Trump’s economists answered how much tariffs will raise prices
The Smoot-Hawley Trade War: Why the U.S. Economy is Going to Have a Big Break
The president’s announcement of new tariffs caused a drop in the US stock markets, a sign that the trade war will hurt the economy.
The market fell over 1,200 points, or 3%, around midday. The broader S&P 500 index sank 4% and the tech-heavy Nasdaq index dropped nearly 5%.
For instance, take China. Americans imported more than $500 billion of goods from China last year while exporting less than $150 billion. According to this formula, a 67% tax on those Chinese products should correct this trade imbalance. (On Wednesday Trump announced that the actual tariff would only be half of that, or 34%.)
Economists warn the new taxes will result in higher prices and slower growth in the United States, while likely pushing many other countries into recession.
On Wednesday night, the administration revealed how they calculated the new tariffs, which are the highest taxes on foreign products that America has seen in generations. Listen to the Planet Money episode about the Smoot-Hawley tariffs.
“This is a game-changing event for the U.S. economy and the world economy, as well as the rest of the globe’s economy,” said Sonola in a research note.
During his first term in office, Trump tried to build a wall against illegal immigrants, but now he’s trying to create a barrier against global trade to encourage domestic manufacturing.
“We’re going to make chips, airplanes, minerals, and medicines in our country, and we need those right here in America,” said Trump in the White House Rose Garden. If they don’t come back, they’ll have a big tax to pay.
Many factories are bracing for higher costs because of the trade war, which is a blow to domestic manufacturers. Trading partners have already promised to retaliate with tariffs of their own on U.S. exports.
“Here it comes and we’re already seeing that, so we’re thinking about doing this more often” said Tim Fiore of the Institute for Supply Management. “The retaliatory tariffs are going to be really ugly. It’s just going to kill demand.”
The U.S. launched a similar, worldwide trade war in the 1930s. It did not end well. It is thought that the Smoot-Hawley tariffs worsened the Great Depression.
“It was bad for consumers, because it meant higher prices,” says former Treasury Secretary Larry Summers. It was a bad thing for producers, because it meant higher input costs. It undermined comity among nations, that was bad for peace.
Trump ignores the broader economic consequences of the new tariffs. They will have an effect on the overall American economy. They will affect exchange rates. They will likely retaliate with tariffs from other countries.
Here’s how Trump’s math says it would work: The 67% tax should raise the prices of Chinese products in the United States. And those higher prices should discourage Americans from buying Chinese products or products that contain Chinese components.
This is different from what Trump has said in the past, where he has denied that tariffs would raise prices or said he couldn’t care less.
There is a blunt approach behind the Greek letters. Essentially, the equation is trying to answer the question: How high should we set tariffs in order to get Americans to buy fewer foreign products, and close the trade deficit? If the US has a trade deficit with another country, the higher the tariffs should be on that country’s products.
That is not true. These are not reciprocal tariffs. They do not correspond to the tariff rates in other countries. The truth behind where the tariffs came from is much more interesting.
When President Trump announced his latest tariffs on Wednesday, he also ignited an economic mystery. Where do those numbers come from?
Is it possible that Trump’s tariffs will actually close the trade deficit? Maybe, maybe not. But finally, at least, the administration has shown its work. And according to their calculations, raising prices and closing the trade deficit is what these tariffs are designed to do.
As President Trump rolls out a new round of tariffs, shoppers are keeping a tight grip on their wallets, setting the stage for a possible economic slowdown.
Personal spending was weaker than expected in February, according to the Commerce Department, with lower spending on discretionary services such as restaurant meals.
And people across the political spectrum say they’re worried about their personal finances, unemployment and inflation, suggesting the president’s policies on tariffs and government job cuts are partly to blame. A survey by the University of Michigan found consumer sentiment fell in March for the third month in a row.
“I don’t see things moving in a positive direction. I really don’t,” says Dan Fitch, a nurse who works for the Veterans Administration in Portland, Ore. The cost of living has risen for a while. So adding on tariffs — I don’t see how that positively affects anybody.”
Why the American economy is so lousy about its economy, and why it is time to replace the car? Kathy Fitch and her husband are worried about the future of their hair
Fitch says he and his family aren’t traveling as much as they usually do. And he’s even stopped paying for haircuts for his 3-year and 7-year-old sons.
I bought a pair of clippers, so I’m cutting my kids’ hair now. Heck, I might start doing my own, too,” Fitch says. It can get pretty ugly. It is worth it for more peace of mind over your money.
Kathy says it is hard to stick to a budget in her research laboratory. The amount of money that is being spent is the same as the amount of bags of groceries.
Merkler is also concerned about the scientific job market, given the federal cutbacks at the National Institutes of Health and the Centers for Disease Control and Prevention. She and her husband are debating whether or not it is a good time to replace their car.
Source: Tariffs are another reason why Americans feel so lousy about the economy
Consumer spending is sputtering over the past few years, and tariffs are another reason why Americans feel so lousy about the economy
Consumer spending is the biggest driver of the U.S. economy, and it remained remarkably resilient through the pandemic and the period of high inflation that followed. But now that consumer engine may be sputtering a bit.
“I think if you’re a consumer, you’re sitting there and saying, ‘Ugh, I’m not so sure about these tariffs here,’ ” says Dan North, a senior economist at Allianz Trade North America. “My income is kind of dwindling a little bit. By the way, I just opened up my credit card bill and there are still some items I have to pay off before Christmas. I’m gonna draw my horns in a little bit.”
The threat of tariffs hasn’t been all bad for spending. Some shoppers raced to buy big-ticket items in February, before most of the import taxes took effect. Spending on durable goods jumped 1.4% during the month. The burst of spending is not likely to last.
Dawn Woodward, a librarian in Michigan, bought her son a new television weeks before his birthday, in an effort to avoid an expected tariff. Woodward is trying to cut back on other shopping.
Source: Tariffs are another reason why Americans feel so lousy about the economy
How Much Does This Phone Cost? Consumer Tech Issues With Trump’s High-Tariffs Tariffs Put the iPhone in a Tough Spot
The share of income that people save was 4.6% last month, the highest level in eight months. It’s another sign of how wary Americans are feeling as President Trump doubles down on tariffs.
I’ve been writing about consumer tech for 10 years. She has a special interest in mobile photography and telecom. Previously, she worked at DPReview.
The US smartphone market isn’t normal. Most of us buy our phones through some combination of installment plans, trade-in offers, and carrier deals, so answering the question “How much does this phone cost?” can sometimes require a little galaxy-brain math. Things are going to be even more complicated when President Trump increases tariffs on Chinese goods on April 9th. Will Apple pass on the extra cost of an expensive product to buyers? The market seems to think so. It’s likely why Apple’s shares are down almost 10 percent, the worst drop in about five years.
Apple will still make the phone overseas, so they won’t have to pay extra taxes to ship it to the US. It has been reported that Apple is trying to get the supply chain to absorb some of the additional cost. The tendency to buy phones through carrier subsidies could cushion the blow if Apple raises prices.
Source: Trump’s tariffs put the iPhone in a tough spot
How New Trade Tariffs Impact Small Retailers. Key Takeways from Trump’s 7th Week: Up First Briefing Trump New Trade Barriers nsc-firings Laura loomer
There is still a lot of uncertainty around these tariffs and it is possible they will be pushed back yet again. Like I said, it’s complicated.
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Source: How new tariffs will impact small retailers. And, key takeaways from Trump’s 7th week
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