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An Editorial From Over the Pond: A Reality Check/Correction of Drumpfonomics [1]
['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']
Date: 2025-01-24
'A very bad idea': Two economists respond to White House citing them on 20% tariffs -Le Monde [English]
Stephen Miran, the new head of the Council of Economic Advisors, cited work by researchers Arnaud Costinot and Andres Rodriguez-Clare to justify Trump's plans for high tariffs. At Le Monde's request, the two economists responded in this op-ed.
To understand how the optimal tariff argument works, suppose that the US government imposes a tariff on French wine. Everything else being equal, US consumers would face higher prices and reduce their demand. This could put downward pressure on the prices at which French wine producers would be willing to sell, leading to overall gains for the US that may now purchase wine from Bordeaux and other French terroirs at a discount at the dock, even though US consumers would still pay a higher price at the supermarket since the price they pay has the tariff added on top.
A pedagogical tool We expect large countries like the US to have some market power. What's less clear is: How much? This depends on several factors that are difficult to measure precisely. For example, market power depends on how easy it is for foreign exporters to find alternative markets. If French winemakers can no longer sell their products freely to US consumers, can they sell them to German or Chinese consumers? If so, the price of French wines won't change much and the optimal tariff should be lower.
The world economy has changed. China has emerged as a new hegemon. It is natural for US economic policy to change and adapt to the new circumstances. But tariffs are not the powerful tool to solve all problems that the new Trump administration believes them to be. Retaining its dominance in high-tech sectors, regaining a foothold in new green sectors, and restoring prosperity to lagging regions, to name just a few, are critical goals for US economic policy in the years to come. A richer set of economic policies are needed, with tariffs playing at best an auxiliary role. Pursuing a policy of raising tariffs would most likely lead to a new global trade war. Its consequences, unfortunately, are not hard to predict. It would mean less trade and, most importantly, less international cooperation on the big issues of the day: war, poverty, and climate change.
It also shows
1- Trump does not understand macroeconomics/global trade.
2- His acolytes have reading comprehension challenges
3- They’ll twist anything to meet their dogma’s demands see Project 2025 as well
4- The poorest will be the hardest hit.
Oh, if you want to read Miran’s Corned beef hash of an article
A User’s Guide to Restructuring the Global Trading System — Link to Hudson Bay Capital-Stephen Miran, Senior Strategist
It's always interesting to hear from the original authors their opinion on dimwits referencing their articles.
A Muse
~A
PS
Tariffs are Taxes on those they are imposed upon i.e. Americans
Not the exporting countries.
Drumpf is preparing to impose Federal taxes at the port of entry.
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