthcare.
Tariffs...relatively unimportant, and the effects will be mitigated in time.
In addition, there are huge national security issues attendant in tariffs.
Sadly, what the war in Ukraine shows, and not in theory but in fact, is that liberal democracies need the ability to produce vast amounts of war material, and to radically innovate, simultaneously.
In addition, a chilling idea is that what "free trade" has done in the last 20 years is provide resources and ability to "arm up" to the most illiberal regimes on the planet, in Beijing, Moscow and Tehran. Ugly, but true?
There are surely unpopular topics in econ departments across America.
The reality is tariffs hurt most those who can afford it most. Trump’s base is most impacted by oil & gas and USA grown food. Italian wine? Buy California. VW? Buy Tesla. Ferrari? Pay the tariff. Hermes? Pay the tariff.
I think otherwise. Check out the country of origin for what you buy at Walmart.
Never been. Closest one is another state. I will check back in a year and re-assess. To date, easily avoiding much impact. The money printer is what is really going to set things off, not tariffs, in my opinion.
Tariffs are a sales tax. Trumps tariffs will cause jump in retail prices. If the tariffs are removed, retail prices will drop back down. But if the tariffs are not removed, the jump will remain in place.
You are correct about what economists call price inflation, which is an ongoing RISE in prices, and which is due to money creation, whether that new money is created directly by the Fed monetizing U.S. Treasury debt or is created by the banking system creating credit in excess of household saving.
It’s not that simple. You have to go deeper part by part, product by product, alternative by alternative. Talk to a cfo not an economist
JC's essay is about talking to a CEO of a "fairly large retailer." We are not talking about what some economist said. We are talking about what some CEO said. This is all about pretty simple business accounting, actually. It's not rocket science, as they say.
It's not even that complicated. Trumpies like to simultaneously Trump cut $300 billion in income taxes and raised $300 billion in tariff revenue (numbers vary all over the map) seemingly oblivious to that tariff revenue being a tax rise. I had one numbskull tell me the comparison was loony because income taxes are not spent inside the US, but externally, and I have zero idea what that even means, what with money being fungible, other than him just being another Trumpie making excuses for being ignorant.
But I digress. The simple reality is that $300 billion (or whatever the actual number is) is a tax increase which manifests in higher prices on mostly all that "cheap Chinese junk" which onshoring nuts brag about. You don't need to ask economists or CEOs or CFOs or Joe and Jane in street surveys. $300 billion higher prices on the cheapest goods is noticed every day, and those continual price rises are what sticks in people's memories.
Well, that’s what we need to know. That is $1k per person in the states. Who is paying it and for what? I imagine luxury goods equate for a material amount. Until then, all this is just people making assumptions and talking as if it impacts everyone equally. I’m very much waiting to see the impact and reaction. In the meantime, the impact on my budget is negligible. The big increase in expenses are medical and utilities. No tariff impacts felt yet. To my original point, i don’t see his base revolting just yet.
I wonder if this applies to energy? It seems as though whenever there is a supply chain event, prices go up right away for oil products. Is energy not subject to sticky prices theory?
Sticky price theory is sticky mostly in the minds of macro economists. In real world markets, prices are not sticky. Are prices sticky in financial markets? Yes, retailers are resisting raising prices ahead of Black Friday and the holidays. But accounting realities will come to bear soon enough.
Arsenal, the English soccer team, lets you shop tariff free.
https://arsenaldirect.arsenal.com/?utm_source=arsenaldotcom&utm_medium=OnlineShoppingButton&utm_campaign=ArsenalOnlineShopping
I assume they are paying the tariff.
Intersting that he does no want to sound critical of the President, wans to hide the effect from consumers as long a possible (unil after the elections?)
The important elections are not coming until November 2026. There will be no hiding.
Good point. I was thinking about VA NJ and PA judges.
The off-term elections matter, too, in Virginia where I live. But the real test will be November 2026. If the House goes back Democratic, Trump will be the lamest duck that ever quacked. How do you spell impeach?
Democrats will still be powless to undo the illegal and exonomically daaging tariff setting, defund the lafor-force diminishing deportations or force more H1B visas, dent the growth-sapping deficit and prevent the continued appointment of MAGA federal judges. Trump’s damage will continue quacking. :)
From my perspective, Democrats do all of the above themselves, with the exception of appointing originalist federal judges.
Agree. But Trump is worse! And MUCH worse at stretching ececutive power. And worse at discouraging foreign students to come for study and hopefully to stay. And worse at scinece and technology funding.
But because his tariffs are all by executive order, there's a real chance of it being undone come January 2029, or sooner if the Supreme Court rules against him. Trump is throwing away the opportunity to get Congress to enshrine his tariffs in legislation which could be much harder to undo come 2029.
I certainly do not want his tariffs enshrined by Congress. Do you? I'm an economist. Tariffs are a selective sales tax. Why would we want selective taxes under the control of the POTUS? Why would we want a selective sales tax, period? All the economics I know augers against tariffs.
That assumes that he wants taraffis for some purpose other than just posing as “tariff man,” tokens to push around on a board. “Enshrining” them would miss the point.
Thanks for sharing. Something similar was included with the Flash US PMI increase this past week:
The survey data are consistent with the
economy expanding at a 2.5% annualized rate in October after a similar rise was signalled for the third quarter.
“However, business confidence in the outlook for the coming year has deteriorated further, and is at one of the
lowest levels seen over the past three years as companies worry about the impact of policies, most notably tariffs.
Companies are also concerned over disappointing export sales, especially in manufacturing, and factories are
seeing an unprecedented rise in unsold stock. Having bought excess inputs earlier in the year to front-run tariffs, producers are making more goods to use up these inputs but are often struggling to sell the end product to customers.
“Hence, although input costs continued to rise sharply again in October, principally reflecting the pass-through
of tariffs, average selling price inflation has cooled to the lowest since April as firms compete on price to win sales.”
Caring about whether your inventory item cost $1 or $1.50 as an input to the price you can charge is a kind of sunk cost fallacy. The widgets before and after the tariff impact remain worth exactly whatever the customers are willing to pay, which in turn depends on what alternatives customers have and what price changes your rivals will implement.
I think of tariffs as a sales tax levied on a subset of goods from a subset of places. Market distorting, sure, A Bad Thing, OK, but over time not worse for either consumers in general or producers in general than a sales tax on all stuff from anywhere.
And say the tariffs raise $xB, and sales taxes were cut by $xB. Revenue neutral for govt, cost neutral for consumers.
You just described a free lunch. There ain't no such thing. Willingness to pay is not the same thing as ability to pay. Real money is coming out of real consumer pockets and going into real U.S. Treasury bank accounts.
‘From consumers, to the Treasury’. Well, yes. Of course. Like a sales tax, in fact. Which nobody likes, but nobody thinks crazy and illegitimate, or disproved by Ricardo in 1810, or proof that the legislature is crazy, or a
free lunch.
Tell me a sales tax is bad for US consumers, and I’ll agree with you, and then I’ll tell you tariffs are bad for US consumers for the same reasons and to the same extent. But not more.
Tariffs are far less bad, for the country that has them, than a sales tax. In the short run, always. Bad for the world if it means total trade goes down, or some countries have higher trade deficits.
Today in the USA, unlike in 2000, nor 1992, is not rich enough to allow globalization so as to have a huge total trade deficit, as well as trade deficits with most trading partners. Discussion of tariffs without discussing trade balance is as biased as discussing benefits of govt spending without reference to deficits & debt. Often done, but not completely honest.
Why are tariffs less bad than sales taxes?
* Sales taxes are about as in-yer-face transparent as taxes get.
* Tariffs are hidden and impossible for retail shoppers to even know about, since they apply to manufacturing inputs more than retail products.
Trade balances between pairs of countries are meaningless drivel in a world of more than two trading partners.
You are as ignorant as Trump if you think trade deficits are debts, and do not realize they are foreign investments.
The USA is far richer now than in 2000 or 1992. If you actually believe we are poorer now, cite some sources.
But sales taxes are not being cut. These are real price rises, and on the cheapest goods. Even if people don't buy everything on shelves, they still notice prices going up.
Consumers do indeed notice prices going up. And you are right: it’s typically consumers and not producers who pay the higher prices than otherwise that tariffs create. That’s 100% a valid and relevant criticism of the politicians who decide to create inflation, *and* decide to impose tariffs on top of sales taxes instead of whatever would be the revenue neutral replacement of [some] sales taxes.
It’s not though a valid criticism of tariffs as such, unless you have the same venom for sales taxes. Which I don’t notice much.
Sales taxes aren’t jumping around like fleas on a hot plate. Tariffs are.
That’s a reasonable argument in favour of tariffs not jumping around like fleas on a hot plate, but it’s not an argument against tariffs.
Plus, think of it this way. Tariffs are easier to avoid than sales taxes. Just buy more domestic and less foreign stuff.
And here’s a point: the very fact that they are jumping like fleas suggests that the tariff-master-in-chief is not committed to tariffs as such, but is using them as tools in a non-tariff negotiation. As if the real objective is discouraging IP theft, fentanyl production, restrictive trading rules, and military buildups in the South China Sea. Food for thought!
A. I’m not arguing about Smoot-Hawley or 1800s tariffs.
B. Tariffs are impossible to avoid because they apply to inputs which no retail buyer knows anything about, unlike sales taxes, which by the way, are just as impossible to avoid.
C. Tariffs are impossible to avoid by buying domestic because the point of tariffs is to raise import prices so domestic producers can also raise prices.
D. Trump has stated three conflicting purposes of his tariffs: to block imports so domestic production can raise prices and ramp up; to replace the income tax, which requires high tariffs which would reduce imports and reduce revenue; and as leverage to get to zero tariffs around the world.
E. Anyone who believes anything Trump says is going to wear out his neck from all the swiveling. If you actually believe he “is using them as tools”, you believe the impossible. He doesn’t know what he is doing or why. He just makes it all up for the gullible to believe.
A. I’m not arguing about Smoot-Hawley or 1800s tariffs.
B. Producers know where their raw materials come from, and will make different, now rational sourcing decisions. In any event, the smaller the tariff-subject components, the smaller the impact of tariffs. It’s not all or nothing.
C. That is not the point of tariffs, but I do agree it is one of the consequences of them. But luckily, I can be relaxed, because I have not repeat not argued that tariffs are A Good Thing. I would be happy if there were no tariffs anywhere. I have simply made the claim that they are not worse for either consumers or producers alike than a sales tax.
D. It sounds like you think Trump is not committed to tariffs, but will swivel and pivot as the [perceived] need of the moment arises. Cool. We’re in agreement.
BTW, l loved his negotiating performance in Gaza! Israeli and Hamas necks remain unswivelled. You too?
Per your last article, if interest rates don’t obviously control inflation, what does empiricism say about how tariffs pass through affects inflation? By definition we’re talking about prices, so would be the empirics that tariffs drive (one off, delayed?) inflation?
A typo?
You write "Then, the cost of losing a customer now is a lot of future sales.".
I think you mean 'Then, the cost of losing a customer now is a LOSS of future sales."
What I don't understand is why the price of a product has to inflate just because a single component is more expensive. I'm not talking about dolls imported from China, but something domestic. Why does the price of a pizza increase by 15% if only the imported tomato sauce is tariffed by15%. I believe the producer is taking advantage of tariffs (or inflation) and passing higher costs through to their customers for a greater profits. I just stop buying, but not before I let a manager know that their prices are too high. Speak up, people. Let the sellers know that their prices are too high and then walk out the door.
Do you have any real-world examples of that? I have not heard anyone claiming a single input price rise translates to a finished price rise of the same magnitude.