FIRE Members - Are any of you pro-tariff?

[Ian S]

The goods/balance issue isn't a viable goal. However, the US "exports" a whole lot of non-physical stuff that isn't part of the trade equation.

We are very much a service economy.
Entertainment (netflix, major movies, etc.)
Google, Amazon (not the goods purchased, but Prime and streaming, cloud hosting, etc.
Financial services (Citi, Amex, etc.)

Stuff like that. No product going through any port, but the world is still buying from the US.

You bring up a great point. My understanding of the current trade squabbling omits consideration of non-physical service type stuff. Interestingly, the USA runs a surplus in those "products." And, let's face it: the US hands are pretty dirty too when it comes to tariffs. Just consider the 100% tariffs on Chinese EVs which are reportedly excellent cost effective products in many cases but obviously, if they were permitted entry without a high tariff, our auto manufacturers might be out of business. Seriously, as the richest country in the world, we look a bit whiny and hypocritical in this spat. And now we see ways in which China can strike back without using tariffs.

 

[pb4uski]

No necessarily so. You might want to read economist James K. Galbraith about the fact that we will have a budget deficit so long as we have a trade deficit. It was once discussed at length in this forum - here Understanding the relation between Trade Deficits and Budget Deficits

Poppycock. Let's say the federal budget was balanced. Federal spending was exactly equal to income so no deficit or surplus. And at the same time trade was totally balanced with imports equal to exports.

Then at the 11th hour pb4uski buys $x of widgets from outside the US and mails the foreign vendor $x in cash. The transaction is subject to a 10% tariff when it is imported. I pay the $0.1x tariff to the feds. The federal budget now has a surplus for $0.1x for the tariff and we have a trade deficit for $x because exports exceed imports by $x.

 

[Winemaker]

Short term, yes, to improve trade deals, long term, no, I prefer free trade. Under current rules, the US cannot sell a car in Europe or Japan because of tariffs, and that's not free trade.

 

[Koolau]

Now that brings back pleasant memories.

Jarts!

 

[jcfradio]

For example: EU tariffs are below 2%. Claiming they’re 20% doesn’t magically make them 20%—they were, and still are, under 2%.

This has been confused in the press and by others; the trade deficit might be 20 % but average tariffs are only 2 % with the EU.

 

[pb4uski]

... I guess I am in the camp that we have done great long term harm to our middle class over the last 50 years which has left us as a country very exposed, especially if some of our largest trading "partners" decide we have very limited ability to rebuild military assets lost in conflict, or that we can be harmed greatly economically by cutting off supplies of goods. I am also in the camp that we have gone so far down this road that we will be unlikely to change our destiny.

The US leads the world in defense material production.

 

[MichaelB]

Poppycock. Let's say the federal budget was balanced. Federal spending was exactly equal to income so no deficit or surplus. And at the same time trade was totally balanced with imports equal to exports.

Then at the 11th hour pb4uski buys $x of widgets from outside the US and mails the foreign vendor $x in cash. The transaction is subject to a 10% tariff when it is imported. I pay the $0.1x tariff to the feds. The federal budget now has a surplus for $0.1x for the tariff and we have a trade deficit for $x because exports exceed imports by $x.

When we run a trade deficit there is an offsetting domestic increase in debt. It doesn’t have to be public debt. In the example you present you use savings to pay for the export, thereby reducing aggregate savings in the economy, which increases net debt.

 

[BigNick]

Short term, yes, to improve trade deals, long term, no, I prefer free trade. Under current rules, the US cannot sell a car in Europe or Japan because of tariffs, and that's not free trade.

The EU imposes a 10% tariff on all vehicles from outside the EU. Even prior to *looks around* all this, the US only imposed a 2.5% tariff on cars, but it had (and still has, assuming that someone is keeping track) a 25% tariff on pickup trucks — a measure dating from 1964. That's not free trade either.

 

[Winemaker]

Right, I know plenty who find it soul sucking work to sit in front of a computer for 9 hours a day. I'd guess these jobs are the next to go. These are the low hanging fruit. Virtual robots are faster, cheaper and easier to build.

We already pay a lot of people not to work or to work low paying jobs. A factory job has a lot of other benefits for the country. It gives people dignity, pride, keeps people out of trouble, offers social cohesion, additional training and skills, opportunities for advancement and learning how to save and buy things.

• Approximately 100 million Americans—about one in three—receive some form of government assistance, including programs like Medicaid, SNAP (food stamps), Social Security, and housing aid.
• Someone is no longer counted as unemployed after 4 weeks of not actively job hunting, even if they still want a job.
• 32% of the U.S. workforce—about 46.5 million people—are employed in occupations with a median wage below $15 an hour. These positions often lack benefits and offer little opportunity for advancement.

American corporations and their politicians took us down this road in the 80s. The US has looked the other way ever since.

They installed suicide-prevention nets at their factories and we say Americans don't want the jobs? Is the US really the bully or just standing up to a bully (we made stronger) that doesn't play fair?

I've told this story before many times on this forum before. I was able to get a distant relative a job with local company. Starting wage $15/hour plus medical, dental, life insurance, 401k match. She turned it down because she needed $20/hour, to be able to break even because she would lose SNAP, free healthcare for herself and child, and more taxes, as she under reported her tips.

 

[Gumby]

I've told this story before many times on this forum before. I was able to get a distant relative a job with local company. Starting wage $15/hour plus medical, dental, life insurance, 401k match. She turned it down because she needed $20/hour, to be able to break even because she would lose SNAP, free healthcare for herself and child, and more taxes, as she under reported her tips.

That's a good reason to have those benefits phase out gradually instead of having a cliff.

 

[pb4uski]

...Under current rules, the US cannot sell a car in Europe or Japan because of tariffs, and that's not free trade.

Before the recent changes, tariffs on US autos were 10% in Europe and 0% in Japan.

 

[pb4uski]

I've told this story before many times on this forum before. I was able to get a distant relative a job with local company. Starting wage $15/hour plus medical, dental, life insurance, 401k match. She turned it down because she needed $20/hour, to be able to break even because she would lose SNAP, free healthcare for herself and child, and more taxes, as she under reported her tips.

Her statement suggests that her benefits are worth $40k a year if she needs $20/hour to break even. FY 2025 SNAP benefits average $4,116 per household annually. I'm skeptical that what she claims is true, but she may well believe that it is true.

 

[Winemaker]

Her statement suggests that her benefits are worth $40k a year if she needs $20/hour to break even. FY 2025 SNAP benefits average $4,116 per household annually. I'm skeptical that what she claims is true, but she may well believe that it is true.

And I forgot free childcare. Anyhoo, She remarried and her and her husband are no longer wards of the state. I just felt stupid at the time to recommend her for a position in my friend's growing business, the wasting his time.

 

[Winemaker]

Based on Google's statistics, in 2018, <1% of Japan's and <12% in the EU's car sales were US made.

 

[HFWR]

Short term, yes, to improve trade deals, long term, no, I prefer free trade. Under current rules, the US cannot sell a car in Europe or Japan because of tariffs, and that's not free trade.

Amusing anecdote: During my only corporate or otherwise trip to Japan, I saw the Japanese-sized vehicles one would expect in 1985. The only exception, discovered by taking an alley shortcut from the bar back to the hotel, was an Olds 98. That land yacht was so out of place, and had to be hard to maneuver on narrow city streets.

Better margins on well-equipped SUVs and pickups, and aren’t the F-150 and Chevy Silverado still one and two in sales?

 

[pb4uski]

When we run a trade deficit there is an offsetting domestic increase in debt. It doesn’t have to be public debt. In the example you present you use savings to pay for the export, thereby reducing aggregate savings in the economy, which increases net debt.

Yes, but the claim was that "we will have a budget deficit so long as we have a trade deficit" ... that was what I was objecting to.

No necessarily so. You might want to read economist James K. Galbraith about the fact that we will have a budget deficit so long as we have a trade deficit. It was once discussed at length in this forum - here Understanding the relation between Trade Deficits and Budget Deficits

 

[Closet_Gamer]

It’s not intuitive and is tough to grasp.

The US economy consumed more goods and services than we produced. That excess consumption, or imbalance, has to be paid for. Total income (production) wasn’t enough to pay for all the consumption so the difference had to come from savings. Debt is negative savings. So, somewhere in the US economy, debt increased to pay for the excess consumption. Private debt increased, but not enough to pay the entire difference. That remaining difference must be paid, and it is in the form or public debt. Our lender of last resort.

I understand the point that if consumption > production then it must be debt somewhere in the system. That’s basically just accounting. If we decided to divide $36T by 340M citizens and just hand each person their $108k piece of the national debt, the public debt would be zero but societal debt remains the same. There is no free lunch.

What I disagree with is that we would have had the same levels of consumption if it was personally financed rather than public debt.

Skin in the game changes behavior — a lot. Not only would aggregate consumption likely be lower (leading to less societal debt) but the efficiency of the consumption would be higher (leading to less societal debt).

That efficiency would be two-fold:

1- greater discretion about buying things that really provide value (we see this same effect in gift giving; I don’t value a a new iPhone enough to pay for it but if you give me one that’s great.)

2- reduced tolerance for overhead/inefficient delivery of services that drive up cost without giving more value

 

[pb4uski]

And I forgot free childcare. Anyhoo, She remarried and her and her husband are no longer wards of the state. I just felt stupid at the time to recommend her for a position in my friend's growing business, the wasting his time.

While I concede that in some cases to shift from public assistance to a job is a net negative financially, I have to wonder how many people on public assistance think that they would be worse off if they got a job but are misjudging it because they don't have the skills to assess it correctly or they are just listening to peers who believe that is true and not looking at it critically.

 

[HFWR]

While I concede that in some cases to shift from public assistance to a job is a net negative financially, I have to wonder how many people on public assistance think that they would be worse off if they got a job but are misjudging it because they don't have the skills to assess it correctly or they are just listening to peers who believe that is true and not looking at it critically.

Going from unemployed to employed, which I think is different because one might still qualify for various programs even after employment, is often then complicated by unreliable or non-existent transportation, and childcare.

 

[Koolau]

I always thought they were saying "ear-ache" and never understood how getting under my desk would help.

 

[Onda]

But tariffs are only one example of trade barriers. With the EU folks, you have to also include VAT and import regulations and other costs of doing business there in the mix.

VAT (Value-Added Tax) in the EU is a general sales tax paid by everyone—residents, tourists, and businesses—on most goods and services, regardless of where they're made. It’s not a tariff, because it applies equally to domestic and imported products and isn’t designed to restrict trade. Import VAT simply ensures foreign goods are taxed the same as local ones at the point of sale.

What import regulations and other costs?

 

[Onda]

Europeans are experts at non-tariff barriers and the Japanese world class. Anyone who lived through the trade issues of the 80’s can surely recall the many different and creative ways countries approach trade. Delaying customs inspections of perishable goods, constantly changing forms and processes for customs, insisting on industry guild certifications, just to name a few.

I’m European. The EU, for example, bans imports of chickens washed in chlorine, which is a common practice in the U.S. due to different food safety approaches. However, companies like Bell & Evans, which use air-chilling and avoid chemical washes, can export their chicken to the EU because they meet our standards.

Every country has the right to set such standards for health, safety, and consumer protection—and in the EU, they apply equally to both domestic and imported products. That’s why it’s not considered a trade barrier under WTO rules. And when you fire most of the USDA and loosen standards even further, all you achieve is a greater loss of foreign markets—for example, U.S. chicken exports that no longer meet international requirements.

 

[Closet_Gamer]

VAT (Value-Added Tax) in the EU is a general sales tax paid by everyone—residents, tourists, and businesses—on most goods and services, regardless of where they're made. It’s not a tariff, because it applies equally to domestic and imported products and isn’t designed to restrict trade. Import VAT simply ensures foreign goods are taxed the same as local ones at the point of sale.

What import regulations and other costs?

I’m skeptical of the claim that VAT is a trade barrier and rolled my eyes when I heard that.

I do have one personal experience that gives me pause however. Yes, I know this can be written off as an anecdote but it may be instructive.

When we were living in England our US family sent us a big box of Xmas stuff. Nothing crazy. T-shirts, mugs, other clothes and some really odd cookies based on a long lost family recipe (that should have stayed lost).

My brother paid the shipping and (without doing real math) just said the package was worth $800 and jotted down what was in the package.

When the box was delivered to my house, I was told I had to pay £180 to receive it. There must be a mistake I said. My brother didn’t send this to be paid on receipt.

Oh no, that’s the import duties and VAT on the goods inside. Hmmmm. So I glumly paid the cost and moved on.

Now then … my family had already paid all of the taxes related to those products creation and transport in the US. When it hit the UK border I was essentially asked to pay taxes again in the form of a VAT even though that value add (and associated societal costs) did not take place in the UK (other than port fees and the guy to drive it to my house). There were also some product-specific tariffs. We would have been much better off had my brother sent me $800 and told me to go shopping on the high street.

If this experience is representative of the broader approach then the notion that foriegn goods are taxed the same as domestic goods in VAT countries isn’t really accurate. It does, in fact, appear to the people in the transaction as a border tariff that makes the product more expensive than something produced domestically.

I think this one is very complicated.

 

[jesaco]

I think as a country we've been taken advantage of for too long on too many fronts. Kind of like the rich dad who has so much money that he doesn't realize that his kids are spending wildly but then suddenly wakes up and all hell breaks loose.

I'd like to see a more level playing field. Current situation is a temporary one IMO.

So why put a tariff on the stores where the kids spend the money? shouldn't the dad control his kids spending instead? I don't think the stores took advantage of the kids if they went to the store and spend their money there.

 

[street]

I believe with what is happening now we do need them to get things back to an even trade system.
They are maybe the best and from the results I do believe things will boom but it won't happen ovah night.