A twofer. First up, from CNBC April 10"
The U.S. tariff rate on Chinese imports now effectively totals 145%, a White House official confirmed to CNBC.
Trump’s latest executive order hikes tariffs on Beijing to 125% from 84%.
But that comes on top of a 20% fentanyl-related tariff that Trump previously imposed on China....
....MUCH MORE (live updates)
And from MarketWatch, also April 10 but before the White House clarification:
JPMorgan still forecasts economy to contract even as tariff bite decreases
Economist calculates the effective tariff rate if Americans stop buying Chinese goods
The combination of a 10% tariff on most products and 125% on Chinese ones had Wall Street scrambling to come up with their new assessments.
Their calculations were not universal, but all had effective tariff rates in the mid-20% range. But JPMorgan had a different calculation on what tariffs would be if Americans just stopped buying Chinese products.
That would be an extreme reaction, of course, but then consumers and companies clearly will be put off from buying products with a 125% tariff.
The effective U.S. tariff rate would be 12% if no Chinese goods were imported, according to JPMorgan.
“With Chinese tariffs going to punitive rates, even conservative estimates of the price elasticity of imports would suggest that China’s share of imports should shrink dramatically, taking down China’s contribution to the increase in the total average effective tariffs,” said Michael Feroli, chief U.S. economist at JPMorgan.
But even with a more reasonable tariff rate, Feroli didn’t reverse his recession call.
“The drag from trade policy is likely to be somewhat less than before, and thus the prospect of a recession is a closer call. However, we still think a contraction in real activity later this year is more likely than not,” he said.
The tariff increase will still be on the order of a $300 billion tax increase since Inauguration Day, even if imports from China fall to a trivial amount, he said....
....MUCH MORE
This is the point we were attempting to make over the last few weeks. Here's the intro to March 31's "Tariffs have a Laffer curve, to ":
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....
And the outro from March 22's "Transformative AI, existential risk, and real interest rates":
....Our short term guess is a continued downtrend in reported year-over-year CPI due, not to AI, but to higher prints from last year falling off.If interested see February 9's "Prepare for a Springtime CPI Collapse"Regarding the inflationary impact of tariffs, President Trump seems, despite his "tariff is a beautiful, beautiful word" rhetoric to have decided on tariffs as the cudgel to beat the rest of the world into smaller trade surpluses rather than as a revenue generator or protectionist measure, lending some credence to our slightly snarky comment of seven weeks ago:
Now the good news is that after the tariff costs work their way through the economy the inflation effect will be transitory. And I have it from multiple very good authorities that transitory is nothing to worry about.
So who knows? We shall see.But the thought we could have deflation but higher interest rates is intriguing.
