A lot of smart people, including the author of this piece, David Goldman, seem to be treating the Trump tariffs as old-school protectionist and/or old-school revenue-raising measures. As best as I can tell the current administration is using them and the threat of more as a blunt instrument to force a lower trade deficit. From Politico February 5:
....U.S. goods imports in 2024 totaled $3.3 trillion, a record high, while exports were nearly $2.1 trillion, producing a 14 percent jump in the trade gap to $1.2 trillion.
The United States still runs a surplus in services trade, such as banking, travel and transportation. When that is included, the combined goods and services trade deficit totaled $918 billion in 2024, up 17 percent from 2023 and the second highest on record.
The report showed the U.S. trade deficit with China increased to $295 billion in 2024, but remained well below the record level of $418 billion set in 2018....
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And the headliner from Asia Times, March 30:
Tariffs in the 10%-15% range likely will generate significant amounts of new revenue without much damage to economic activity
Legend has it that the supply-side revolution – Ronald Reagan’s 1981 cut in the US top income tax rate to 40% from 70%– began in a Washington restaurant, when economist Arthur Laffer drew his eponymous curve on a cocktail napkin for then White House Deputy Chief of Staff Dick Cheney.
At a tax rate of zero, the government has no tax revenues, but it also has no revenues at a tax rate of 100%, because the economy would shut down. Somewhere in between, there’s a tax rate that generates the maximum revenue.
The US can’t continue to run trillion-dollar trade deficits without dire consequences. The US net international investment position has sunk to negative $25 trillion, about equal to the sum of US deficits over the past 30 years. During the past decade, foreigners poured into US tech stocks. If the tech boom fades, for example, the US will have to persuade foreigners to buy bonds, and that implies higher interest rates to attract funds.
Tariffs are a tax, and Laffer’s simple illustration applies to the impact of tariffs as well, although more variables are in play. A reasonable guess is that tariffs in the 10% to 15% range would yield a meaningful amount of revenue without undue disruption of economic activity.
Tariffs have multiple effects: Domestic production will replace some imports, but some consumers and businesses will have to absorb higher import prices. Some exporters will build plants in the US to avoid tariffs, as US President Trump proposes....
....MUCH MORE
Our boilerplate mini-bio for Mr. Goldman:
...The author of this piece, David Goldman, is Deputy Editor (Business) at Asia Times.
Prior to taking that position he was:
- Global head of credit strategy at Credit Suisse
- Global Head of Fixed Income Research for Bank of America
- Global Head of Fixed Income Research at Cantor Fitzgerald
In addition to apparently not being able to hold onto a job I think one of his requirements for moving on was a "Global Head" title. (JK, young Master. G.)
"Worse to come from worst US inflation in 40 years"
The author of this piece, David Goldman has been quite vocal (and quite accurate) about inflation not being "transitory." (I think the word deserves the scare quotes by this point, don't you?)
He has also been among the voices pointing out that the shelter component of the CPI, rent and owners equivalent rent, is not reflecting the real-time high-frequency data that we get on rent increases and house price appreciation.
Although he does not go this far, saying instead that shelter inflation will show up later this year, I am starting to wonder if there isn't a methodological flaw in the CPI....
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Previously:
January 22Its almost as though he's trying to tell us something.
"More inflation shoes to drop on NASDAQ by end-2022"
Soaring rent increases will hit the Consumer Price Index with a lag of up to eight months
January 20
David Goldman Looks At The Housing Component Of Official Inflation Statistics
October 2021
"Inflation depresses – later will clobber – stocks"
September 2021
Prices: "Rent blowout mysteriously missing from US report"
August 2021
"Home rents set to turbocharge US inflation"
