Well, I guess they do publish relatively truthy stuff on occasion. I had read that ten-year CBO projection elsewhere but the top of the tweet seems pretty accurate as well: as you (and everyone should) know, American consumers ultimately pay those tariffs, despite what Trump - and even Lutnick - claim. Of course, last week, Trump even claimed that âTrillions of dollars are being taken in on tariffsâ.
Appreciating that Trump is firing people who publish numbers he doesn't like...
As of August 19, we estimate that the effective tariff rate for goods imported into the United States has increased by about 18 percentage points when measured against 2024 trade flows. We project that increases in tariffs implemented during the period from January 6, 2025, to August 19 will decrease primary deficits (which exclude net outlays for interest) by $3.3 trillion if the higher tariffs persist for the 2025â2035 period. By reducing the need for federal borrowing, those tariff collections will also reduce federal outlays for interest by an additional $0.7 trillion. As a result, the changes in tariffs will reduce total deficits by $4.0 trillion altogether.
So they are taking credit for both the payment, and the interest avoided by making the payment. That's like buying something with your credit card, and claiming you saved money because you paid off the balance.
The details aren't yet available (September release), but like Trumps tax cuts in term #1, there is surely some very healthy economic growth driving the tariff revenues. When prices go up, consumption goes down....but somehow these miraculous tariffs only raise revenue and fix trade imbalances.
There is no way the numbers work....but "the best people" are now in charge of the reporting, so what could possibly go wrong?
Well, I guess they do publish relatively truthy stuff on occasion. I had read that ten-year CBO projection elsewhere but the top of the tweet seems more accurate: as you (and everyone should) know, American consumers ultimately pay those tariffs, despite what Trump - and even Lutnick - claim. Of course, last week, Trump even claimed that âTrillions of dollars are being taken in on tariffsâ.
The impact of tariffs has so far had limited impact on consumer prices. That's about to change... and it's gonna get painful pretty quickly when the floodgates open.
Good thing we have "the best people" managing the reporting now. Can't wait until they tell us inflation and unemployment are down when the experience of buying things and finding a job don't support that.
Trump trade advisor Peter Navarro wrote a very hostile op-ed in the FT today targeting India over its purchases of Russian oil, and threatening cessation of technology transfer and other retaliatory measures. The thing that does not make sense is that if the U.S. is anyways interested in rebuilding ties with Russia why is it so offended by India purchasing Russian oil?
There is a significant hostility which may be explained by frustration over India declining to reduce protectionist measures in its own economy and open it up to U.S. competition.
A U.S. manufacturer with a respectable 7 percent profit margin might want to use those profits to invest in expanded operations. But, with tariffs, those profits donât stretch quite as far. Construction materials and new equipment are simply more expensive. The business may choose to hold onto those earnings or pay them out as dividends to shareholders rather than grow their business.
This is where we need to raise taxes on the "rich." Disincentivize excess shareholder returns so more capital is reinvested.
When you prevent dividends... you reduce the access to capital, again harming the industry you're attempting to help/support/grow.
Raising taxes and lowering tariffs would help manufacturing grow.
This is an informed, logical summation of why Trump's lack of vision and understanding undermines his own motivations.
Bringing manufacturing back to the US.... good. Imposing tariffs that have spiked manufacturing costs... bad. 3 steps forward, 2 steps back (with another step or two back on the horizon)
A U.S. manufacturer with a respectable 7 percent profit margin might want to use those profits to invest in expanded operations. But, with tariffs, those profits donât stretch quite as far. Construction materials and new equipment are simply more expensive. The business may choose to hold onto those earnings or pay them out as dividends to shareholders rather than grow their business.
This is where we need to raise taxes on the "rich." Disincentivize excess shareholder returns so more capital is reinvested.
This is an informed, logical summation of why Trump's lack of vision and understanding undermines his own motivations.
Bringing manufacturing back to the US.... good. Imposing tariffs that have spiked manufacturing costs... bad. 3 steps forward, 2 steps back (with another step or two back on the horizon)
Trump wants to hide the consequences of his bad policies by manipulating BLS dataâit wonât work "Trumpâs attempt to politicize BLS means that policymakers and the public wouldnât be able to trust the data. If this happens, confidence in U.S. data will collapse and reasonable economic decision-making will be impossible. This manufactured chaos will reduce business investment and consumer spending, making a recessionâand soaring unemploymentâfar more likely in coming months. Between illegal firings of public servants, starving data agencies of needed resources, and now political intimidation, the U.S. looks set to run into the next economic downturn flying blind."
CPI data out today, core goods inflation (excl food and energy) rose to a two year high of 3.1%.
Another interesting trend which is expected to continue - energy/gas was down 1.6%/9% YOY. But electricity and gas service still up, 5.5%/13.8%.
Some of this is due to higher national gas prices, due to shifts in global demand (more exports)....but higher consumer utility bills are also being driven by investments to upgrade aging grids, data centers to power AI/tech, and... the rollback of clean energy credits. Then there is the demand from "bringing back manufacturing"...
more dots to connect...dot dot dot
The differences and intentions are obvious, but under both dems and repubs, the federal government has actively engaged in economic affairs through strategic subsidies, ownership stakes, and executive directives moving our economy more towards China "state capitalism."
A generation ago conventional wisdom held that as China liberalized, its economy would come to resemble Americaâs. Instead, capitalism in America is starting to look like China.
The federal government has often waded into the corporate world. It commandeered production during World War II and, under the Defense Production Act, emergencies such as the Covid-19 pandemic. It bailed out banks and car companies during the 2007-09 financial crisis. Those, however, were temporary expedients.
Former President Joe Biden went further, seeking to shape the actual structure of industry. His Inflation Reduction Act authorized $400 billion in clean-energy loans. The Chips and Science Act earmarked $39 billion in subsidies for domestic semiconductor manufacturing. Of that, $8.5 billion went to Intel, giving Trump leverage to demand the removal of its CEO over past ties to China. (Intel so far has refused.)
State capitalism is a means of political, not just economic, control. Xi ruthlessly deploys economic levers to crush any challenge to party primacy. In 2020, Alibaba co-founder Jack Ma, arguably the countryâs most famous business leader, criticized Chinese regulators for stifling financial innovation. Retaliation was swift. Regulators canceled the initial public offering of Maâs financial company, Ant Group, and eventually fined it $2.8 billion for anticompetitive behavior. Ma briefly disappeared from public view.
Trump has similarly deployed executive orders and regulatory powers against media companies, banks, law firms and other companies he believes oppose him, while rewarding executives who align themselves with his priorities.
In Trumpâs first term, CEOs routinely spoke out when they disagreed with his policies such as on immigration and trade. Now, they shower him with donations and praise, or are mostly silent.
American democracy constrains the state through an independent judiciary, free speech, due process and the diffusion of power among multiple levels and branches of government. How far state capitalism ultimately displaces free-market capitalism in the U.S. depends on how well those checks and balances hold up.
