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The High Cost of Rising Tariffs

Mister-JrMister-Jr Posts: 27,752 AG
IMF study finds that tariffs lead to slower growth, more unemployment, higher inequity - and no improvement in the trade balance.

https://blogs.wsj.com/economics/2018/10/31/the-high-cost-of-rising-tariffs/#comments_sector


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Replies

  • TarponatorTarponator Under a BridgePosts: 17,010 AG
    edited October 2018 #2
    Of course they don't help.

    This time it will be different, I suppose.
  • WadeFishermanWadeFisherman Posts: 439 Deckhand
    Fake news or news with an agenda
  • mustang190mustang190 Posts: 10,104 AG
    I noticed that spatula in Walmart went from $2.80 to $2.86. 
  • sjm1582002sjm1582002 Posts: 4,364 Captain
    The high cost of paywalls means that article will be largely ignored.











  • mplspugmplspug Palmetto FloridaPosts: 12,617 AG
    Oddly, none of that is happening.

    Captain Todd Approves

  • ScminnowScminnow Posts: 4,097 Captain
    For years the unhinged left hated Walmart cried and wailed for more things made in America, where did those wackos go? Miss them
  • AaronCannonAaronCannon Northwest ArkansasPosts: 866 Officer
    edited November 2018 #8
    Well now that Walmart has killed off its local competition, theyll squeeze producers here to put out cheaper goods.
    Im sure some factories will be happy to get started again, theyll just have to find a way to cut costs...labor is the easiest way.
    Those immigrants may come in handy after all.
    The rifle itself has no moral stature, since it has no will of its own. Naturally, it may be used by evil men for evil purposes, but there are more good men than evil, and while the latter cannot be persuaded to the path of righteousness by propaganda, they can certainly be corrected by good men with rifles.
    Jeff Cooper
  • Westwall01Westwall01 Posts: 5,453 Admiral
    As long as they come here legally
  • Bimini TwistedBimini Twisted Posts: 11,444 AG
    We're the ones that pay the tariffs, not the Chinese, so it's really just a regressive tax that we pay because of poor leadership and bad policy.
  • Mister-JrMister-Jr Posts: 27,752 AG
    edited November 2018 #11
    The high cost of paywalls means that article will be largely ignored.











    The collapse of the Soviet Union and the rise of emerging markets 30 years ago were accompanied by a string of economic papers arguing nations that liberalized trade grew much faster than those that didn’t. Country after country followed that advice to fight recessions.

    Three decades later, the phrase "trade liberalization" is often criticized as globalism. A new era of protectionism is being led by the world’s largest economy, the U.S., as it figures out how to extend an economic expansion.

    Four International Monetary Fund economists—Davide Fuceri, Swarnali Hannan, Jonathan Ostry and Andrew Rose—decided to take a look again at the relationship between trade and prosperity, only this time by analyzing the impact of trade restrictions during a time of economic growth.

    Specifically, they analyzed data from 151 nations between 1963 and 2014, looking for what occurred when tariffs rose by about 3.6 percentage points—small potatoes compared with the tariffs the U.S. is imposing on China, steel producers and others. The study didn’t take account of other trade restrictions, including nontariff barriers and retaliatory tariffs. Mr. Ostry, who decades ago worked on some of the trade-liberalization papers, said the IMF economists wanted to see what impact even a small increase would have.

    The result: slower growth, more unemployment, higher inequality, exchange rate appreciation–and no improvement in the trade balance, which President Trump has said is his main measure of U.S. trade health.

    Why the negative effects? Mainly because tariffs block competition, and reduce efficiency and productivity. Less productive economies prosper less, Mr. Ostry said.

    Some of the IMF findings are counterintuitive. Advanced economies are affected more by tariffs than developing nations. Tariffs have a bigger impact when economies are expanding–choking off growth somewhat–than when economies are contracting.

    Indeed, the economists find that trade restrictions boost growth somewhat during recessions. Mr. Ostry said that may be because firms that “couldn’t quite cut it at world prices, maybe could cut it under protectionist walls.” That was the theory Latin American nations operated under for decades before their economies slowed and they turned to liberalized trade.

    Even so, Mr. Ostry said, he wouldn’t recommend protectionism as a strategy to cope with recessions.

    “That mild stimulative effect comes at a cost,” he says. “It’s distortive and can reduce productivity, efficiency and welfare.”

     

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  • Mister-JrMister-Jr Posts: 27,752 AG
    Well now that Walmart has killed off its local competition, theyll squeeze producers here to put out cheaper goods.
    Im sure some factories will be happy to get started again, theyll just have to find a way to cut costs...labor is the easiest way.
    Those immigrants may come in handy after all.
    Well now that Walmart has killed off its local competition, theyll squeeze producers here to put out cheaper goods.
    Im sure some factories will be happy to get started again, theyll just have to find a way to cut costs...labor is the easiest way.
    Those immigrants may come in handy after all.
    Lower standard of living for employees?   Not in my hood.
    Vote for the other candidate
  • AaronCannonAaronCannon Northwest ArkansasPosts: 866 Officer
    Living in the shadow of the monster, i hear some good stories.
    The rifle itself has no moral stature, since it has no will of its own. Naturally, it may be used by evil men for evil purposes, but there are more good men than evil, and while the latter cannot be persuaded to the path of righteousness by propaganda, they can certainly be corrected by good men with rifles.
    Jeff Cooper
  • Mister-JrMister-Jr Posts: 27,752 AG
    As long as they come here legally
    Three steps behind and six to the right.    :p
    Vote for the other candidate
  • stc1993stc1993 Albany, GA Carrabelle, FLPosts: 7,554 Admiral
    Walmart has sure put a lot of stores out of business here & most were not local.  That & the dollar stores on every block & even out in the boonies.
  • dave44dave44 Posts: 11,552 AG
    Scminnow said:
    For years the unhinged left hated Walmart cried and wailed for more things made in America, where did those wackos go? Miss them
    This. Walmart was the main boogeyman for a long time. Stuff imported from China, killing mom and pops, stuff was too cheap, anti American and keeping wages down.
       It is hilarious to see a bunch of unhinged people trying to extoll free trade with countries that use slave labor and underhanded business practices now. 
         Nearly makes one think they have no real compass.
  • Mister-JrMister-Jr Posts: 27,752 AG
    edited November 2018 #17
    Who are these unhinged you speak of that amuse you much?
    Vote for the other candidate
  • Ol MuckyOl Mucky Posts: 5,540 Admiral
    We're the ones that pay the tariffs, not the Chinese, so it's really just a regressive tax that we pay because of poor leadership and bad policy.
    Yep. 
    We pay for country’s to take our goods and gladly let them flood ours with their junk. 

    Why wont any of these country’s agree to go tariff free with us?
    I have a much bigger and more powerful button
  • sjm1582002sjm1582002 Posts: 4,364 Captain
    edited November 2018 #19
    One word debunks that miniscule and uninformative article.

    China.

    That country has had much higher tariffs than the USA while experiencing much faster economic growth than the USA and this has been going on for decades.

    Below is a link to a much more thoughtful (and lengthy) discussion of the cost and benefits of trade that's not hidden behind a high cost paywall.

     An excerpt....

    "..............The idea that all countries lose in a trade war is unintelligible. This cannot possibly be true, not just because there is overwhelming historical evidence that countries have benefitted from trade intervention but also because the claim is logically impossible. Whether countries benefit or lose from trade intervention depends on the underlying institutions that mediate trade and capital flows, the extent of existing trade and capital flow imbalances, and the types of intervention employed.

    While tariffs and other forms of trade intervention may indeed raise prices for consumers, this is only one way, and often a minor way, in which these policy tools affect households. Depending on underlying conditions, they may also reduce unemployment, cause wages to rise, and reduce the growth of debt............"
    http://carnegieendowment.org/chinafinancialmarkets/76777




  • Mister-JrMister-Jr Posts: 27,752 AG
    One word debunks that miniscule and uninformative article.

     
    http://carnegieendowment.org/chinafinancialmarkets/76777

    Your informative link is dead. 

    This site can’t be reached

    http’s server IP address could not be found.

    ERR_NAME_NOT_RESOLVED





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  • tagtag Posts: 8,920 Admiral
    The very same people that blast Walmart for killing small businesses renew their Prime accounts and made Jeff Bezos the richest man in the world. Amazon has killed more small business than Walmart.
  • Mister-JrMister-Jr Posts: 27,752 AG
    tag said:
    The very same people that blast Walmart for killing small businesses renew their Prime accounts and made Jeff Bezos the richest man in the world. Amazon has killed more small business than Walmart.
    E-commerce is here to stay.  You still have the choice to go brick and mortar, if you can find it. 
    Vote for the other candidate
  • surfmansurfman WC FLPosts: 5,982 Admiral
    I rarely use e-commerce, I prefer to go to the store and pick out what I want. If I can't find what I want then I will go to the internet. It really doesn't seem like that big of a deal to me, maybe because that's the way I have always done it. I used to order stuff from magazines back in the day too, you know fill out an order form and mail it in. That was a pain I'll admit.
    Tight Lines, Steve
    My posts are my opinion only.

    Be thankful we're not getting all the government we're paying for.  Will Rogers
  • mustang190mustang190 Posts: 10,104 AG
    Mister-Jr said:
    Who are these unhinged you speak of that amuse you much?
    One rides a bicycle. 
  • sjm1582002sjm1582002 Posts: 4,364 Captain
    Mister-Jr said:
    One word debunks that miniscule and uninformative article.

     
    http://carnegieendowment.org/chinafinancialmarkets/76777

    Your informative link is dead. 

    This site can’t be reached

    http’s server IP address could not be found.

    ERR_NAME_NOT_RESOLVED





    Works when I click on it.

    Maybe you should get one of those google assistants to help you with this complex task.

    http://carnegieendowment.org/chinafinancialmarkets/76777

    Another excerpt from the link above:

    "..............Most economists limit their discussions about the impact of tariffs and trade intervention to the impact on consumers. This is dishonest, or at best confused, because the primary impact of tariffs (and of trade intervention, generally) is not necessarily on consumption. Countries have successfully intervened in trade for centuries; yet mainstream economists often argue, against the evidence, that trade intervention is always harmful to the intervening country because it raises consumption prices.

    But raising consumption prices is only one of the many ways that trade intervention can affect households. Trade intervention can also reduce unemployment, as it clearly did in the case of Germany after the Hartz labor reforms, which I discuss below............

  • TarponatorTarponator Under a BridgePosts: 17,010 AG
    edited November 2018 #27
    One word debunks that miniscule and uninformative article.

    China.

    That country has had much higher tariffs than the USA while experiencing much faster economic growth than the USA and this has been going on for decades.

    Below is a link to a much more thoughtful (and lengthy) discussion of the cost and benefits of trade that's not hidden behind a high cost paywall.

     An excerpt....

    "..............The idea that all countries lose in a trade war is unintelligible. This cannot possibly be true, not just because there is overwhelming historical evidence that countries have benefitted from trade intervention but also because the claim is logically impossible. Whether countries benefit or lose from trade intervention depends on the underlying institutions that mediate trade and capital flows, the extent of existing trade and capital flow imbalances, and the types of intervention employed.

    While tariffs and other forms of trade intervention may indeed raise prices for consumers, this is only one way, and often a minor way, in which these policy tools affect households. Depending on underlying conditions, they may also reduce unemployment, cause wages to rise, and reduce the growth of debt............"
    http://carnegieendowment.org/chinafinancialmarkets/76777




    From your article:

    I have often argued that U.S. President Donald Trump’s proposed tariffs on Chinese and other foreign goods will not reduce U.S. trade imbalances and are unlikely to be positive for the U.S. economy.

    Perhaps you should read it in its entirety before using it as a linchpin in your argument.  It goes on to say this:

    It is not at all a coincidence that Germany began to run surpluses just when households began to retain a smaller share of what they produced. Contrary to Oettinger’s claims, Europe is not running a surplus with the United States because Americans for the first time discovered German cars. It is running a surplus with the United States because between 2003 and 2005, to reduce domestic unemployment, Germany implemented policies that reduced the share of income German workers received and caused business profits to soar. This effectively represented a transfer of wealth from ordinary households, which consume most of their income, to German businesses and their wealthy owners, who consume very little of their income. Consequently, the German consumption share of GDP declined. Sharply declining consumption shares are, of course, the obverse of sharply rising savings shares.

    The Hartz reforms can be seen as a classic beggar-thy-neighbor policy that worked exactly as it is supposed to work. Rather than become more competitive by investing in productivity growth, Germany became more competitive by suppressing wage growth. As a result, Germany’s contribution to global demand declined (by the decline in the GDP share of consumption, sharply exacerbated by a decline in the GDP share of private-sector investment), but Berlin more than made up for this by taking a greater share of global demand. Germany’s soaring surpluses have nothing to do with the excellent cars Germany produces, the value of which had been well-known to Americans for decades.

    So much for fighting for the little guy, I suppose.

  • sjm1582002sjm1582002 Posts: 4,364 Captain
    My "argument" has always been that economic policies produce costs and benefits.

    Unlike the increasingly discredited "phree traders" who insist there is a "magic carpet ride" available.

    The recent rapid economic growth of high tariff China coincides with extremely anemic economic growth in the low tariff USA.  This cannot be disputed.

    So, who pulled the rug out?
  • mustang190mustang190 Posts: 10,104 AG
    Comparing the German economy to ours is apples and oranges. 
  • cadmancadman Home of the Gators Posts: 32,734 AG
    edited November 2018 #30
    It all depends on your consumers and the need for local manufacturing. China imposes Tariffs to get their consumers to buy Chinese products. The Chinese want and will buy American products at a small premium, but China needs them to buy their products to keep their economy growing, so they raise prices of American goods with Tariffs. 

    I do understand the need to try and balance trade, but do we want to raise the price of Chinese goods to try and bring back American manufacturing and will the consumer be willing the higher prices to accomplish this. 

    My biggest issue with the current plan is, I don't think there is a plan. I think it was just a reaction to the unbalanced trade with no plan or forethought. We need to decide if there are segments of the market we want to protect and increase tariffs on those. But do we really want to be making plastic spatulas or other items that require factories that will increase pollution?

    I do agree that we need to stop China from requiring American companies to hand over technology to do business. Stopping this practice is important even if it does lead to higher prices. But I think if all American companies banded together and refused to ship to China unless they dropped that requirement, China would have to do so or face a backlash from Chinese consumers. But I think companies are willing to let the government play the bad guy to keep their relationship with China intact.

    My 2c and that is what it is worth. 

    Mini Mart Magnate

    I am just here for my amusement. 

  • fish_stixfish_stix Posts: 1,389 Officer
    You're all taking the onesided view of tariffs; that view is that consumers take a hit when we impose tariffs. The other side of the story is that tariffs are a tremendous negotiating point. Mexico and Canada both signed a new NAFTA agreement with us, strengthening our position because Trump threatened new tariffs and they knew he would carry through with it. We currently carry a multi hundred billion dollar trade deficit with China because past Presidents didn't have the testicles to protect our interests or they thought that encouraging Chinese economic growth would lessen the threat from them. So now they steal our technology, tax the hell out of our goods and then build military bases in the S. China Sea. Great tradeoff, right!!!!
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