Liberation Day

[birdman22]

Please help keep this forum on track.

Can anyone with a good understanding attempt to explain the effects of the speculated tariffs?

Something that affects most users here is auto prices, which are speculated to rise 5% to 25%. No one obviously wants to see that.

At our company, our major heavy equipment vendors have all announced a price increase coming due to the tariffs. Several implemented a 2% tariff through the month of March, even though tariffs are not in effect (except for the 20% China tariff). After 3/31, they are saying the full burden of the tariff will be passed on to the buyers. It is speculated this could increase the cost of equipment by 20% or more, but again that is speculation.

Based on this limited example, it seems to me that the burden of these tariffs will be passed along directly to the consumer.
In my pea brain, it doesn't make sense. We can't source the materials or labor to make everything domestically, and if we can it is a long term proposition.

Please keep it civil, I'm just trying to gain an understanding of the situation. Thanks

 

[MuleyFever]

Appears you already have an understanding of the situation. Effects are increased prices.

 

[Jimbee]

Smells like another tax.

 

[Ten Bears]

There are a ton of pros and cons explanations of the topic online via multiple financial media.

Do a quick search, read some opinions on it, form your own thoughts.

For someone to summarize the idea of tariffs and global trade in a rokslide post would be pretty tough.

 

[wapitibob]

I have no issue with reciprocal tariffs, if that's what they are.

 

[Dos Perros]

Where does the money go?

Does our government currently bring in more money than it spends?

Do other countries tariff our goods?

Are you willing to spend more for the same product if it were made in America vs China?

 

[mgray34]

Why can we (USA) not source the material and labor?

My understanding is that is what the tariffs are designed to do. Bring the manufacturing and jobs back to the US. IMHO, the government needs to cut some of the regulation and tax burden and make it feasible for everyone involved.

 

[Poser]

Please help keep this forum on track.

Can anyone with a good understanding attempt to explain the effects of the speculated tariffs?

I asked this question to Grok2 xAI w9ch is the new parent company of X/Twitter (aka Musk's AI):


The effects of the speculated tariffs, particularly those implemented by the Trump administration, can be analyzed across several dimensions. Here's a detailed explanation:

1.​

a. Increased Prices for Consumers:

• Direct Impact: Tariffs increase the cost of imported goods, which can lead to higher prices for consumers. For example, tariffs on steel and aluminum raised the cost of products made with these materials, like cars, appliances, and construction materials.
• Indirect Impact: Domestic producers might also raise prices, taking advantage of reduced competition from cheaper imports.

b. Impact on Domestic Industries:

• Positive for Protected Sectors: Industries directly protected by tariffs, like steel and aluminum, might see short-term benefits through increased demand for domestic products and potentially higher profits.
• Negative for Dependent Industries: Sectors that rely on imported materials (e.g., automotive, construction) face higher production costs, which can reduce competitiveness and profitability.

c. Trade Deficits:

• Short-term Reduction: Tariffs might reduce the trade deficit with specific countries by making their exports less competitive in the U.S. market.
• Long-term Uncertainty: However, this might not lead to a sustainable reduction in the overall trade deficit, as other countries could retaliate, and U.S. exports might suffer.

d. Economic Growth:

• Potential Slowdown: Many economists argue that tariffs can slow economic growth by disrupting trade, increasing costs, and reducing efficiency. The uncertainty can also deter investment.
• Job Creation and Loss: While some jobs might be created in protected industries, jobs could be lost in sectors affected by retaliatory tariffs or higher input costs.

2.​

a. Retaliation:

• Trade Wars: Countries affected by U.S. tariffs often retaliate with their own tariffs on U.S. goods, leading to a trade war. For instance, China imposed tariffs on U.S. agricultural products, affecting farmers.
• Strained Relations: Tariffs can strain international relations, complicating diplomatic efforts and potentially leading to broader geopolitical tensions.

b. Trade Negotiations:

• Leverage: Tariffs can be used as leverage to negotiate better trade terms. The Trump administration used tariffs to pressure China into the Phase One trade deal.
• Uncertainty: However, this strategy can backfire if it leads to prolonged disputes without resolution, creating uncertainty for businesses.

3.​

• Shift in Supply Chains: Companies might need to find alternative suppliers or move production to avoid tariffs, which can be costly and time-consuming.
• Efficiency Loss: Global supply chains are often optimized for efficiency; tariffs disrupt this, potentially leading to less efficient production and distribution networks.

4.​

• Reduced Investment: The uncertainty created by tariffs can lead to reduced investment, both domestically and internationally, as businesses might delay or cancel expansion plans due to unpredictable trade policies.
• Stock Market Volatility: Tariffs can lead to volatility in stock markets as investors react to the potential impacts on corporate earnings and global trade.

5.​

• Shift in Preferences: Consumers might shift their preferences towards domestic products or look for alternatives if imported goods become too expensive.
• Reduced Consumer Welfare: Overall, consumer welfare might decrease due to higher prices and potentially lower quality or variety of goods available.

6.​

• Reshoring: Some companies might decide to move production back to the U.S. to avoid tariffs, potentially leading to long-term changes in manufacturing locations.
• Innovation and Efficiency: Over time, the pressure from tariffs might encourage domestic industries to innovate and become more efficient, though this is speculative and depends on many factors.

7.​

• Tariff Revenue: Tariffs generate revenue for the government, which can be significant. However, this is often offset by the economic costs mentioned above.

Conclusion​

While tariffs can achieve certain short-term goals like protecting specific industries or pressuring trade partners, the broader economic consensus is that they often lead to negative outcomes, including higher consumer prices, trade disruptions, and potential economic slowdowns. The effectiveness of Trump's tariffs in achieving long-term strategic goals remains debated, with many economists pointing out the significant costs and unintended consequences. The key is in the implementation, specificity, and the broader context of global trade dynamics.

 

[drdrop]

I found this opinion article to be a unique perspective. It has a tongue in cheek tone, but arguments seem sound.

Opinion | Thank you, GOP, for fighting climate change with tariffs

Republicans embrace tool climate-conscious economists, environmentalists see as solution to pollution tied to global trade, economist explains.

wyofile.com

TLDR: Tariffs make things more expensive, thus reducing consumption of goods. Studies show tariffs lead to reduced greenhouse gas emissions.

Personally, I try to avoid mindless consumerism so I can retire earlier. Tariffs probably won't affect me much apart from the decline in the value of my investments, which is a good thing if you're in an accrual phase and still optimistic about the future economy. Less good if you're retired/policy actions hurt the economy in the long run.

 

[Mish-pop]

I asked this question to Grok2 xAI w9ch is the new parent company of X/Twitter (aka Musk's AI):


The effects of the speculated tariffs, particularly those implemented by the Trump administration, can be analyzed across several dimensions. Here's a detailed explanation:

1.​

a. Increased Prices for Consumers:

• Direct Impact: Tariffs increase the cost of imported goods, which can lead to higher prices for consumers. For example, tariffs on steel and aluminum raised the cost of products made with these materials, like cars, appliances, and construction materials.
• Indirect Impact: Domestic producers might also raise prices, taking advantage of reduced competition from cheaper imports.

b. Impact on Domestic Industries:

• Positive for Protected Sectors: Industries directly protected by tariffs, like steel and aluminum, might see short-term benefits through increased demand for domestic products and potentially higher profits.
• Negative for Dependent Industries: Sectors that rely on imported materials (e.g., automotive, construction) face higher production costs, which can reduce competitiveness and profitability.

c. Trade Deficits:

• Short-term Reduction: Tariffs might reduce the trade deficit with specific countries by making their exports less competitive in the U.S. market.
• Long-term Uncertainty: However, this might not lead to a sustainable reduction in the overall trade deficit, as other countries could retaliate, and U.S. exports might suffer.

d. Economic Growth:

• Potential Slowdown: Many economists argue that tariffs can slow economic growth by disrupting trade, increasing costs, and reducing efficiency. The uncertainty can also deter investment.
• Job Creation and Loss: While some jobs might be created in protected industries, jobs could be lost in sectors affected by retaliatory tariffs or higher input costs.

2.​

a. Retaliation:

• Trade Wars: Countries affected by U.S. tariffs often retaliate with their own tariffs on U.S. goods, leading to a trade war. For instance, China imposed tariffs on U.S. agricultural products, affecting farmers.
• Strained Relations: Tariffs can strain international relations, complicating diplomatic efforts and potentially leading to broader geopolitical tensions.

b. Trade Negotiations:

• Leverage: Tariffs can be used as leverage to negotiate better trade terms. The Trump administration used tariffs to pressure China into the Phase One trade deal.
• Uncertainty: However, this strategy can backfire if it leads to prolonged disputes without resolution, creating uncertainty for businesses.

3.​

• Shift in Supply Chains: Companies might need to find alternative suppliers or move production to avoid tariffs, which can be costly and time-consuming.
• Efficiency Loss: Global supply chains are often optimized for efficiency; tariffs disrupt this, potentially leading to less efficient production and distribution networks.

4.​

• Reduced Investment: The uncertainty created by tariffs can lead to reduced investment, both domestically and internationally, as businesses might delay or cancel expansion plans due to unpredictable trade policies.
• Stock Market Volatility: Tariffs can lead to volatility in stock markets as investors react to the potential impacts on corporate earnings and global trade.

5.​

• Shift in Preferences: Consumers might shift their preferences towards domestic products or look for alternatives if imported goods become too expensive.
• Reduced Consumer Welfare: Overall, consumer welfare might decrease due to higher prices and potentially lower quality or variety of goods available.

6.​

• Reshoring: Some companies might decide to move production back to the U.S. to avoid tariffs, potentially leading to long-term changes in manufacturing locations.
• Innovation and Efficiency: Over time, the pressure from tariffs might encourage domestic industries to innovate and become more efficient, though this is speculative and depends on many factors.

7.​

• Tariff Revenue: Tariffs generate revenue for the government, which can be significant. However, this is often offset by the economic costs mentioned above.

Conclusion​

While tariffs can achieve certain short-term goals like protecting specific industries or pressuring trade partners, the broader economic consensus is that they often lead to negative outcomes, including higher consumer prices, trade disruptions, and potential economic slowdowns. The effectiveness of Trump's tariffs in achieving long-term strategic goals remains debated, with many economists pointing out the significant costs and unintended consequences. The key is in the implementation, specificity, and the broader context of global trade dynamics.

Thank you for that breakdown

 

[Pony Soldier]

From my point of view, the issue is short term effect vs long term effect. We have somewhat lived with the effect from slave labor in foreign countries while giving leverage to our enemies. A bunch of this has resulted in driving industry out of the US.

There will be change and short term effects. The time it takes to reestablish infrastructure and labor in the US is a major unknown. We have been getting hosed on the international market. Can we re-adjust to compete is an unknown as is how long. It's worth watching but there's no guarantees to the outcome. I think it is worth the gamble.

In my lifetime I remember someone saying we didn't need resources any more. We could make it with our superior intelligence. There was some imagination.

 

[mtnbiker208]

As a business owner who is in retail. This is the 3rd time i have had to deal with tariffs. Back in 2006 the US government put 25% tariffs on bedroom furniture out of china. This did not bring bedroom furniture production back to the USA. I passed those tariffs on to the consumer.

In 2016 Trump enacted tariffs on China. Some of the vendors in china split the tariffs with me, some did not.
I passed those price increases on to the consumer. Manufacturing did not come back to USA, but went to Vietnam.

I doubt these new tariffs will do anything on a major scale but increase prices. The USA does not have the workforce or environmental regulations that would allow for competitive manufacturing to return to the USA.

Now alot of what is going on is interesting. And if you are for it or against it, can be related to a couple of simple concepts. Does short term pain equal long term gain?

 

[Poser]

Why can we (USA) not source the material and labor?

My understanding is that is what the tariffs are designed to do. Bring the manufacturing and jobs back to the US. IMHO, the government needs to cut some of the regulation and tax burden and make it feasible for everyone involved.

Here's a list of items that the US cannot produce or would be extremely difficult for the US to produce:

1. Certain Minerals and Rare Earth Elements: The U.S. is heavily reliant on imports for certain minerals crucial for high-tech manufacturing, including rare earth elements used in electronics, batteries, and magnets. While some domestic production exists or could be developed, it likely could not ever be enough to meet demand or be cost-competitive with established global suppliers.

2. Specialized Pharmaceuticals and Medical Equipment: Some pharmaceuticals and medical devices require highly specialized manufacturing processes or ingredients that might not be readily available or cost-effective to produce in the U.S. We often already have the highest priced Pharmaceuticals in the entire world. Since we can't produce many of these, tariffs will only result in even higher prices.

3. Tropical Agricultural Products: The U.S. climate is not suitable for growing certain tropical crops like coffee, cocoa, bananas, or certain spices. Tariffs on these products would primarily affect consumers without stimulating domestic production. 70% of Americans drink coffee.

4. Certain Types of Electronics and Components: While the U.S. designs and develops many advanced electronics, the manufacturing of certain components, like specific semiconductors or display panels, is often concentrated in other countries due to established supply chains and economies of scale. Tariffs could disrupt these supply chains without necessarily leading to domestic production. Anything that could potentially produce these items domestically is years out and, even then, domestic production would still be more expensive than any tariffed import barring extreme geo political shakeup. AND every country that is a producer knows this.

5. Certain Textiles and Apparel: While some textile and apparel manufacturing exists in the U.S., many types of clothing and fabrics are significantly cheaper to produce in other countries with lower labor costs. Tariffs could raise prices for consumers without substantially increasing domestic production. The production infrastructure doesn't exist to meet large scale demand, building the infrastructure is years out. For outdoor brands, you would have to expect the retail costs to mirror that of the BERRY compliant Arc Terx line. That ~$300 Kuiu rain jacket would cost ~$800.

 

[yfarm]

WSJ is running a series of articles looking at the tariff impacts.
This one is about China shifting production to Mexico to take advantage of the NAFTA successor

https://www.wsj.com/economy/trade/china-mexico-factory-moves-trump-tariffs-f136250e?mod=Searchresults_pos1&page=1

Another today looks at F150 parts sourcing.
Seems like everything made or used has some connection with China.
I refuse to deal with foreign call centers, ask to be transferred to a US based supervisor whenever I am switched automatically, happened yesterday dealing with my mothers bank.
Received a notice from my accounting firm(big 8) notifying me that unless I objected my tax returns would be done in India and that US privacy laws regarding personal information might not be honored. Called the managing partner and asked if they were trying to get out of the tax business, his response was no it was very important, my response was this was an odd way to show it.

 

[jjohnsonElknewbie]

Manufacturing did not come back to USA, but went to Vietnam.

I doubt these new tariffs will do anything on a major scale but increase prices. The USA does not have the workforce or environmental regulations that would allow for competitive manufacturing to return to the USA.

Now alot of what is going on is interesting. And if you are for it or against it, can be related to a couple of simple concepts. Does short term pain equal long term gain?

There are already major manufacturers that have committed to manufacturing more goods in the US including Hyundai and Apple to name a couple of the largest.

The UAW is generally in favor of the tarriffs as domestic auto companies are currently producing cars in MX and Canada instead of in the US. They are taking the long view that as demand drops for more expensive vehicles produced elsewhere, auto companies may bring more capacity and manufacturing inside the US.

Reasonable environmental deregulation is part of the larger plan, along with tax cuts, to attract more manufacturing into the US. This will not happen overnight.

I believe that short term pain is equal to long term gain. It's just like investing and how much risk people are willing to accept in the long run, undestanding there will be peaks and valleys.

Using COVID example, i'd gladly pay a little more for TP and paper towels if they were manufactured here and supply issues were no longer an issue. That goes for a lot of things. We need to produce more finished products in the US from start to finish, versus simply performing final assembly with parts sourced internationally. These dependencies hamstring the supply chain.

 

[Dos Perros]

Manufacturing has maintained a relatively flat share of real GDP since WW2. It is certainly plausible to think that could increase, or at least stay flat.

 

[jjohnsonElknewbie]

Here's a list of items that the US cannot produce or would be extremely difficult for the US to produce:

1. Certain Minerals and Rare Earth Elements: The U.S. is heavily reliant on imports for certain minerals crucial for high-tech manufacturing, including rare earth elements used in electronics, batteries, and magnets. While some domestic production exists or could be developed, it likely could not ever be enough to meet demand or be cost-competitive with established global suppliers.

2. Specialized Pharmaceuticals and Medical Equipment: Some pharmaceuticals and medical devices require highly specialized manufacturing processes or ingredients that might not be readily available or cost-effective to produce in the U.S. We often already have the highest priced Pharmaceuticals in the entire world. Since we can't produce many of these, tariffs will only result in even higher prices.

3. Tropical Agricultural Products: The U.S. climate is not suitable for growing certain tropical crops like coffee, cocoa, bananas, or certain spices. Tariffs on these products would primarily affect consumers without stimulating domestic production. 70% of Americans drink coffee.

4. Certain Types of Electronics and Components: While the U.S. designs and develops many advanced electronics, the manufacturing of certain components, like specific semiconductors or display panels, is often concentrated in other countries due to established supply chains and economies of scale. Tariffs could disrupt these supply chains without necessarily leading to domestic production. Anything that could potentially produce these items domestically is years out and, even then, domestic production would still be more expensive than any tariffed import barring extreme geo political shakeup. AND every country that is a producer knows this.

5. Certain Textiles and Apparel: While some textile and apparel manufacturing exists in the U.S., many types of clothing and fabrics are significantly cheaper to produce in other countries with lower labor costs. Tariffs could raise prices for consumers without substantially increasing domestic production. The production infrastructure doesn't exist to meet large scale demand, building the infrastructure is years out. For outdoor brands, you would have to expect the retail costs to mirror that of the BERRY compliant Arc Terx line. That ~$300 Kuiu rain jacket would cost ~$800.

These are good points, and tarriffs are not going to solve problems overnight. They are also just one tool in the bag. To your point, it will take a committment from the US and its consumers, to see this transition to its end over years, not months or days.

A lot of these points are highlighted by the fact is costs less to produce some things oversees due to low wages and reduced regulation. If US tarriffs increase the cost of doing business overseas, the theory is that will drive manufacturers to invest in production here.

There will absolutely be some items that we cannot reasonably produce or source in the US cheaper. That is why we need to (re)negotiate fair trade deals in these examples.

Regarding the rare earth minerals, there is more supply in the US than the pols are telling people. There is a proposed mine in Northern MN for example that has been hamstrung by regulation and environmental sensationalism for years. I'm sure this isn't the only example where modern domestic mining is being constrained by perceived environmental threats.

 

[hunt1up]

Our business manufactures hydraulic lifts for trucks(liftgates). Our biggest competitor filed bankruptcy in the early 90s. NAFTA happened, they moved to Mexico, and now they own probably 70% of the market. Over the past few months we've had several customers sending out emails asking what tariffs will do to our prices. For us, nearly completely American made, the answer is that the tariffs won't change our prices much or at all. Now our Mexican made counterpart, not so much. They'll have no choice but to pass it on. We've recently gotten a lot more interest in our products as a result.

Another example from our industry: Most box semi trailers were manufactured in the Midwest. Largely in Indiana. Hyundai Trailers(from South Korea), opened a plant in Mexico in the early 2000s. They produce the most trailers now. Something like 50,000 a year. The American made brands of Great Dane, Wabash, and Utility lost all that market share to foreign competition. How many American manufacturing jobs was that? It's hard to say.

The manufacturing base of America was gutted by NAFTA and free trade. We were told it's good for everyone because we get more competition and lower priced goods. So we get lower prices but we've shipped out millions of solid middle class manufacturing jobs for the privilege. Drive through the Midwest and you'll see shells of companies and communities that were gutted by this. Great, we get cheaper TVs and appliances that break in 3 years(by design). Our shelves at Walmart are full of "stuff," 90% of which will be in the landfill in a year.

I'd rather go back to a day where perhaps we buy less things as a society, but those things are made by our neighbors, here at home. The concentration of wealth at the top in our society is greater than it has ever been. Free trade worked out great for the people that pushed it. Ross Perot was right. My $.02.

 

[Predator_SD]

As a business owner who is in retail. This is the 3rd time i have had to deal with tariffs. Back in 2006 the US government put 25% tariffs on bedroom furniture out of china. This did not bring bedroom furniture production back to the USA. I passed those tariffs on to the consumer.

In 2016 Trump enacted tariffs on China. Some of the vendors in china split the tariffs with me, some did not.
I passed those price increases on to the consumer. Manufacturing did not come back to USA, but went to Vietnam.

I doubt these new tariffs will do anything on a major scale but increase prices. The USA does not have the workforce or environmental regulations that would allow for competitive manufacturing to return to the USA.

Now alot of what is going on is interesting. And if you are for it or against it, can be related to a couple of simple concepts. Does short term pain equal long term gain?

You US ABSOLUTLEY has the available workforce.

Now, the real question is will that currently unemployed but able to work workforce who decided they no longer needed a job after Covid thus dropped out to “find themselves and live their best life” are broke enough yet to take their unskilled selves back to work in a steel factory, auto factory or build bows for Mathews.

Being people are inherently lazy with the younger American demographic being perceived as exceedingly lazy as they put a higher priority on “finding themselves and living their best life” than putting a roof over their kids heads. All this while buying $8 Starbucks coffees on credit cards i don’t have high hopes.

But it is an admirable attempt by Trump to essentially yell, “go get a job” as Americas new father figure for those who don’t feel the need to respect their own father figure. Or….their own father figure is also “finding himself and living his best life” so they have poor role models and been raised by their favorite Instagram influencers.

Cheers

 

[Dos Perros]

If you believe in global climate change then you can't possibly support offshoring your waste via production in countries with little to no environmental regulation. Same can be said for human rights. Put your money where your mouth is, your money is a vote you get to make every day!