Could Trump's Tariffs Work?

[jacks]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

 

[hedrick]

It depends upon what you mean by work. In the end, the US economy could probably become self contained. Things would be more expensive, but we could probably do it. But it would take decades. There are many challenges. One is that investors would have to believe that the tar riffs would last for a long time. That’s questionable. Another is that even if it works, new factories will be automated. They won’t have as many jobs as in the good old days, and workers will probably have to be more educated.

The reasons manufacturing left are complex. But one problem is that Wall Strret doesn’tthink in the long term. If your company doesn’t make high short term profits Ot get bought out and sucked dry. Thst whole approach would have to change. But it’s those people who support trump, so I don’t see that happening. Also, Trump doesn’t want to set policies for the long term. He keeps changing them as people suck up to him. Thats not going to lead to the kind of long term chsnge needed to bring back msnufsctuting. It would take a long term bi partisan commitment.

I would like to see more manufacturing in the US. It’s possible that some tarriffs would be part of that. But continuing chaotic leadership won’t get there. I think there may actually be a commitment in principle in both parties. But its not clear whether we can turn that into workable policy. One danger of depending g too much upon tartiffs is that you allow our companies to be uncompetitive. That seems to have happened to the steel industry a few decades ago. Pushing car makers back to gasoline will tend to make them less competitive internationaloy also.

In the short term, there will surely be some idle capacity that will be turned on. I’m skeptical that there will be enough to make a significant difference to Trumps supporters.

 

[hedrick]

Incidentally, recent history shows that the current tarriffs won’t last. There will be continuing churn as long as Trump is president. However if they last long enough to raise prices, the prices likely won’t come down.

 

[jacks]

Incidentally, recent history shows that the current tarriffs won’t last. There will be continuing churn as long as Trump is president. However if they last long enough to raise prices, the prices likely won’t come down.

Thank you for your thoughtful answers.

So is it a trade-off of protecting US base industries vs having cheaper products? If other countries lower their tariffs, won't this also help US companies? Is it fundamentally "fair" to have some countries charge us tariffs, while we don't charge them or is that really not an issue?

Note: I don't expect you to answer all these questions, they are just things to help me understand the consequences of tariffs.

 

[Richard T]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

It depends upon what you mean by work. In the end, the US economy could probably become self contained. Things would be more expensive, but we could probably do it. But it would take decades. There are many challenges. One is that investors would have to believe that the tar riffs would last for a long time. That’s questionable. Another is that even if it works, new factories will be automated. They won’t have as many jobs as in the good old days, and workers will probably have to be more educated.

The reasons manufacturing left are complex. But one problem is that Wall Strret doesn’tthink in the long term. If your company doesn’t make high short term profits Ot get bought out and sucked dry. Thst whole approach would have to change. But it’s those people who support trump, so I don’t see that happening. Also, Trump doesn’t want to set policies for the long term. He keeps changing them as people suck up to him. Thats not going to lead to the kind of long term chsnge needed to bring back msnufsctuting. It would take a long term bi partisan commitment.

I would like to see more manufacturing in the US. It’s possible that some tarriffs would be part of that. But continuing chaotic leadership won’t get there. I think there may actually be a commitment in principle in both parties. But its not clear whether we can turn that into workable policy. One danger of depending g too much upon tartiffs is that you allow our companies to be uncompetitive. That seems to have happened to the steel industry a few decades ago. Pushing car makers back to gasoline will tend to make them less competitive internationaloy also.

In the short term, there will surely be some idle capacity that will be turned on. I’m skeptical that there will be enough to make a significant difference to Trumps supporters.

Hedrick gives a great answer. I will add that 98% of economists do not like tariffs. Trump's mistake for the moment is that he went too extreme and even punished nations where their tariffs are lower. He has bent the markets out of shape and even if he caves in the next couple of weeks, there is already harm because what nation would trust him? he likes too much theatrics. Better to just slap them on gradually in the right places and not be so incendiary.
In the discussion on tariffs the one thing that is often left out is that the U.S. balance of payments includes far more than just trade. The deficit is typically made up by foreign investment. Here is an article that helps explain this. The upside of the trade deficit: More foreign investment in the U.S. - Marketplace
Meanwhile the stock market was facing headwinds or negative events that could hurt any rally. Trump's tariffs were shocking, one reporter called it worse than anyone had thought of as a worse case scenario. His way out is to at least negotiate with the EU, Canada and Mexico. Even a small increase would be a win for Trump and give the market hope again. He can save face if he does that quick enough though I think that trust in the USA is very low in treaties and in trade. The USA by the way is in violation of the World Trade Organization rules. The U.S. basically set up the trade agreements and they were signed off on. Trump blew all that up.
If the USA were to go through with long term tariffs it is a very inward looking economy. Some South American nations tried this (mostly in the 60s to 90s, and it really hurt them. The USA is bigger and might have better results but as Hedrick explains to even try you have to be committed. A better policy would have subsidized the industries to bring them here. We are doing that with chip manufacturing. Having an internal supply of some production is a legitimate argument against free trade. Also working against Trump is that the unemployment rate is still only 4.3% historically low and if one created too many jobs wage increases would make inflation worse. Shipping off immigrants hurts available workers too. Odds now of a recession are as high as 60%. I think one is coming, and it could even be a depression.

 

[Job 33:6]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

It's worth noting that manufacturing output has not actually declined in the US. Only the quantity of workers needed to produce it. We've become reliant on foreign nations for manufacturing because...let's face it, who here wants their 12 year old boy working at a Chinese sweat shop making sneakers for Walmart?

It's funny, everyone talks about how low unemployment is and how good the economy is doing and blah blah blah, and yet here we are. Trying to bring back jobs that A. Nobody wants, and B. Robots can and do better.

All the while, everyone's retirement funds are taking a hit. If a person were 65 years old with a 401k of 1 million dollars and on the verge of retirement, they would have lost 100,000 dollars of their retirement in just this last month alone. Imagine saving money in a retirement fund your whole life, just to watch it disappear overnight.

Additionally, if people were really worried about poor working class America, why would price hikes across the board be a good idea?

The long term benefits are questionable. The immediate damage is clear and will have long lasting negative effects.

Maybe the trump administration will prove wall street wrong. But let us hope that this isn't just another case of maga playing stupid games and winning stupid prizes.

 

[Yarddog]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

Most likely not. Tariffs have historically hurt the economy. Especially the way Trump seems to think tariffs are.

The chart he uses isn't about the tariffs other nations impose on the US. The chart shows the trade deficits. So, will a tariff imposed on another country help reduce the trade deficit? Maybe.

The other country can negotiate with Trump to increase imports from the US. If they do, then the tariffs can be a success.

We will have to wait and pray the tariffs don't throw us into a recession or even a depression.

 

[Richard T]

It's worth noting that manufacturing output has not actually declined in the US. Only the quantity of workers needed to produce it. We've become reliant on foreign nations for manufacturing because...let's face it, who here wants their 12 year old boy working at a Chinese sweat shop making sneakers for Walmart?

It's funny, everyone talks about how low unemployment is and how good the economy is doing and blah blah blah, and yet here we are. Trying to bring back jobs that A. Nobody wants, and B. Robots can and do better.

All the while, everyone's retirement funds are taking a hit. If a person were 65 years old with a 401k of 1 million dollars and on the verge of retirement, they would have lost 100,000 dollars of their retirement in just this last month alone. Imagine saving money in a retirement fund your whole life, just to watch it disappear overnight.

Additionally, if people were really worried about poor working class America, why would price hikes across the board be a good idea?

The long term benefits are questionable. The immediate damage is clear and will have long lasting negative effects.

Maybe the trump administration will prove wall street wrong. But let us hope that this isn't just another case of maga playing stupid games and winning stupid prizes.

From a 16% of GDP (1997) to 10.6% now is a substantial drop. U.S. Manufacturing Output 1997-2025

 

[hedrick]

Thank you for your thoughtful answers.

So is it a trade-off of protecting US base industries vs having cheaper products? If other countries lower their tariffs, won't this also help US companies? Is it fundamentally "fair" to have some countries charge us tariffs, while we don't charge them or is that really not an issue?

Note: I don't expect you to answer all these questions, they are just things to help me understand the consequences of tariffs.

In part. But the impact on US companies is ambiguous. In a world where much of the sales of major companies is international, it can make them less competitive and lead to long term problems. This page discusses whether they ever make sense. https://www.weforum.org/stories/2025/01/tariffs-trump-trade-modern-economies/ I.

In principle they can be used when another country is dumping or doing other anticompetitive things. They can be used by developing countries to provide room for local industry to start up. They could also be used in the long run if a small country wanted to have local industry for policy reasons when its industry is unlikely to be able to be competitive.

The question is whether that could apply in the US. Economists would say no. But there are industries that are uneconomical here because of differences in labor cost. I could imagine using tarriffs to change that and make it economic to do things in the US. But by definition those industries could only sell in the US. They would not be competitive internationally. Perhaps for s few targeted areas. Bit the most likely areas are ones where we are currently competitive. Creating a whole economy that is intentionally uncompetitive strikes me as really dangerous. Basically thst would tend to stop innovation in the protected industries. In the long run foreign competitors would win because they had better products or production techniques. Arguably this happened in the auto industry when foreign cars first started selling widely. Their advantage wasn’t just cost. US companies weren’t making what US consumers wanted. The benefits of competition aren’t just low price, but forcing companies to change when technology or consumer demand calls for it. Any decrease in competition will tend to remove that, particularly if the domestic industry doesnt hsve robust competition within the US. The politicians interested in tarrriffs tend not to be interested in aggressive anti-trust enforcement.

 

[hedrick]

I'm also concerned about the effect of Wall Street. Is it even possible to build manufacuring in an environment where long-term investment is difficult. If you don't make a high enough short-term profit, but have a good deal of capital equipment, you'll get taken over with leveraged buyout and the equpment sold off.

Boeing is not in trouble because of Far East low-cost competition, but because of management that stopped looking a quality and long-term heath of the business. In an economy protected by tarriffs this would likely become more common. (Of coursr Boeing themselves wont be saved by tarriffs, because too much of their customer base is outside the US.)

The US is currently dominant in Internet Services. This is an industry requiring almost no long-term investment and producing relatively quick returns. It's also one that can put labor overseas without worrying about tarriff, because no physical goods are moved.

 

[Laodicean60]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

This is some scary stuff, but there might be a reason for this madness. We are a few days into this, and some countries are negotiating new terms with us. Maybe this is all of what Trump wants, except for China; time will tell.

I believe Hedrik is right about manufacturing; we have a national security problem with manufacturing. Both Biden and Trump recognize this, and I never thought I'd say this (because after 30 years of fighting, I'm done), but we need warfighter manufacturing, ships, planes, and missiles because China supplies a lot of components to the USA. We've known this since 2010, lol, the lunacy in our politics. COVID showed me how dependent we are on China. It kinda made me mad.

Disclaimer: This is only the second Tucker Carlson video I've watched, but I watched it because it had Luke Gromen, but on this show, around 50 minutes in, Luke said we have fallen victim to the resource curse and the Dutch disease and thus the reason for our hollowed out manufacturing base. The whole video mainly talks about gold, but starting at 50 minutes, it got interesting.

Why are we buying gold, anyone? Biden in December and Trump is currently, especially when we have the reserve currency and the money printer.

Lastly, we can't have manufacturing without resource supply and were dependent on China and Russia for natural resources and processing. Australia and a few others have some, but if we get into a world war, it'll be like the German U-boats in the previous world war, not a dependable supply, and China is building a lot of submarines.

When I first heard about Greenland, I thought it was dumb, but I didn't know about their natural resources and Ukraine (which is overblown). There is a reason for all this talk about it.

 

[hedrick]

Denmark was an ally. We could get resources from Greenland by making agreements with them. I can’t say whether that is still true.

 

[hedrick]

This is some scary stuff, but there might be a reason for this madness. We are a few days into this, and some countries are negotiating new terms with us. Maybe this is all of what Trump wants, except for China; time will tell.

I believe Hedrik is right about manufacturing; we have a national security problem with manufacturing. Both Biden and Trump recognize this, and I never thought I'd say this (because after 30 years of fighting, I'm done), but we need warfighter manufacturing, ships, planes, and missiles because China supplies a lot of components to the USA. We've known this since 2010, lol, the lunacy in our politics. COVID showed me how dependent we are on China. It kinda made me mad.

Disclaimer: This is only the second Tucker Carlson video I've watched, but I watched it because it had Luke Gromen, but on this show, around 50 minutes in, Luke said we have fallen victim to the resource curse and the Dutch disease and thus the reason for our hollowed out manufacturing base. The whole video mainly talks about gold, but starting at 50 minutes, it got interesting.

Why are we buying gold, anyone? Biden in December and Trump is currently, especially when we have the reserve currency and the money printer.

Lastly, we can't have manufacturing without resource supply and were dependent on China and Russia for natural resources and processing. Australia and a few others have some, but if we get into a world war, it'll be like the German U-boats in the previous world war, not a dependable supply, and China is building a lot of submarines.

When I first heard about Greenland, I thought it was dumb, but I didn't know about their natural resources and Ukraine (which is overblown). There is a reason for all this talk about it.

I agree that we need to avoid dependence on China for critical technology. Also Russia. Not sure whether tartiffs will help there, but national security is a valid justification if the scope is really limited. Typical this would exempt allies. If we have any left.

 

[Laodicean60]

I agree that we need to avoid dependence on China for critical technology. Also Russia. Not sure whether tartiffs will help there, but national security is a valid justification if the scope is really limited. Typical this would exempt allies. If we have any left.

You'd have to listen to Luke because he gives his take on current Trump policy.

 

[Maria Billingsley]

Will Trump Negotiate Tariffs? White House Claims Over 50 Countries Want To Talk

Personally, I'm confused by this whole Tariff situation. (I can't even remember if it is spelled with two r's or one...) I'm wondering if you think it is possible that it isn't just the act of a "mad man", but a strategy to reduce tariffs across the board. Could this actually work and be beneficial to the U.S.?

We should be concerned. That being said, I thought I would make a list of the many failures he has left behind including leaving hard working people and businesses in the dust. I don't feel good about making this list, I never knew there were so many, however, some must face the truth, he is not what you think.

Trump Taj Mahal
Trump Plaza Hotel
Trump Casinos Resorts
Trump University:
Trump Shuttle
Trump Vodka:
Trump Mortgage:
Trump Steaks
Trump MagazineTrump: The Game
Trump Castle
Trump Marina
Trump Tower Tampa
Go Trump
Trump bottled water
Trump fragrances
Trump Network
Etc.

 

[Job 33:6]

From a 16% of GDP (1997) to 10.6% now is a substantial drop. U.S. Manufacturing Output 1997-2025

GDP shouldn't be confused with raw output.

Over the past 50 years, U.S. manufacturing exports have experienced significant growth in absolute terms. Between 1983 and 2005, for instance, exports of manufactured goods increased by 407%.

Part of this is due simply to automation. We are becoming more productive with less labor. We lose manufacturing jobs despite manufactured goods actually increasing.

We are also wealthier than in the early 1900s. More digital services, health services. It's cheaper to import a pair of cheap Nike shoes from a sweat factory in China than it is to ask people here in America to work for 5 dollars an hour producing the same.

And it's not clear that our nation will be able to go in reverse, reversing things like robotics and AI automation, or reversing things like labor laws and social security in favor of getting people to give up cushy IT jobs for manual labor. Nor is it clear that the nation would even want to. That's why so many farmers hire illegal immigrants from Mexico. Because nobody wants to do that work and we have enough wealth to hire someone else to do it.

Think about Tesla for example and what Elon Musk emulates. Tech. AI. Robotics. Huge wealth not in salary but in stocks and investments. Services like Twitter. Service efficiency. Nobody is sitting around wishing they had a job at a steel mill dumping tubs of molten metal at the risk of burning their flesh off. Robots can do that for us now.

 

[Laodicean60]

Now, interest rates are up, and if they continue to go up, Trump's whole plan of refinancing 8 trillion in debt at a lower interest rate is trash.

 

[Vanellus]

We should be concerned. That being said, I thought I would make a list of the many failures he has left behind including leaving hard working people and businesses in the dust. I don't feel good about making this list, I never knew there were so many, however, some must face the truth, he is not what you think.

Trump Taj Mahal
Trump Plaza Hotel
Trump Casinos Resorts
Trump University:
Trump Shuttle
Trump Vodka:
Trump Mortgage:
Trump Steaks
Trump MagazineTrump: The Game
Trump Castle
Trump Marina
Trump Tower Tampa
Go Trump
Trump bottled water
Trump fragrances
Trump Network
Etc.

Trumpusa? Trump stock markets. But if you mean by work betting for a drop in share prices - there's probably a technical term for that - they are working like a dream. How are Tesla's shares these days?

 

[JustaPewFiller]

@hedrick and @Job 33:6 - Great answers!

In short, I agree. I think they could bring some manufacturing back I don't know that they will be in place long enough for that to happen.

Regarding "the jobs".

I come from a tech background. I agree that many jobs in new factories will be automated to the largest extent possible. Ie - robotic assembly lines and the like. Leaving less blue collar jobs than in a factory years ago.

But what about the white collar jobs? Is there anything in the tariffs that say the white collar jobs that support the manufacturing have to be done in the US? The reason I ask is that in this day and age most tech jobs (and many management jobs) can be done remotely from anywhere.

In other words a scenario like the following., Company X opens a new plant in the US due to the tariffs. The goods are actually made in the plant. However, most everything is automated. A small staff is local in the US to do what work requires people on site. Such as keep the robots and machines running, do maintenance, etc. However, most of the white collar jobs (IT, accounting, audit and controls, HR, marketing, etc) are all done off-shore in India, Brazil, etc. where labor is cheaper. If there is nothing in the tariffs to stop this, I could easily see it happening. Plenty of US companies are already doing this. Many of the jobs in the tech layoffs didn't go away - they just went overseas. I'm not sure the tariffs are going to bring those back?

 

[hedrick]

at this point i'm more worried about the deficit. It's unsustainable. We need to give up either Medicaid or Trump's cuts, or cut each in half. The probem with cutting Medicaid is that it's propping up hospitals. Tarriffs are a mess, but I'm not sure they're actually as bad as a continuing huge deficit.

Some have proposed that Trump is creating a recession so that lower interest rates lower the burden of the deficit. But unless he proposes to have a permanent recession I don't see how that can work. And if he forces the Fed to keep interest rates low anyway, he'll get inflation, which will kill him politically.

Or is he planning to retire in 2028 and doesn't care what happens after?