a tax is a tax, unless it also shifts production of the widget to a different less efficient producer (as the $3 tariff would)
Ponca Dan when will tariffs ruin us?
- Thread starter HighStickHarry
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Who’s to say the $1 tariff wouldn’t cause the same shift? The comparative advantage the widget manufacturer in country XYZ may disappear with the $1 increase. My point is there is economic disruption regardless. Of course $3 will cause more disruption than $1. But expecting government bureaucrats to know at what point the disruption becomes hazardous is a big mistake.
Because I stipulated in this hypothetical that XYY's widget advantage is $2 in this case
Thanks ponca dan this is the best serious discussion on a subject on this board that I have ever see. Kudos to both sides and interesting questions raised.
Ponca a country like Pakistan whose currency is not dollar but trade is done in dollar
how does trade deficit effect the country?
Ponca a country like Pakistan whose currency is not dollar but trade is done in dollar
how does trade deficit effect the country?
OK, but there are more ingredients involved in the comparative advantage than the $1.00 or $3.00 per widget tariff. Acme Widget Distributors in country ABC faces the consequences of the tariff. Pre-tariff what was Acme paying for a widget? If it used to be $3.00./widget and now it's $4.00 or $6.00 the tariff would have far greater impact than if the original price had been $2,000.00 each. And how many widgets are we talking about? If it's in the millions the economic impact might be pretty significant.
Let's cut to the chase and agree on the actual, honest-to-God purpose of a tariff. We are told by politicians and their government agents that tariffs are good, they save jobs. But we both know that's a very insignificant reason, way down the priority list. Tariffs are imposed when executives of politically connected companies seek relief from foreign competition, are doing everything in their power to eliminate the foreigner's comparative advantage. Rather than do the hard work necessary to be competitive they take the easy route and get their political allies to use the police power of the state to quash the competition. Can we at least agree on that?
I said a tax is a tax regardless of what it is called. Let's run an experiment in our heads. DJT has threatened a 25% tariff on products imported from Mexico unless the Mexican government accedes to his immigration demands. Always-Trumpsters hail him as a godsend, protecting us with his unique 3-D chess tactics. Suppose Mexico refuses his demands so he imposes his tariffs, and now automobiles are costing hundreds if not thousands of dollars more than then had the day before. Rich liberals will no longer get their guacamole. Vacuum cleaner manufacturers who had shifted their operation to Mexico are now seeing their products skyrocket in price. Inflation raises its ugly head. Will the always-Trumpsters blame Trump for the sudden loss in their purchasing power? Probably not. After all he has boasted he could shoot someone and they would still stand with him. He would blame the Mexican government for their recalcitrance, and they would eat it up like ice cream.
But suppose Trump managed to get the legislature to impose a 25% federal sales tax on all products that make their way into the US from Mexico. From an economic standpoint it would have the same impact, wouldn't you agree? But how do you think the always-Trumpsters would react to a 25% sales tax being levied? I think most of them would be outraged. Maybe we should ask them.
At any rate it seems to me our conversation has pretty much run its course. I always appreciate polite conversation. This was fun.
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Thank you for your kind words. The answer to your question is way over my head. I am a lowly business owner in Oklahoma City, not a professional economist. So any answer I would give you would be pure speculation on my part.
I don't know pilt, no idea how old he is, what is qualifications are, his education, nothing. But he presents himself on this board as something of an economic expert. Perhaps he would be more qualified to give you an answer.
While we disagree on economics (he's a professed socialist, I'm a professed laissez-faire capitalist) I always respect his opinion as something he has thought through (even though I almost always think his conclusions are in error).
Is he on this board I don't remember any of his posts.
US trade deficits all else being equal lower the value of the dollar versus other currencies, which means if higher prices for import and exports in dollar terms.
Pilt remember a poor country has limited dollar reserves,the biggest import is oil.
we have a lot of american franchises plus the expensive grocery stores have imported food items does free trade still applies,don't you think economic terms and policies should be different for poor countries.
we have a lot of american franchises plus the expensive grocery stores have imported food items does free trade still applies,don't you think economic terms and policies should be different for poor countries.
Alibedi: Never lose sight of the fact that economic laws are universal. They do not change because of any external conditions. The only economic system that has ever dragged a society out of poverty has been free market capitalism, or at least some semblance of it. If your country is impoverished and wants to prosper, the only way to accomplish that goal is to establish and maintain free markets, preserve the rule of law, protect private property and practice minimum government interference with the spontaneous relationships developed within a society. There is no governmentally supplied shortcut. The only option is to guarantee the liberty of each individual the opportunity to better his conditions by his own means.
https://www.cnbc.com/2019/04/18/tru...-lead-to-modest-boost-to-growth-and-jobs.html
Note that the tariffs lead to the renegotiation of NAFTA which per estimates above is a net win for the US. 5% and 6% net export increases to Mexico and Canada respectively is a good thing for us.
Note that the tariffs lead to the renegotiation of NAFTA which per estimates above is a net win for the US. 5% and 6% net export increases to Mexico and Canada respectively is a good thing for us.
I also believe in open trade and capitalism I am going to get hold of couplr of Pakistani economists to see what they . If it is worth it I would share.
That’s an interesting article, and it will be interesting to see if things work out the way the author says. But keep in mind he’s writing in the future tense, so it’s a prognostication not reality. I haven’t followed the trade deals very closely, but the few things I have read say the new deal is very similar to the existing one (NAFTA), not much more than window dressing, like one of those deals designed to look good for a politician’s resume, but really not amounting to anything substantial. At this point it’s anybody’s guess who is right. But thank you for the link, it was an interesting opinion!
Agreed, that it was a prognostication, and frankly I've read a number of similar articles as you that have indicated that NAFTA 2.0 didn't change much. This was the first that I've read though that tried to put value estimates, and 5-6% export growth (to those countries) does amount to more than just 'window dressing'. We'll see if it comes to fruition, but when the tariffs were first being discussed, I had been supportive of the policy on the basis that it would be a temporary pain to get better terms and at least one economic think tank is predicting that's what occurred.
