Yeah over some period that could (likely would) occur and increasing the aggregate domestic demand wouldn’t necessarily restore the amount available imported goods in the economy, and it could indeed result in additional inflation. That makes sense but it’s gonna take a bit for supply chains to reshuffle. I think you’re right that it’s already beginning to happen.

I guess they’d be ramping up Comac C919 production.

Switch to Mastodon.

Has unemployment risen? I looked at some numbers and it looks really low over the last few years. Not a Mexican.

The purpose of tariffs is to reduce supply, and allow local producers to increase costs without facing competition. So, supply will be affected, no matter what.

I think you’re mistaking change in price with its potential effect. And I think that hides some insight. Tariffs do nothing to supply. They increase the prices of the imported goods. As a result of the increased prices, you expect people to buy less. I think you call this effect reduced supply. That’s not a change in the supply though. It’s a change in the demand for the good. The supply is unchanged. The supply chain was able to produce and import 10 (or more) units prior to the tariffs, and the US consumer bought 10. Today the consumer can afford only 5, but the supply chain can still produce and import 10. Price rises decrease demand when the demand is elastic. Now you could just shortcut that and say tariffs decrease the availability of a good in the economy since less is purchased but that’s not the same as tariffs reducing supply. And that’s important for the following reason. If on one hand tariffs increase prices and on the other the government cuts taxes (increases the money supply) by an equivalent amount, people would be able to afford the new, higher price of the tariffed good and again buy the 10 units that can be supplied, effectively nullifying the tariff effect. In such a scenario, the amount of tariffed imported goods in the economy would remain unchanged compared to untariffed state.

The way we’d express this scenario in terms of inflation is that there would be short term inflation (increase in prices with the application of the tariffs) and then “wages would have caught up” (in my example by leaving higher disposable income after lower taxes). A process similar to the one economists are talking about post-COVID inflation. The inflation rate has decreased in most places but the price levels are higher and people are poorer. People began demanding higher wages to cover for the higher prices - which is the wages catching up part.

Now this kind of thing would be largely pointless for local manufacturers since the effective prices of the competing imports haven’t increased. It would achieve lowering the value of the dollar though, which would theoretically make American exports cheaper and therefore reduce trade balance. Again, I don’t think they’ll manage to do this, especially since they’re only talking about the tariff part of the scheme, and since there’s nothing currently preventing trade partners from moving away from the dollar… Also they could’ve just subsidized the industries they want to grow… And maybe tariff only their competitors once there’s enough production capacity in the US…

It’s crazy. I’ve worked at a bank, and yeah, it’s crazy.

Good. Stimulate demand by increasing wages if they have to.

Firstly, the value of the dollar decreasing will increase the cost, in dollars, of all imports. The tariffs on top will add to this inflation.

Yes

Printing money doesn’t automatically lead to inflation but in a recession environment where less is being produced, it certainly does. The quantitative easing and money printing workdwide, due covid, led to the crazy inflation we saw. Certainly supply was a problem, but a reduction in trade between 2 giant economies is also going to cause those kinds of bottlenecks.

Disagree on two points. Depending on what the cause of a recession is, printing may or may not produce inflation. If a recession isn’t caused by a shortage of some real resource (e.g. oil) or reduced production capacity (e.g. physical destruction, mass death), printing money while there’s slack in production capacity does not cause inflation, it increases production via increased aggregate demand. The pandemic was a perfect example of having reduced production but no reduction in production capacity. The monetary stimulus kept aggregate demand from collapsing and production rapidly increased close to capacity once we reopened. That leads to the second point of disagreement. A few good analyses I’ve seen on this clocked stimulus overshooting at causing up to a quarter of the inflation we saw while the rest was caused by the significant increase in oil prices and corporate price gauging (record profits and all that). The outlets I’ve seen claiming it was mostly due to spending have typically been ideologically driven. Take that as you will. I won’t change my mind on this as I believe I’ve seen enough information on it. No hard feelings. ☺️

Add loss of faith in the dollar and this multiplies. Trump is destroying the dollars purchasing power which leads to inflation. All the while he’s killing jobs in public sector and private sector at the same time.

More for some items, less for others. It’s going to increase prices of imported goods as you said in your first point. It won’t increase the prices of domestically produced items. Of course many domestically produced items have imported components. Those that have more are going to go up to more than those that have less. And anywhere in-between. It’s probably impossible to accurately gauge the result but inflation is definitely going to occur as a result of the devaluation of the dollar within the US. With that said, and you’re not gonna like this, Trump would be able to offset that by printing money to increase wages to compensate for that. And that likely won’t cause additional inflation because the production capacity would remain unchanged. In fact he’d have to do it to avoid a decrease in the aggregate demand due to the reduction in real wages from the devaluation. Now I highly doubt his people are competent enough to do this and to do it right, as they could easily over or undershoot. 😂 They might even be ideologically opposed to doing it.

But don’t get me wrong, on the whole I think it’s going to be a shit show and they won’t be able to pull off what they’re trying to do and the US is gonna go into a dumpster fire stage. From the horribly targetted tariffs and the other damage unrelated to the trade war they’re doing. If anything I’d be losing more confidence in the US because of the latter, since tariffs can be reversed more easily than say the long term effects of destroying education on their labor force among other things.

Is this a life hack to avoid CECOT and rot a US jail instead?

The reduction in value of the dollar relative to other currencies would occur pretty certainly and that’s something some in the Trump admin want because it would make US exports cheaper and therefore they expect it to reduce trade imbalance. Whether the extra dollars result in inflation is an open question. Increasing money supply does not automatically produce inflation. Inflation only occurs if the economy is at absolute capacity, that’s no more additional units of goods and services could be produced or rendered. This is rarely the case. In this case we’re talking about new dollars appearing outside of the US. Unless the US cannot export more units of goods and services than they do today, the prices of those goods and services wouldn’t increase as a result of the extra dollars. Instead the extra dollars would allow other countries to buy more goods and services from the US. E.g. more MS Azure cloud contracts, more OpenAI service contracts, more soybean, etc. That’s what Bessent wants. Whether these countries would do that or decide to just stash the dollars, or burn them, or use them to trade with other countries is an open question.

Didn’t Elon say the problem with Social Security is that Americans live too long?

Elon lost, Bessent won.

You’re hereby given a ✅

Oh. Is that the kind of bonds the US government issues?

Yeah that’s a related effect as far as I understand, but it depends on how the domestic debt market reacts, as in whether it absorbs the difference. Also it depends on whether the US government continues the policy of issuing debt when creating dollars. They could just stop doing that. They don’t need debt to finance spending, they’ve just historically done so. That said I don’t know if they’d actually do that since they’re ideologically opposed to this sort of monetary policy.

Some material bits here - the US can’t run out of dollars so they can repay all of this debt, since it’s denominated in US dollars. The foreign countries can’t force the US to give them dollars in place of the bonds they hold, as far as I’m aware, since those bonds have predefined maturity dates. The US only has to pay their value in dollars as they come due. Which they can always pay. So bankruptcy from foreign debt isn’t on the cards. What foreign countries could do is not buy new US debt with the dollars the US pays them as bonds mature. That would leave the above mentioned dollars in international circulation and therefore devalue the dollar. And that would have implications on what the US can buy from other countries. Arguably this is the intended goal of Bessent and Miran. Although they were hoping to achieve it by getting other countries to appreciate their currencies against the dollar via Bretton Woods-style agreements.

This has always been the case and intellectual labor isn’t special other than the training lacking in some parts of the world. The owner class has always worked to lower the standard of living in the US with only organized labor preventing or slowing it down. Perhaps a secondary factor standing in the way of this process used to be the restriction on movement of capital prior to free trade taking over the world. That meant the owner class would face the contradictory effect of suppressing labor costs - decreasing demand for the goods they sell and profit from. Now that owner capital has moved around the world however, they can utilize the aggregate demand of many countries to keep themselves rich, even if there are fewer people in each country that can afford their products. I think in effect this frees them to depress wages in the wealthiest countries in the absence of strong organized labor.

Thank you!

Unlearning Economics is this you?

It’s got no legal standing, but as many things in life, when you want to advocate for something and you want to say that something is important to people, the arguments are a lot easier to make when you have “evidence.” A bunch of signatures can serve this purpose. Could be something they could use in a legal argument. This petition could even be just a first step, to be followed by others methods or actions.

Another function it could serve is getting people engaged and aware of the issue, spreading further awareness.

Another function is getting the contact information of people willing to do something about this issue. They could later leverage that to ask for other actions that are more meaningful.