"If the price starts popping after Trump’s inauguration, it will be fun to see all the MAGAs try to fight back against the inevitable online deluge of photographs showing elevated prices."
I am 99% certain that the line they'll adopt is "this is happening because Biden deliberately sabotaged the economy on the way out, to make Trump look bad, by [something something]ing the [something something]!"
I am about 95% certain that, even now, somebody in the Trump-Fox orbit has a full-time job inventing those something-somethings ("It was Biden's commutation of federal death sentences that caused this inflationary spiral!"), so they can be delivered from the podium when prices escalate sufficiently.
I am about 90% certain that the prestige press will take these "explanations" very Seriously.
Saying contradictory things has not stopped them in the past, but they will also be motivated to say how great things are, now that DT is back. In some ways things will probably be good. Jobs and maybe the stock market, for instance.
If the economy is otherwise good they might, as you say, try the standard political "look at this, not at that," but I'd expect something more like "Bidenflation was the most evil and destructive thing that America has ever suffered, but Trumpflation is Good, Actually; they're two entirely different things." They know that their most devoted supporters are entirely fine with doublethink. OTOH, people being more sensitive to inflation than to the employment rate would likely be a constant he can't nullify by fiat.
And if the Dow does plummet, we'll be told that this is a sign of Trump's populist disdain for the interests of corporations, and that Trump has made the stock market more affordable than ever to the working class!
Thanks for the post Max, (after a 40 year career devoted to too much modeling of international trade) I have some technical notes.
1. At 10% tariff on a $140 (retail) microwave (by itself) would not raise the price by $14. About half of the retail value of appliances are transport and trade margins added within the US . So IF the importer passes the entire tariff on to consumers the retail price would increase by just ~$7.
2. As Trump insists, importers do not necessarily pass the entire tax onto domestic consumers ("in theory" retailers could also take a haircut). Through history we have seen tariff pass-throughs that are neither instantaneous nor ultimately complete depending on -- as Trump says -- market conditions (demand and supply elasticities).
Microwaves are a good example. Since nearly all of them are manufactured in China (low price-supply elasticity) and because when a US consumer needs a new microwave they need a new microwave (low demand-price elasticity) market conditions would imply rapid and complete pass through. Indeed, multiple research studies on the Trump-Biden tariffs indicate that pass through was both remarkedly rapid and virtually complete. (There are MAGA studies out there that use a raw -and timeless - version of GTAP that assumes no pass-through and therefore a large terms-of-trade benefit to the US. I don't think anybody buys them.)
3. The own-currency appreciation one expects after a country raises tariffs occurs automatically; there is no need for trade partners to manipulate currency values (though that may also occur). Tariffs increase demand for the home currency and reduce demand for the foreign currency, driving up the home currency, voila: appreciation. Moreover, if the tariffs do cause a transitory uptick in inflation, any increases in interest rates (by explicit Fed action or just through the market because of the inflation effect) will increase demand for the local currency. This effect is a powerful stabilizer which reduces net exports just as the economy is hot. High interest rates are the main reason the dollar has been so strong recently, and why -- notwithstanding the imposition of new tariffs -- we will probably see widening trade deficits under Trump at least as long as the economy grows.
4. The bigger dangers that tariffs pose for price stability and employment is (a) the behavior of domestic producers (who as you point out now have free rein to raise their own prices), (b) foreign governments who retaliate with trade barriers of their own (requiring new subsidies for farmers?) and (c) the corruption that may or may not occur as the home government adjudicates who gets breaks from the taxes and who does not (remember how we used to chide other countries on rent-seeking).
"If the price starts popping after Trump’s inauguration, it will be fun to see all the MAGAs try to fight back against the inevitable online deluge of photographs showing elevated prices."
I am 99% certain that the line they'll adopt is "this is happening because Biden deliberately sabotaged the economy on the way out, to make Trump look bad, by [something something]ing the [something something]!"
I am about 95% certain that, even now, somebody in the Trump-Fox orbit has a full-time job inventing those something-somethings ("It was Biden's commutation of federal death sentences that caused this inflationary spiral!"), so they can be delivered from the podium when prices escalate sufficiently.
I am about 90% certain that the prestige press will take these "explanations" very Seriously.
Saying contradictory things has not stopped them in the past, but they will also be motivated to say how great things are, now that DT is back. In some ways things will probably be good. Jobs and maybe the stock market, for instance.
If the economy is otherwise good they might, as you say, try the standard political "look at this, not at that," but I'd expect something more like "Bidenflation was the most evil and destructive thing that America has ever suffered, but Trumpflation is Good, Actually; they're two entirely different things." They know that their most devoted supporters are entirely fine with doublethink. OTOH, people being more sensitive to inflation than to the employment rate would likely be a constant he can't nullify by fiat.
And if the Dow does plummet, we'll be told that this is a sign of Trump's populist disdain for the interests of corporations, and that Trump has made the stock market more affordable than ever to the working class!
Thanks for the post Max, (after a 40 year career devoted to too much modeling of international trade) I have some technical notes.
1. At 10% tariff on a $140 (retail) microwave (by itself) would not raise the price by $14. About half of the retail value of appliances are transport and trade margins added within the US . So IF the importer passes the entire tariff on to consumers the retail price would increase by just ~$7.
2. As Trump insists, importers do not necessarily pass the entire tax onto domestic consumers ("in theory" retailers could also take a haircut). Through history we have seen tariff pass-throughs that are neither instantaneous nor ultimately complete depending on -- as Trump says -- market conditions (demand and supply elasticities).
Microwaves are a good example. Since nearly all of them are manufactured in China (low price-supply elasticity) and because when a US consumer needs a new microwave they need a new microwave (low demand-price elasticity) market conditions would imply rapid and complete pass through. Indeed, multiple research studies on the Trump-Biden tariffs indicate that pass through was both remarkedly rapid and virtually complete. (There are MAGA studies out there that use a raw -and timeless - version of GTAP that assumes no pass-through and therefore a large terms-of-trade benefit to the US. I don't think anybody buys them.)
3. The own-currency appreciation one expects after a country raises tariffs occurs automatically; there is no need for trade partners to manipulate currency values (though that may also occur). Tariffs increase demand for the home currency and reduce demand for the foreign currency, driving up the home currency, voila: appreciation. Moreover, if the tariffs do cause a transitory uptick in inflation, any increases in interest rates (by explicit Fed action or just through the market because of the inflation effect) will increase demand for the local currency. This effect is a powerful stabilizer which reduces net exports just as the economy is hot. High interest rates are the main reason the dollar has been so strong recently, and why -- notwithstanding the imposition of new tariffs -- we will probably see widening trade deficits under Trump at least as long as the economy grows.
4. The bigger dangers that tariffs pose for price stability and employment is (a) the behavior of domestic producers (who as you point out now have free rein to raise their own prices), (b) foreign governments who retaliate with trade barriers of their own (requiring new subsidies for farmers?) and (c) the corruption that may or may not occur as the home government adjudicates who gets breaks from the taxes and who does not (remember how we used to chide other countries on rent-seeking).
Thanks for this.
Heroic effort
Facing revelation quality eventuality
Jousting with
a 5 eyed 7 horned
flying purple people eater