The Economics of Tariffs

They say the election is about the economy.  

If it is then looking forward, rather than backward, Americans should be concerned about the impact of tariffs on the economy. One specific area of concern relates to Tech products. 

The CTA predicts [PDF] that the increased cost of importation, and retaliatory tariffs from other countries, would raise the cost of a laptop by 46 percent, a gaming console by 40 percent, and smartphone prices would be 26 percent more expensive. As a result, the association expects demand to fall 54, 57, and 44 percent, respectively.

"At their core, these proposals are tools for the US government to grab as much tax revenue as possible from the American people," said CTA CEO Gary Shapiro. "The proposed tariffs will not create more employment or manufacturing in the US. In fact, the opposite may happen where our productivity decreases and jobs may be lost over time when workers and businesses have less affordable access to technology."

The report points out that, for example, in the case of smartphones, there is virtually no manufacturing capability in the US, beyond a few refurbishing companies. (The Register)

Tariffs broadly applied will likely cause a major disaster in the economy. 

And here is a fun fact: 3 of the last 4 presidents faced economies on the brink of recession when they took office. Which president did not? Trump. 

Obama handed Trump a thriving economy for which Trump takes all of the credit. Important note, the inflation rate for Trump's term was 1.9%, but under Obama it was only 1.4%. The inflation rate during Biden's term, so far, has been 5.2%.  (Investopedia)

Trump, it must be remembered, handed Biden an economy on the brink of disaster AND a pandemic which saw, it is estimated, over 600,000 Americans die needlessly due to Trump's negligence.The Biden team pulled off a never before seen soft landing for the economy which was able to lower inflation from a high of 9.1% to just above 2% without spawning a recession. 

How do tariffs raise inflation: 

"The prices of all domestic goods will rise because they won't have foreign competition, at least some service prices will rise too," she said. "So you have the secondary price effect on domestic prices, which we've seen before with the open aluminum tariffs, with tariffs on washing machines, with tariffs on some of the things that were coming from China." (The Register)

Tariff Realities: Trump claims that foreign countries like China pay for the tariffs, and therefore they're subsidizing us. Well, that's wrong. And no, foreign countries are not going to pay for Social Security, childcare, or anything else. In the first round of the Trump tariffs, a lot of the effects were born by the intermediaries--wholesalers, retailers, distributors, et cetera. These intermediaries absorbed some of the cost of tariffs through lower profit markups. They also avoided the tariffs by shifting their sourcing to countries without tariffs. So, the United States didn't really see a big increase in consumer prices. But new tariffs, especially if they're large and they're applied to all imports like Trump suggests, so that firms couldn't escape them, would be much more likely to push up prices for consumers.  (American University)

If Trump gets elected, buy your tech items before he is sworn in, else wait 4 years. Oh yea, and get ready for the recession that Biden's team avoided.

-- Bob Doan, Tequesta, FL