Posted on 12/06/2024 7:49:03 AM PST by karpov
One key motivation for imposing tariffs on imported goods is to protect U.S. firms from foreign competition. By taxing imports, domestic prices become relatively cheaper, and Americans switch expenditure from foreign goods to domestic goods, thereby expanding the domestic industry. In a recent Liberty Street Economics post, we highlighted that our recent study found large aggregate losses to the U.S. from the U.S.-China trade war. Here, we delve into the cross-sectional patterns in search of segments of the economy that may have benefited from import protection. What we find, instead, is that most firms suffered large valuation losses on tariff-announcement days. We also document that these financial losses translated into future reductions in profits, employment, sales, and labor productivity.
During the 2018-19 U.S.-China trade war, the U.S. levied 10 to 50 percent import tariffs on more than $300 billion of imports from China (and some other countries). To understand why tariffs can cause the domestic industry to shrink, we need to distinguish between tariffs on inputs and outputs. The focus is usually on industry output tariffs; for example, higher tariffs on cars can protect the domestic car industry because the higher tariff-inclusive price of imported vehicles makes consumers switch to domestic cars. But, U.S. import tariffs were largely levied on industry inputs, for example, steel. Input tariffs raise the cost of producing final goods like cars in the U.S., making domestic production less competitive. However, foreign firms do not need to pay for these tariffs when producing in their markets. As a result, higher input tariffs make it difficult for U.S. producers to compete with foreign firms exporting to the U.S. market or in U.S. export markets.
Whether U.S. firms benefit from import protection depends on the net effect, that is, the “effective rate of protection.”
(Excerpt) Read more at libertystreeteconomics.newyorkfed.org ...
Stop right there. China has been engaging in a trade war with us since time eternal. We (with Trump) didn't start fighting back until recently, but don't talk like that's when the trade war began.
For decades we've all known that China has had import restrictions and tariffs on U.S. products. And there's the portion of IP theft where China won't let American products be sold in China unless the American company gives away the blueprints to China.
Then there's the other parts of IP theft like hacking and traditional espionage (spies in firms and universities). To the tune of total IP theft being 1/2 to 3/4 trillion$ per year.
So anyone who says Trump started the trade war is lying their big fat butt off.
Nice to see the unbiased, nonpartisan Reserve bank innocently spouting about a concerning economic question. Completely random timing, too.
Jobs were lost, too. Quoting the article, “We also document that these financial losses translated into future reductions in profits, employment, sales, and labor productivity.”
I favor a blocked currency like India has.
The Chinese stuff would get paid for by US dollars that would be lent to the federal government at 0% interest until the Chinese use those dollars to pay American workers or buy American goods.
No tariffs - no higher consumer prices - level playing field for American/EU/Chinese firms.
250 years ago a newly independent nation composed of former colonies at the a55 end of nowhere used tariffs to become the industrial superpower of the world, bar none. Past use of tariffs is the reason why you are commenting with me in English and not in a Slavic language karpov.
I rest my case.
Tariffs result in winners and losers. They are neither intrinsically good nor bad; it depends on how they’re used.
They should be used to level the playing field where foreign competition uses unscrupulous labor practices, like in China where child and slave labor is common and government-sanctioned.
Americans cannot and should not compete with that. However, there may be reasons to allow trade with nations that pay lower wages and have less workforce restrictions that we do. This is because what would be slave wages here could be a path to a better future in some places.
Good policies will be a win-win. They should make everyone more prosperous who plays by the rules. Americans should be encouraged to find work where greater skills and education are required rather than filling spots with anyone with a pulse.
Such jobs will be plenteous and even offer training to entry-level workers when we have a thriving economy.
Tariffs may not only level the playing field but also help correct human rights abuses abroad. We don’t need children or adult slaves making our cell phones to enrich a Communist regime that ultimately wants to conquer America.
Tariffs can also be a bargaining chip. Just the threat of possible tariffs can bring people to the negotiating table.
I trust President Trump to use tariffs wisely.
Mary Amiti, Matthieu Gomez, Sang Hoon Kong, and David E. Weinstein
My understanding is that the world has tariffed US manufacture, and our tariffs have been small to none. We lost a great deal of manufacturing. We need a manufacturing base in case of war, or the threat of war. We need manufacturing jobs for a portion of our population.
In the future, those losing their DEI and MSM reporting jobs can get a good, honest job in manufacturing. :)
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