the macroeconomic effects of the tariffs Trump has announced are, macroeconomically speaking, trivial. Remember, only 15% of our economy is trade related. And a lot of that number is not finished goods, just parts and pieces of things assembled here.historian said:whiterock said:same is true for taxes.historian said:boognish_bear said:Leavitt: Tariffs are a tax hike on foreign countries and a tax cut for the American people
— Acyn (@Acyn) March 11, 2025
Reporter: Have you ever paid a tariff? I have. They don’t get charged on foreign countries
Leavitt: I think it’s insulting that you are trying test my knowledge on economics pic.twitter.com/usJyrfEZFP
She is wrong. In the final analysis, the consumer pays all tariffs. The companies who buy the products and then sell them here in America pass on the increased costs through higher prices. It's inevitable.
It's all political theater.
the point of tariffs is to increase the cost of imported goods, to make them less competitive against domestically produced goods. And looming tariffs can have significant impact on investment decisions (as we have seen numerous times to our advantage in the last few weeks). Manufacturers can on longer count on reflexive US aversion to tariffs. The only way to hedge against that risk is to invest in MANUFACTURING in the USA (to ensure access to the US market).
Nothing new here. We did that in the 70s with Japanese automakers, and now most Japanese brand vehicles sold here are made here. Trump is merely trying to force that same dynamic on other sectors now.
I understand tariffs, including protective tariffs. It generally bites back in the form of higher consumer prices and other negative ramifications.
Now, if Trump is serious about ending the income tax and the IRS, then it could mean the transition to an entirely different tax structure. That's another story and might work. But that's a dramatic change and it's probably impossible to predict all of the consequences. It's also a gamble and unlikely to be a smooth process.
What the tariffs will do is force manufacturers to invest here if they want to play here.
We've done that before (1970's with Japanese automakers)......