Summary Of Tariffs, And Reasoning

[mark46]

There are at least 3 kinds of tariffs.

PROCTECTIVE TARIFFS - the idea is to increase prices and protect US workers (the proposed policy of Sanders and Democrats for years)
1) steel
2) aluminum
3) auto and auto parts

ACROSS THE BOARD TARIFFS ON ALL IMPORTS (Trump want to collect these taxes and reduce the reliance on US income taxes, as was the case over 100 years ago)
There could be exemptions (perhaps on electricity and oil). The immediate effect will be that food costs more (e.g. bananas, coffee, and avocados and other produce from Mexico. Canada and Mexico might get some exemptions if Trump continues to allow the terms of our agreement signed 4 or so years ago to stay in place. It seems likely that Trump will negotiate a better deal after the Canadian elections.

"RECIPROCAL" TAXES - these are taxes to tax/tariff those countries who sell more to us than they buy. It has nothing to do with their actual tariffs by these countries.
So, Vietnam purchases from us are only 10% of what they sell to us. This 90% deficiency will result in a 45% tariff. We simply want to punish those who don't buy a lot from us.
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EXAMPLE CONSEQUENCES - SHOES AND SNEAKERS (lots are produced in Vietnam)
1) Prices can go up 45%
2) Manufacturers can absorb some of the tariffs (prices will still go up)
2) Production can move to the US over time. After this happens, the jobs can be low pay jobs, higher than in Vietnam but still very low. This certainly isn't the goal. Or the jobs can be what we pay in the US, much higher. In that case the prices will be much higher than now. Say the labor cost plus delivery is now $25; that cost would likely go to $5) or more. As economists have said for year, if Americans want to have US made shoes, then they need to be prepared to pay more for shoes (and also for electronics)

 

[Akita Suggagaki]

I can see the value of some very carefully selected tariffs. But due diligence must be given to the possible unintended consequences.

 

[Always in His Presence]

Question in the signature?

 

[doubtingmerle]

So, Vietnam purchases from us are only 10% of what they sell to us. This 90% deficiency will result in a 45% tariff. We simply want to punish those who don't buy a lot from us.

The people of Vietnam make all kinds of cool stuff in factories. They trade it to us for pieces of paper with pictures of dead Presidents (dollars). That sounds like a good deal to me. We give them pieces of paper. They give us cool stuff. Ok, if we were short on paper with pictures of dead Presidents, that might be a problem, but we aren't. We have been running the presses and printing money for years. We call it quantitative easing. Normally quantitative easing can cause inflation, because we then have too much money chasing too few goods However, when we get rid of some of that money in exchange for foreign goods, we no longer have too much money chasing too few goods.

If you have the reserve currency accepted around the world, you can get by with a trade deficit.

But anyway, even if you think there are good reasons for these tariffs, do you think it justifies destroying the whole economy?

 

[doubtingmerle]

Question in the signature? [If Tariffs are bad for the economy, why do over 150 nations have tariffs against the US? Are they trying to ruin their economy?]

No, they are trying to protect industries from competition. That is far different from raising tariffs on things we don't even make ourselves. Who are we protecting?

Tariffs usually have some benefit, and the question then becomes whether the benefits outweigh the downside.

But in this case, the massive tariffs have little benefit and will have a massive downside.

Trump says people will build factories in America in response to the tariffs in the next 2 years. LOL! Does he know how long it takes to start mass production from nothing?

 

[mark46]

But anyway, even if you think there are good reasons for these tariffs, do you think it justifies destroying the whole economy?

I think that we should separate out the various tariffs.

PROTECTIONISM TARIFFS
Almost all (all?) countries have them. Trump has imposed them on aluminum, steel and autos. Other than negotiations with Canada and Mexico (primarily on parts).

I don't see these as particularly terrible or having a huge effect on the economy. HOWEVER, they don't go far enough. Shouldn't auto tariffs be reciprocal? Should we punish (with high tariffs) those countries who essentially deny access to our autos? These countries include Japan, South Korea and India.

TEN PERCENT ACCROSS THE BOARD
This is Trump's response to the high VAT taxes that many countries use, I think that these are wrong on their face. If there are countries with high general taxes, then we should impose a 10% tax on those countries (primarily the EU).

TRADE DEFICITS TARIFFS
These are just plain stupid. Taxing a country because they produce lots of goods that we want is just plain wrong.

CHINA
China is a special case. Their internal policies make it reasonable to apply tariffs to them.

 

[doubtingmerle]

then we should impose a 10% tax on those countries (primarily the EU)....Taxing a country because they produce lots of goods that we want is just plain wrong.... Their internal policies make it reasonable to apply tariffs to them.

Uh, we don't tax other countries. We tax the importers who bring the goods into the country. It's basically the same thing as a sales tax. And ultimately, the buyers--you and I--end up paying, not the exporter.

Tariffs hurt consumers and hurt sales from countries that were selling to us, often causing them to raise tariffs to punish the perpetrators by hurting their sales.

Despites these downsides, tariffs can have an upside if they help struggling businesses within the country to compete easier with foreign competition. But in this case, what we have is a broadside of high tariffs with all the pain, without even a clear targeted benefit.

 

[mark46]

Uh, we don't tax other countries. We tax the importers who bring the goods into the country. It's basically the same thing as a sales tax. And ultimately, the buyers--you and I--end up paying, not the exporter.

Tariffs hurt consumers and hurt sales from countries that were selling to us, often causing them to raise tariffs to punish the perpetrators by hurting their sales.

Despites these downsides, tariffs can have an upside if they help struggling businesses within the country to compete easier with foreign competition. But in this case, what we have is a broadside of high tariffs with all the pain, without even a clear targeted benefit.

As Pence says, this is the largest peacetime tax increase in the history of the US.
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I would note that some tariffs are targeted: those on aluminum, steel and autos.

Also, we are targeting China.
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The across-the-board tariffs are simply targeted at US consumers, being a 10% import tax on all foreign goods.
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The idea of punishing the countries (or rather their US consumers) that have a trade deficit with us is totally bonkers. There is only one person (other than Trump) who suggests these tariffs are in any way rational. That person is the one that suggested them in Trump's first term, Navarro Navarro's only support for trade deficit tariff were the extended writings of economist Vera, a fictional character invented by Navarro.

 

[MarkSB]

I think that we should separate out the various tariffs.

PROTECTIONISM TARIFFS
Almost all (all?) countries have them. Trump has imposed them on aluminum, steel and autos. Other than negotiations with Canada and Mexico (primarily on parts)."

The steel tariffs, in particular, are likely to drive up costs on just about everything. Steel goes into so much of what we manufacture. And it's likely that American producers will just raise their prices to follow suit, because they can.

I'm all for having a strong steel industry, because it's important strategically. But there's a proper time and way to do that. We just came out of one of the most inflationary periods in recent history. People are having difficulty keeping up as it is, and the gain that will be realized from the steel mill jobs won't offset the broader losses across the economy.

The best way to help out Americans is to keep prices and inflation low, and (hopefully) bring interest rates down. Bolstering the housing market in some way would help as well.

TEN PERCENT ACCROSS THE BOARD
This is Trump's response to the high VAT taxes that many countries use, I think that these are wrong on their face. If there are countries with high general taxes, then we should impose a 10% tax on those countries (primarily the EU)."

I'm not sure what you're saying here. Are you saying that the VAT taxes are wrong? My understanding of VAT taxes is that they are added to all goods sold within those countries - not only to imports. So if you're asking them to not charge VAT on American imports, that would give the American imported goods an unfair advantage over domestically made goods in those countries. It hardly seems logical to expect that from a trading partner.

 

[mark46]

The steel tariffs, in particular, are likely to drive up costs on just about everything. Steel goes into so much of what we manufacture. And it's likely that American producers will just raise their prices to follow suit, because they can.

I'm all for having a strong steel industry, because it's important strategically. But there's a proper time and way to do that. We just came out of one of the most inflationary periods in recent history. People are having difficulty keeping up as it is, and the gain that will be realized from the steel mill jobs won't offset the broader losses across the economy.

The best way to help out Americans is to keep prices and inflation low, and (hopefully) bring interest rates down. Bolstering the housing market in some way would help as well.




I'm not sure what you're saying here. Are you saying that the VAT taxes are wrong? My understanding of VAT taxes is that they are added to all goods sold within those countries - not only to imports. So if you're asking them to not charge VAT on American imports, that would give the American imported goods an unfair advantage over domestically made goods in those countries. It hardly seems logical to expect that from a trading partner.

FOCUSED TARIFFS
indeed drive up prices. They also protect the steel industry. Other countries sometimes subsidize their steel companies so that can sell cheaper to the US, replaces our steel and jobs. Overall, one can accept this dumping and predatory behavior or not. Few industries are worth the high prices. For example, we are OK when Japan sells TV's cheaper in San Francisco than in Tokyo. It is simply a benefit to US consumers paid for by Japanese consumer. However, the US believes that we need a steel industry and an aluminum industry. These are critical products. Not so for TV's sneakers.

I support focused tariffs. The other example I gave was that some countries put huge taxes on our autos, essentialy pricing them out of the country's markets, yet they have no such high tariffs on them by the US in our markets. Japan, China and South Korea are examples (also Germany I think). I could see the logic of putting taxes on their autos. This policy would incentivize more production by those companies within the US, hiring US workers.

Products coming into the EU pay a VAT tax. Why shouldn't the US charge a similar tax (tariff) for products entering the US.

 

[MarkSB]

FOCUSED TARIFFS
indeed drive up prices. They also protect the steel industry. Other countries sometimes subsidize their steel companies so that can sell cheaper to the US, replaces our steel and jobs. Overall, one can accept this dumping and predatory behavior or not. Few industries are worth the high prices. For example, we are OK when Japan sells TV's cheaper in San Francisco than in Tokyo. It is simply a benefit to US consumers paid for by Japanese consumer. However, the US believes that we need a steel industry and an aluminum industry. These are critical products. Not so for TV's sneakers.

I support focused tariffs. The other example I gave was that some countries put huge taxes on our autos, essentialy pricing them out of the country's markets, yet they have no such high tariffs on them by the US in our markets. Japan, China and South Korea are examples (also Germany I think). I could see the logic of putting taxes on their autos. This policy would incentivize more production by those companies within the US, hiring US workers."

Yeah, I get what tariffs are typically used for. But as said, there's a strategic way to go about that... and this has been anything but.

Products coming into the EU pay a VAT tax. Why shouldn't the US charge a similar tax (tariff) for products entering the US.

Read my post again. Products being sold in the EU - whether they are imported or not - are charged a VAT. (At least, that's my understanding of the VAT's). You're asking them to not apply the same tax to imports as what is being applied to domestically made goods, which would favor the imports. That hardly seems like "fair trade".

 

[SimplyMe]

FOCUSED TARIFFS
indeed drive up prices. They also protect the steel industry. Other countries sometimes subsidize their steel companies so that can sell cheaper to the US, replaces our steel and jobs. Overall, one can accept this dumping and predatory behavior or not. Few industries are worth the high prices. For example, we are OK when Japan sells TV's cheaper in San Francisco than in Tokyo. It is simply a benefit to US consumers paid for by Japanese consumer. However, the US believes that we need a steel industry and an aluminum industry. These are critical products. Not so for TV's sneakers.

I support focused tariffs. The other example I gave was that some countries put huge taxes on our autos, essentialy pricing them out of the country's markets, yet they have no such high tariffs on them by the US in our markets. Japan, China and South Korea are examples (also Germany I think). I could see the logic of putting taxes on their autos. This policy would incentivize more production by those companies within the US, hiring US workers.

Products coming into the EU pay a VAT tax. Why shouldn't the US charge a similar tax (tariff) for products entering the US.

You misunderstand what a VAT (Value Added Tax) is -- and to be clear, saying VAT tax is redundant (Value Added Tax tax). VAT is simply a national sales tax, much like the sales taxes we have in the US. Both are applied by retailers to retail customers, just that a VAT is typically applied to the price of individual products (so a can of beans might cost $1 but the price on the shelf will include the VAT of 8%, so it shows a price on the shelf of $1.08), whereas a sales tax is added at the register when the sale is rung up (it will show a price of $1 on the shelf but, after sales tax is added, you will pay $1.08 at the register). Both are a sales tax, neither is a tariff.

 

[HantsUK]

You misunderstand what a VAT (Value Added Tax) is -- and to be clear, saying VAT tax is redundant (Value Added Tax tax). VAT is simply a national sales tax, much like the sales taxes we have in the US. Both are applied by retailers to retail customers, just that a VAT is typically applied to the price of individual products (so a can of beans might cost $1 but the price on the shelf will include the VAT of 8%, so it shows a price on the shelf of $1.08), whereas a sales tax is added at the register when the sale is rung up (it will show a price of $1 on the shelf but, after sales tax is added, you will pay $1.08 at the register). Both are a sales tax, neither is a tariff.

Adding to this (as Trump and some posters do not understand VAT - I guess that Trump has personally never paid for anything, so cannot be expected to understand such 'minor' details).

VAT (in the UK and EU) is charged on most products and services, irrespective of whether it is domestically produced, or from the USA or China (other countries exist). In the UK VAT is usually 20%. Some products are zero-rated and some products are VAT exempt. There is a difference. Businesses that supply products or services that have VAT can reclaim all the VAT that they pay for their inputs. So effectively VAT is only paid by consumers, not businesses. (However, businesses cannot reclaim VAT when products are VAT exempt.)

Shops and businesses selling to consumers will show prices that include VAT. Businesses selling to other businesses usually show prices excluding VAT.

VAT is never a tax that discriminates against American products.

VAT is effectively not paid by businesses.