The idea that “textbooks predicted” 100% passthrough to consumers simply isn’t serious. No textbook says that. What they do say is that the incidence of any tax depends on relative elasticities of supply and demand. That means the burden is shared, and the split can vary widely. I think it's plausible that if you'd polled economists about how much passthrough we'd see, the mean point estimate would have been more than 20%, but it would have been a lot less than 100%. And there's still a lot of uncertainty about the tariff regime, which lowers passthrough, at least in the short run. Firms often smooth temporary shocks—absorbing losses if they think the regime might change, exemptions might be granted, or retaliatory tariffs might be negotiated away. But that’s not sustainable indefinitely. So I wouldn't be surprised if we saw higher than 20% passthrough a year from now, assuming something roughly like the current regime stays in place. (One big source of uncertainty which firms may be waiting out: SCOTUS!)
Second, a recurring issue in pieces like this is the move from a strong claim about a broad trend—“we’re already seeing a huge rise in investment in American manufacturing”—straight to a handful of anecdotal examples. That’s not how you establish a trend. You need to look at aggregate data. And on that front, as far as I can tell, real investment in manufacturing structures is actually down in 2025 relative to 2024, though still quite high: https://fred.stlouisfed.org/series/C307RX1Q020SBEA?utm.
In a big country with lots of companies, it will always be possible to identify examples that illustrate any trend you like, including nonexistent ones. If you want to make a good faith case to skeptical readers, you should point to aggregate data. Even better, call your shot: identify some aggregate statistics that you'll come back to in two or three years that you'll agree will constitute a good test of the policy.
Commonplace always cherry picks examples, like the ones about TSMC investing "$100B" in U.S semiconductor manufacturing rather than the actual trend lines. They do this because the trend lines are down. Also, they seem remarkably unconcerned about whether their own cherry-picked examples actually ever come to fruition. Remember that Foxconn investment in Wisconsin during Trump's first term? How'd that work out? The point is that most of these companies know that all they need to do is make a non-binding, non-committal announcement about plans to invest in the U.S, and Trump - being the short-sighted moron that he is - will declare victory and move on. There's never any need for actually following through on these promises as they've already achieved their purpose - and that purpose has nothing to do with American manufacturing.
Well, I'd start by first acknowledging that remaking a 30T economy is going to take a long time and require intense amounts of focus and discipline. Starting with that, I'd reduce the problem using the "first principles" of how the U.S government is structured. There will be areas of change requiring legislation, others that can be done by executive action, there will be the need for enforcement both by the courts and by the regulatory agencies, and there would also be a need to embrace federalism and work with individual states. I'd also recognize that this process would take years - maybe a decade or more - and focus on those areas of change that would be most durable across administrations.
This is the opposite of what the Trump administration is doing. Trump, because he happened to star on a stupid, d-list game show where he played the "big boss man", thinks he can effect lasting change on a 30T economy simply by signing executive orders. His only tool seems to be tariffs, which can be undone at the stroke of a pen when a new administration comes in. He lacks the work ethic, patience, or discipline to actually work with congress to pass legislation, and the knee-walking MAGA republicans in congress lack the spine to tell the emperor he has no clothes. Televised oval office meetings with business leaders that make non-binding promises of "future investment" in the U.S aren't going to cut it.
I've repeatedly said that the biggest problem I have with Commonplace isn't so much their ideas (I disagree with some, agree with others). It is that there is no better way to discredit an idea than to align it with Donald Trump. He will inevitably fumble it so badly that it will forever be tarnished with the stench of failure.
In government, the procedure matters as much as the policies. I said in my comment that there are many policies espoused by Commonplace that I agree with. Let's say I generally agree that tariffs can be an effective tool for incentivizing corporate behavior. Does Trump's on-again-off-again, bail-out-farmers-hurt-by-tariffs approach help or hurt the cause? Does Mike Johnson preventing congress from even voting on tariffs - which would be the best way to make sure they are durable across admins - help or hurt the cause?
I also think that government efficiency is important. But if I were to sabotage the whole notion of government efficiency, I don't think I'd design a program that was materially different than DOGE!
Execution matters. And Trump's execution is incompetent, lazy, undisciplined, and in some cases downright corrupt. If Commonplace really wants to see their policies win, then they need to stop putting lipstick on the pig that is the Trump admin, which is what this essay is doing. When TSMC actually produces something more than a non-binding letter of intent to invest $100B in US chip manufacturing, then we can call it a win. Otherwise, its just words designed to appeal to Trump's onion-skin thinned ego.
I find your procedural answer unsettling not because I disagree with the procedural facets of it, or because it is bereft of any discrete policy prescriptions, but rather because it betrays a view of our Federal government completely divorced from reality. I also think you’re letting your personal hate of DJT cloud the fact that whatever character flaws he obviously has, he is not lazy, undisciplined, incompetent, or stupid. We are on a precipice, and DJT is possibly the last gasp of our dying Constitutional immune system attempting to save itself, somehow. He is effect, not cause.
Tariffs are providing significant revenue to the Treasury, 80% of which is paid by foreign governments and corporations while providing incentives to create jobs here in the US. In other words, a hime run.
Looks like the other comments read a different article or have TDS. LOL!
You can’t logically say that foreign governments are paying tariffs - the US government can’t tax foreign governments, they tax the goods - which are paid by importers at the point of entry. How those importers choose to handle those taxes is a different conversation.
Long article to say that manufacturers and businesses are eating as much of the tariffs for now. Obviously, they can’t do that forever. So it will be us. It’s already started. So tell me again why economists are shocked. All the local businesses in our town are eating as much as they can but…. Not much longer.
Sure they can do this forever. In fact they need to.
The same reasons they are doing it "now" is the reason why they will continue to to do it next year and the year after. Because nobody who does business on a global stage can afford to not compete in the US economic market.
This might be one of the economically illiterate takes I've ever read. No business is going to lose money in perpetuity just to "compete in the US economic market." If its not profitable to sell products in the U.S markets, firms will either raise prices or pull out of the market entirely. They may be willing to lower margins for some short period of time, but this is not something they will do indefinitely.
Companies are not "losing money" in perpetuity by eating the tariffs. They lower their margins a bit, pass some on, and move on. You also forgot the option of foreign companies building factories inside of the United States and employing U.S. citizens to secure access to our market. This is exactly what so many US corporations spent the last 50 years doing in Asia to our disadvantage. And this is exactly what Japanese auto manufacturers do in the American South so they can avoid tariffs.
Funny, when chips were historically dumped in the US market at or below cost, what happened? Did those companies shutter?
No.
What a company may lose in margin it maintains in revenues, so if it keeps prices the same (by eating the margin reduction or offloading it to a govt subsidy) then demand should remain constant. It may mean *smaller* margins, but it would maintain market share and keep the company's doors open. It's no different than if the cost of a specific material or component in a finished good goes up; the world doesn't descend into chaos.
By definition if they are tariffed to the point that they can't compete because their industries margins are lower than the tariffs, then they can only afford to not compete in the US market. That will mean less choice for the US consumer.
It also means that when companies decide where to launch new products, they won't consider the US market because there'd be no profit in it. And so US consumers will only have access to domestic products, even if they suck. That adds up over time.
And IF AND WHEN that happens, then the US will do something else. But in the meantime, trade is being evened back out in our favor. Or at least in an equally fair favor. DUUUUUUHHHHHHHHH
Hasn’t China already shifted much of its exports to Asian and European markets? Haven’t exports from China to the USA plummeted? Foreign manufacturers may absorb part of the tariff taxes for a while but, as soon as they can find a new market, they will shift their exports to another destination.
Hmm as other economies rise our relative share will decline. Our debt alone is financed by the very trade you carp on. If we don’t trade, shall I put you down for an extra trillion in refinancing for the treasury next year? We are making the same mistake the mutual banks made in the late 80s and early 90s mismatched funding. Long term liabilities funded with short term debt. It has always been a gargantuan mistake. And though you might believe the Fed can rescue us with low short term rates we surrender our currency strength for it. Weak dollar like weak peso never works. Wonder why Gold and Silver and host of other commodities are ripping? They are priced in dollars…weak dollar equals strong commodities, particularly Gold.
Unless wages don’t go up at the same rate. If wages stay stagnant, then people will tighten their proverbial belts and not spend as much, causing the economy to contract.
I love the comments. It’s a tax on consumers! (Not a word about the 80% of tariff revenue eaten by foreign companies). It’s never going to last! (Said the same people predicting immediate inflation last April). Get back to me next year! (By the gloom and doomers predicting retaliation six months ago). It just seems like invalidated theory will always trump empirical data in the closed minds of ideologues.
I love the blind allegiance to Don:) Makes me chuckle. It's just so delicious that Wall Street literally made up a term describing how to cash in on Don's incoherent ramblings-the taco tariff. If he was serious, and if it was really about economic policy, he'd ask his own Congress to make his taco tariffs permanent rather than leaving them vulnerable to his successor or the courts. And he probably wouldn't be tariffing Brazil because they are prosecuting his fellow coup plotter, Bolsonaro:) Y'all gotta wise up, this is just another tool for Don to enrich himself. The billions in crypto corruption may be more lucrative, but a Vietnamese golf resort and a 747 ain't bad.
So here is the evidence … if policy arguments fail just switch to ad hominem attacks. So it appears that the objections to tariffs are based on partisan bias rather than what is best for the American people. Fascinating.
Apparently you take this singular piece as dispositive. Assuming Don eventually settles on an actual plan and sticks to it, time will tell if you're correct. Many disagree, but it's a legitimate issue for elites like Oren to argue about. Personally, I don't expect either Oren's return to the 80''s manufacturing nirvana, nor the Armageddon predicted elsewhere. Impacts will be modest either way, although Wall Street seems to have Don pegged:) But, both camps need to get a grip, this isn't about economic policy. Don's own words belie that, as does his unwillingness to make the changes permanent via legislation. It's about more golf resorts in Vietnam, or contributions to the ballroom project for an exemption, etc. It's a perfect tool of grift for a lifelong grifter. There's a reason the billionaire tech bro's got the prime seating at the inaugural...
I understand that many elites in the MAGA establishment actually support the corruption as some sort of 4D chess being practiced by the master. They even support the crypto corruption. It's one more human pretzel routine that humors me so thoroughly:). But alas, maybe you're right, and this really is the art of the deal unspooling before us as Don continues his quest to ameliorate the pain of rural voters in Alabama via a manufacturing renaissance. Maybe. But maybe he's learned that he can sell a lot more to his flock than the mere gold sneakers, perfume, bibles, watches, guitars, NFT's and other bling that he started out with:) The BBB exposed MAGA's revealed preferences regarding economic policy. It was, and will remain, the signature piece of economic policy legislation enacted by MAGA and the "new" right. You'll recall that workin stiffs, got stiffed.
I plead guilty Eric. And I’m a lifelong Republican. Imagine placing country over party… I realized after Oren’s “new” right accepted Don’s insurrection, and the pardon of the insurrectionists convicted of seditious conspiracy, that MAGA would support literally anything he instructed them to. The massive corruption is just the latest acquiescence, or, maybe Don really IS laser focused on the workin stiffs:) I really love irony, don’t you?
Now I’m dying to see the next D prez parrot Don. Imagine, after President Newsom concocts a blatant lie about a stolen election in 2032, followed by his thugs storming the Capitol with their “Gavin Forever” (instead of MAGA) T-shirts, beating cops with their “Viva Antifa!”, (instead of Confederate) flagpoles. Followed by a retooled ICE, with masked agents whisking away Gavin’s disfavored racial groups without due process. Maybe some bubbas in flannel?
Would that trigger you? It would me. Here’s hoping you’d join in.
I'm not wed to any side of this argument; I want to buy what I want from whoever I want at the lowest price, just like everyone else. I basically detest all politicians. But there's always the thing that bothers me, which is that since some of our most important and strategic industries depend completely on foreign imports, something has to change. And usually with any change, comes at least some amount of time, and pain. From what I understand, most other countries have applied tariffs on our goods since whenever, to protect certain industries they deem important. I also read (not sure if it's true) that our base average aggregate rate was around 11-12%, and now it's 18%. All the bluster about 100% this and that, we always knew was a hollow threat for negotiation, but if it ends up somewhere around 15-17%, in my mind that's more of a "tweak". (yeah, I know, 50% higher than previous, but I still call it a tweak because it's not evenly spread out.) Coffee is given a break? Honestly, I don't see coffee as a strategic industry so I don't care. I'm willing to let things play out; inflation is around 3%. It was 9% just what, two years ago? Someone commented about some local small shops (online retailers?) having to close. In my business (a small manufacturer) I've gotten a bunch of large orders from overseas, for products that we make here and get delivered here. I just signed for an additional piece of equipment, a machine tool made in California. The price was around 5% higher than the exact same thing I bought three years ago, except it's got a lot of improvements. Let's see what happens.
George Washington signed the Tariff Act on July 4, 1789
Abraham Lincoln: “Give us a protective tariff, and we will have the greatest nation on earth.”
Teddy Roosevelt: “Thank God I am not a free-trader. In this country, pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fibre.”
What does that have to do with anything? Does it change the fact that Americans pay the tariffs? No. Does it change the fact that youre dumb enough to think that if foreign producers also lose from the tariff that means Americans arent paying for it? No.
Thanks for the personal attacks. You're missing the point of tariffs entirely. Real wages have been flat for 50 years (ever since tariffs were eliminated), the American middle class is shrinking, and we have a drug death crisis rivaling Russia after the Soviet Union collapsed (a failed society). Free trade has caused wages to stop growing and has hurt American livelihoods. After 50 years of economic decline, we need to do something to get back on track. There are plenty of economists who historically have advocated for tariffs: https://en.wikipedia.org/wiki/American_School_(economics)
Next time actually address the point rather than putting up some irrelevant quotes as a cheap rhetorical trick.
Same goes for false and irrelevant claims. Real wages have not been flat for past 50 years, at least since not mid 90s. And we started eliminating tariffs, not 50 years ago but... 1920s. The middle class has not been shrinking unless you redefine middle class in some absurd way. And whatever economic trends you can bring up, habe barely anything to do with tariffs. Other things happened too you know. You can find pro tariff economists, sure, just like you can find some creationist biologists or flat earth geologists.
But none of this has anything to do with the trully dumb part of your post - the idea that if foreign companies are losing money that must mean that Americans are winning. This is a logical idiocy that a 10 year old can avoid. Some things - like taxes - hurt BOTH parties. And i already explained how (higher prices for Americans, lower sales for foreigners) which you repeatedly deflected from addressing.
Don't want personal attacks? Then dont be such a dishonest weasel.
I generally find the victory laps from the pro-Trump-tariff crowd pretty hilarious. They always fall into one of three categories:
1. “Look at how much revenue!” — oh, we’re pro-tax now?
2. “They said the economy would implode, and it hasn’t!” — Not crashing the economy is not, in and of itself, an accomplishment.
3. “The incidence actually falls on foreigners!” — I thought the *whole point* was to use tariffs as industrial policy to re-industrialize the U.S. economy. If foreigners eat the tariff, the problem (too expensive to manufacture here) remains, and we don’t even get the benefit of foreign manufacturing (lower prices) or increased tax revenue.
Fundamentally, it’s all just dancing on the graves of doomsayers (which is fair) and ignoring the irony that we’re celebrating the stated goals *very clearly* not being accomplished (which is dumb).
1/ The government needs revenue, lmao. Where do you think it comes from?
2/ who cares, no implosion—fine that is status quo
3/ So, the tariffs would be successful if more of the incidence fell on American consumers, in your view?
None of your criticisms are actually based in anything. I thought the tariffs would be astonishingly bad, I do not and never have supported Trump, but even I can recognize that they are acting in deeply unexpected ways that on the whole are actually beneficial to the country.
1. Celebrating taxes is an unusual position to take for people who are typically conservative.
2. n/a
3. Yes. That’s literally point — import substitution industrialization, use tariffs to reshore manufacturing. The only way that can happen is if the incidence falls on Americans (either importer or final consumer). If it doesn’t, the price has not changed and U.S. manufacturing has not become relatively more competitive. If Americans don’t feel the pain, they will not change their behavior.
So all we’re doing is celebrating a slight narrowing of the deficit via higher taxes (laudable, but decidedly not the stated aim) and not crashing the economy. Great job!
The biggest part of this stupidity is that the rise in food prices etc could have been avoided with an immigrant labor force, who will do the jobs that ‘native Americans’ (I hate that term) simply won’t do.
Also, all this ‘pledging’ stuff is total crap. If anyone thinks these companies are going to follow up on their pledges, you’re brainless.
The scariest things the administration has done has expanded the role of AI. Look what this will do to middle class jobs. The genie is out of the bottle.
exactly. so we don't have money to keep anything afloat. according to the govt officials, not even to properly fund snap medicare or medicaid which is pennies compared to pentagon. and yet... where is all this "trillions of revenue" we keep hearing about ?
Great article and analysis. The one thing missing though is that we live in a dynamic world, so just because the previous 3 or 9 months have been, the next 9 or 12 months could be different. What I mean is strategies will change and work arounds found.
Tariffs are definitely a great tool to create manufacturing and industrial production, but to do so the US govt. can't rely exclusively on the private sector benevolence to onshore production. In this sense the current administration doesn't seem to have a well thought out plan beyond introducing tariffs. Tariffs ought to be accompanied by measures to support domestic investment and entrepreneurship, better still if paid for by the revenue generated by said tariffs.
Still, nice to read good analysis of what's happening in the real world vs the doom-mongering predictions of vested interests.
2. Short run and long run tax incidence are different. Foreign firms may be willing to eat some of the tariffs now (ie: lower their prices so that exports to the US remain competitive), while they see how long this lasts. They won't do it forever, because their margins are only so big. Something that can't go on forever won't.
3. Reducing demand for foreign goods will push up the US dollar and make US exports less competitive. Oops.
4. Even if that weren't true, "don't buy US" is becoming a thing, everywhere. Ask US border towns how things are going.
The author is engaging in magical, white hat thinking to “prove” a point. Two quarters of tariff effect is too short a time frame to “prove” anything. All I can say is I’ll put my money on US consumers paying more. No such thing as a free lunch.
Yup, there is no free lunch. As Oren argues, there is no such thing as "free" trade. We all pay for it. 50 years of free trade policy have eliminated our industrial base and created massive dependencies on other nations. Real wage growth has been flat for 50 years... it stopped growing after we started eliminating tariffs. America built its massive wealth on tariffs much higher than we have now from 1789 to after WWII.
Thing is, even before Trump, we weren’t living in a free trade world. China, Japan, Korea, the EU and assorted other players were imposing massive tariffs on American goods, pirating American designs, and outright denying market share to American exporters in their own domestic markets (e.g. American beef exports to the EU). So they were playing a hard mercantilist game and netting huge profits.
Most of these, obviously TDS based, comments amount to either I'm going to ignore the facts you presented or, so what if Trump is right so far he won't be for long and even if he is it won't make any difference!
Trump imposed tariffs for a very good reason which was to stop the hollowing out of US industry which had reached the point where our industrial base could no longer even support our shrunken military while we are under grave threat from enemies, particularly China. Do all you scoffers have any answer for this?
So far what Trump has done is obviously working and you just hate him so much you won't allow yourself to see it's working. Wake up.
Who pays tariffs? The answer lies in who the government actually collects them from: the importers. Whether the importers pass those along to consumers is up to them and market dynamics. We may still see that happen, and already are in some markets.
To make your diagnoses hold up, one or both of two things have to happen: either foreign exporters have to lower their prices, or they suffer from reduces sales. Data from the government indicates that pre-tariff prices, those upon which the tariff is calculated, have not fallen. So, your observation must be due to a drop in sales. Yet, you never mention that.
In no case, however, does a foreign company hand over cash to the government, so they are NOT paying tariffs. If the exporter is also the importer, such as Toyota bringing in a car to sell, the import side still pays the tariff on this side of the supply chain.
As a recovering libertarian, tariffs are an issue that I've completely come around on. If our global competitors are going to treat trade policy as a geopolitical wedge, then we *must* do the same. The Clinton-inspired "free trade" of the 90s and onward has been nothing short of a disaster for Americans. It's just the trust game over and over. If one party's playing high trust constantly and the one's defecting constantly, at some point you have to recalibrate your strategy.
Remember half of consumption in the US is by the wealthiest 10%. Personally, all my biggest expenses are things from the US, taxes, insurance, gas, food. The working class only needs so many large screen TVs and iphones.
“Retail pass-through” is the % of tariff cost that hits the shelves via consumer prices in 6 months, nothing about who pays at the border.
In fact the very paper you’re using actually makes positive reference to Amiti, Redding & Weinstein’s 2018-2019 analysis from the first administration that found that substantially all the tariffs are paid by importers.
The idea that “textbooks predicted” 100% passthrough to consumers simply isn’t serious. No textbook says that. What they do say is that the incidence of any tax depends on relative elasticities of supply and demand. That means the burden is shared, and the split can vary widely. I think it's plausible that if you'd polled economists about how much passthrough we'd see, the mean point estimate would have been more than 20%, but it would have been a lot less than 100%. And there's still a lot of uncertainty about the tariff regime, which lowers passthrough, at least in the short run. Firms often smooth temporary shocks—absorbing losses if they think the regime might change, exemptions might be granted, or retaliatory tariffs might be negotiated away. But that’s not sustainable indefinitely. So I wouldn't be surprised if we saw higher than 20% passthrough a year from now, assuming something roughly like the current regime stays in place. (One big source of uncertainty which firms may be waiting out: SCOTUS!)
Second, a recurring issue in pieces like this is the move from a strong claim about a broad trend—“we’re already seeing a huge rise in investment in American manufacturing”—straight to a handful of anecdotal examples. That’s not how you establish a trend. You need to look at aggregate data. And on that front, as far as I can tell, real investment in manufacturing structures is actually down in 2025 relative to 2024, though still quite high: https://fred.stlouisfed.org/series/C307RX1Q020SBEA?utm.
In a big country with lots of companies, it will always be possible to identify examples that illustrate any trend you like, including nonexistent ones. If you want to make a good faith case to skeptical readers, you should point to aggregate data. Even better, call your shot: identify some aggregate statistics that you'll come back to in two or three years that you'll agree will constitute a good test of the policy.
Commonplace always cherry picks examples, like the ones about TSMC investing "$100B" in U.S semiconductor manufacturing rather than the actual trend lines. They do this because the trend lines are down. Also, they seem remarkably unconcerned about whether their own cherry-picked examples actually ever come to fruition. Remember that Foxconn investment in Wisconsin during Trump's first term? How'd that work out? The point is that most of these companies know that all they need to do is make a non-binding, non-committal announcement about plans to invest in the U.S, and Trump - being the short-sighted moron that he is - will declare victory and move on. There's never any need for actually following through on these promises as they've already achieved their purpose - and that purpose has nothing to do with American manufacturing.
What’s your solution?
Well, I'd start by first acknowledging that remaking a 30T economy is going to take a long time and require intense amounts of focus and discipline. Starting with that, I'd reduce the problem using the "first principles" of how the U.S government is structured. There will be areas of change requiring legislation, others that can be done by executive action, there will be the need for enforcement both by the courts and by the regulatory agencies, and there would also be a need to embrace federalism and work with individual states. I'd also recognize that this process would take years - maybe a decade or more - and focus on those areas of change that would be most durable across administrations.
This is the opposite of what the Trump administration is doing. Trump, because he happened to star on a stupid, d-list game show where he played the "big boss man", thinks he can effect lasting change on a 30T economy simply by signing executive orders. His only tool seems to be tariffs, which can be undone at the stroke of a pen when a new administration comes in. He lacks the work ethic, patience, or discipline to actually work with congress to pass legislation, and the knee-walking MAGA republicans in congress lack the spine to tell the emperor he has no clothes. Televised oval office meetings with business leaders that make non-binding promises of "future investment" in the U.S aren't going to cut it.
I've repeatedly said that the biggest problem I have with Commonplace isn't so much their ideas (I disagree with some, agree with others). It is that there is no better way to discredit an idea than to align it with Donald Trump. He will inevitably fumble it so badly that it will forever be tarnished with the stench of failure.
You've described a set of procedural pathways without describing any policies.
In government, the procedure matters as much as the policies. I said in my comment that there are many policies espoused by Commonplace that I agree with. Let's say I generally agree that tariffs can be an effective tool for incentivizing corporate behavior. Does Trump's on-again-off-again, bail-out-farmers-hurt-by-tariffs approach help or hurt the cause? Does Mike Johnson preventing congress from even voting on tariffs - which would be the best way to make sure they are durable across admins - help or hurt the cause?
I also think that government efficiency is important. But if I were to sabotage the whole notion of government efficiency, I don't think I'd design a program that was materially different than DOGE!
Execution matters. And Trump's execution is incompetent, lazy, undisciplined, and in some cases downright corrupt. If Commonplace really wants to see their policies win, then they need to stop putting lipstick on the pig that is the Trump admin, which is what this essay is doing. When TSMC actually produces something more than a non-binding letter of intent to invest $100B in US chip manufacturing, then we can call it a win. Otherwise, its just words designed to appeal to Trump's onion-skin thinned ego.
TSMC is already building chip plants in Az or are you unaware of that?
Maybe you need a little patience before you condemn for non-performance.
I find your procedural answer unsettling not because I disagree with the procedural facets of it, or because it is bereft of any discrete policy prescriptions, but rather because it betrays a view of our Federal government completely divorced from reality. I also think you’re letting your personal hate of DJT cloud the fact that whatever character flaws he obviously has, he is not lazy, undisciplined, incompetent, or stupid. We are on a precipice, and DJT is possibly the last gasp of our dying Constitutional immune system attempting to save itself, somehow. He is effect, not cause.
Cliche after cliche , everything i ever wanted is Still in the Kitchen
BS piece, regime propaganda cloaked in cherry picked numbers/examples and taking vague promises of investments by other countries as a fact.
Tariffs are providing significant revenue to the Treasury, 80% of which is paid by foreign governments and corporations while providing incentives to create jobs here in the US. In other words, a hime run.
Looks like the other comments read a different article or have TDS. LOL!
In your analysis you should spend time considering deadweight loss. That is the net loss to both sides of the tax and the government.
Why did fdt have to bail out the farmers...again? And fu too kurtty. Maga scum
You can’t logically say that foreign governments are paying tariffs - the US government can’t tax foreign governments, they tax the goods - which are paid by importers at the point of entry. How those importers choose to handle those taxes is a different conversation.
Long article to say that manufacturers and businesses are eating as much of the tariffs for now. Obviously, they can’t do that forever. So it will be us. It’s already started. So tell me again why economists are shocked. All the local businesses in our town are eating as much as they can but…. Not much longer.
Sure they can do this forever. In fact they need to.
The same reasons they are doing it "now" is the reason why they will continue to to do it next year and the year after. Because nobody who does business on a global stage can afford to not compete in the US economic market.
This might be one of the economically illiterate takes I've ever read. No business is going to lose money in perpetuity just to "compete in the US economic market." If its not profitable to sell products in the U.S markets, firms will either raise prices or pull out of the market entirely. They may be willing to lower margins for some short period of time, but this is not something they will do indefinitely.
Companies need to pay
Companies are not "losing money" in perpetuity by eating the tariffs. They lower their margins a bit, pass some on, and move on. You also forgot the option of foreign companies building factories inside of the United States and employing U.S. citizens to secure access to our market. This is exactly what so many US corporations spent the last 50 years doing in Asia to our disadvantage. And this is exactly what Japanese auto manufacturers do in the American South so they can avoid tariffs.
Funny, when chips were historically dumped in the US market at or below cost, what happened? Did those companies shutter?
No.
What a company may lose in margin it maintains in revenues, so if it keeps prices the same (by eating the margin reduction or offloading it to a govt subsidy) then demand should remain constant. It may mean *smaller* margins, but it would maintain market share and keep the company's doors open. It's no different than if the cost of a specific material or component in a finished good goes up; the world doesn't descend into chaos.
By definition if they are tariffed to the point that they can't compete because their industries margins are lower than the tariffs, then they can only afford to not compete in the US market. That will mean less choice for the US consumer.
It also means that when companies decide where to launch new products, they won't consider the US market because there'd be no profit in it. And so US consumers will only have access to domestic products, even if they suck. That adds up over time.
And IF AND WHEN that happens, then the US will do something else. But in the meantime, trade is being evened back out in our favor. Or at least in an equally fair favor. DUUUUUUHHHHHHHHH
Hasn’t China already shifted much of its exports to Asian and European markets? Haven’t exports from China to the USA plummeted? Foreign manufacturers may absorb part of the tariff taxes for a while but, as soon as they can find a new market, they will shift their exports to another destination.
Hmm as other economies rise our relative share will decline. Our debt alone is financed by the very trade you carp on. If we don’t trade, shall I put you down for an extra trillion in refinancing for the treasury next year? We are making the same mistake the mutual banks made in the late 80s and early 90s mismatched funding. Long term liabilities funded with short term debt. It has always been a gargantuan mistake. And though you might believe the Fed can rescue us with low short term rates we surrender our currency strength for it. Weak dollar like weak peso never works. Wonder why Gold and Silver and host of other commodities are ripping? They are priced in dollars…weak dollar equals strong commodities, particularly Gold.
Why should we rescue the markets? I say it is about time we restart it all, and let all this paper "wealth" burn.
Higher prices as long as they happen gradually are actually a good thing as they will incentivize domestic investment.
Unless wages don’t go up at the same rate. If wages stay stagnant, then people will tighten their proverbial belts and not spend as much, causing the economy to contract.
I love the comments. It’s a tax on consumers! (Not a word about the 80% of tariff revenue eaten by foreign companies). It’s never going to last! (Said the same people predicting immediate inflation last April). Get back to me next year! (By the gloom and doomers predicting retaliation six months ago). It just seems like invalidated theory will always trump empirical data in the closed minds of ideologues.
I love the blind allegiance to Don:) Makes me chuckle. It's just so delicious that Wall Street literally made up a term describing how to cash in on Don's incoherent ramblings-the taco tariff. If he was serious, and if it was really about economic policy, he'd ask his own Congress to make his taco tariffs permanent rather than leaving them vulnerable to his successor or the courts. And he probably wouldn't be tariffing Brazil because they are prosecuting his fellow coup plotter, Bolsonaro:) Y'all gotta wise up, this is just another tool for Don to enrich himself. The billions in crypto corruption may be more lucrative, but a Vietnamese golf resort and a 747 ain't bad.
So here is the evidence … if policy arguments fail just switch to ad hominem attacks. So it appears that the objections to tariffs are based on partisan bias rather than what is best for the American people. Fascinating.
Apparently you take this singular piece as dispositive. Assuming Don eventually settles on an actual plan and sticks to it, time will tell if you're correct. Many disagree, but it's a legitimate issue for elites like Oren to argue about. Personally, I don't expect either Oren's return to the 80''s manufacturing nirvana, nor the Armageddon predicted elsewhere. Impacts will be modest either way, although Wall Street seems to have Don pegged:) But, both camps need to get a grip, this isn't about economic policy. Don's own words belie that, as does his unwillingness to make the changes permanent via legislation. It's about more golf resorts in Vietnam, or contributions to the ballroom project for an exemption, etc. It's a perfect tool of grift for a lifelong grifter. There's a reason the billionaire tech bro's got the prime seating at the inaugural...
I understand that many elites in the MAGA establishment actually support the corruption as some sort of 4D chess being practiced by the master. They even support the crypto corruption. It's one more human pretzel routine that humors me so thoroughly:). But alas, maybe you're right, and this really is the art of the deal unspooling before us as Don continues his quest to ameliorate the pain of rural voters in Alabama via a manufacturing renaissance. Maybe. But maybe he's learned that he can sell a lot more to his flock than the mere gold sneakers, perfume, bibles, watches, guitars, NFT's and other bling that he started out with:) The BBB exposed MAGA's revealed preferences regarding economic policy. It was, and will remain, the signature piece of economic policy legislation enacted by MAGA and the "new" right. You'll recall that workin stiffs, got stiffed.
$Trump coin anyone?
Karl, you are triggered so much by this. Read your own comments as if they were somebody else's and you will see.
I plead guilty Eric. And I’m a lifelong Republican. Imagine placing country over party… I realized after Oren’s “new” right accepted Don’s insurrection, and the pardon of the insurrectionists convicted of seditious conspiracy, that MAGA would support literally anything he instructed them to. The massive corruption is just the latest acquiescence, or, maybe Don really IS laser focused on the workin stiffs:) I really love irony, don’t you?
Now I’m dying to see the next D prez parrot Don. Imagine, after President Newsom concocts a blatant lie about a stolen election in 2032, followed by his thugs storming the Capitol with their “Gavin Forever” (instead of MAGA) T-shirts, beating cops with their “Viva Antifa!”, (instead of Confederate) flagpoles. Followed by a retooled ICE, with masked agents whisking away Gavin’s disfavored racial groups without due process. Maybe some bubbas in flannel?
Would that trigger you? It would me. Here’s hoping you’d join in.
Good luck America.
I'm not wed to any side of this argument; I want to buy what I want from whoever I want at the lowest price, just like everyone else. I basically detest all politicians. But there's always the thing that bothers me, which is that since some of our most important and strategic industries depend completely on foreign imports, something has to change. And usually with any change, comes at least some amount of time, and pain. From what I understand, most other countries have applied tariffs on our goods since whenever, to protect certain industries they deem important. I also read (not sure if it's true) that our base average aggregate rate was around 11-12%, and now it's 18%. All the bluster about 100% this and that, we always knew was a hollow threat for negotiation, but if it ends up somewhere around 15-17%, in my mind that's more of a "tweak". (yeah, I know, 50% higher than previous, but I still call it a tweak because it's not evenly spread out.) Coffee is given a break? Honestly, I don't see coffee as a strategic industry so I don't care. I'm willing to let things play out; inflation is around 3%. It was 9% just what, two years ago? Someone commented about some local small shops (online retailers?) having to close. In my business (a small manufacturer) I've gotten a bunch of large orders from overseas, for products that we make here and get delivered here. I just signed for an additional piece of equipment, a machine tool made in California. The price was around 5% higher than the exact same thing I bought three years ago, except it's got a lot of improvements. Let's see what happens.
Be careful that level of lucid even keeled thought will get you banned from the from, well earth I think 😆. Next time I demand more outrage!!!!
American consumers pay higher *prices* because of tariffs (taxes). Foreign firms lose profit because of *lower sales* (due to these higher prices)
Tariffs, like all taxes, are lose-lose. This is and always has been what economists and anyone with half a brain said.
Now that what economists said was gonna happen IS actually happening, youre pretending like they said something different
Dumbass.
George Washington signed the Tariff Act on July 4, 1789
Abraham Lincoln: “Give us a protective tariff, and we will have the greatest nation on earth.”
Teddy Roosevelt: “Thank God I am not a free-trader. In this country, pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fibre.”
What does that have to do with anything? Does it change the fact that Americans pay the tariffs? No. Does it change the fact that youre dumb enough to think that if foreign producers also lose from the tariff that means Americans arent paying for it? No.
Calm down lol
Thanks for the personal attacks. You're missing the point of tariffs entirely. Real wages have been flat for 50 years (ever since tariffs were eliminated), the American middle class is shrinking, and we have a drug death crisis rivaling Russia after the Soviet Union collapsed (a failed society). Free trade has caused wages to stop growing and has hurt American livelihoods. After 50 years of economic decline, we need to do something to get back on track. There are plenty of economists who historically have advocated for tariffs: https://en.wikipedia.org/wiki/American_School_(economics)
Next time actually address the point rather than putting up some irrelevant quotes as a cheap rhetorical trick.
Same goes for false and irrelevant claims. Real wages have not been flat for past 50 years, at least since not mid 90s. And we started eliminating tariffs, not 50 years ago but... 1920s. The middle class has not been shrinking unless you redefine middle class in some absurd way. And whatever economic trends you can bring up, habe barely anything to do with tariffs. Other things happened too you know. You can find pro tariff economists, sure, just like you can find some creationist biologists or flat earth geologists.
But none of this has anything to do with the trully dumb part of your post - the idea that if foreign companies are losing money that must mean that Americans are winning. This is a logical idiocy that a 10 year old can avoid. Some things - like taxes - hurt BOTH parties. And i already explained how (higher prices for Americans, lower sales for foreigners) which you repeatedly deflected from addressing.
Don't want personal attacks? Then dont be such a dishonest weasel.
Real male median wages were flat between 1973 and 2014
https://www.brookings.edu/articles/the-typical-male-u-s-worker-earned-less-in-2014-than-in-1973/
ChatGPT moron over here. Did you add the typos so it looks like you're thinking?
Oookay buddy
So where’s all that revenue that the administration touts coming from?
And if foreign manufacturers eat the tariff, how does U.S. manufacturing become more competitive relative to the foreign firms?
I generally find the victory laps from the pro-Trump-tariff crowd pretty hilarious. They always fall into one of three categories:
1. “Look at how much revenue!” — oh, we’re pro-tax now?
2. “They said the economy would implode, and it hasn’t!” — Not crashing the economy is not, in and of itself, an accomplishment.
3. “The incidence actually falls on foreigners!” — I thought the *whole point* was to use tariffs as industrial policy to re-industrialize the U.S. economy. If foreigners eat the tariff, the problem (too expensive to manufacture here) remains, and we don’t even get the benefit of foreign manufacturing (lower prices) or increased tax revenue.
Fundamentally, it’s all just dancing on the graves of doomsayers (which is fair) and ignoring the irony that we’re celebrating the stated goals *very clearly* not being accomplished (which is dumb).
1/ The government needs revenue, lmao. Where do you think it comes from?
2/ who cares, no implosion—fine that is status quo
3/ So, the tariffs would be successful if more of the incidence fell on American consumers, in your view?
None of your criticisms are actually based in anything. I thought the tariffs would be astonishingly bad, I do not and never have supported Trump, but even I can recognize that they are acting in deeply unexpected ways that on the whole are actually beneficial to the country.
1. Celebrating taxes is an unusual position to take for people who are typically conservative.
2. n/a
3. Yes. That’s literally point — import substitution industrialization, use tariffs to reshore manufacturing. The only way that can happen is if the incidence falls on Americans (either importer or final consumer). If it doesn’t, the price has not changed and U.S. manufacturing has not become relatively more competitive. If Americans don’t feel the pain, they will not change their behavior.
So all we’re doing is celebrating a slight narrowing of the deficit via higher taxes (laudable, but decidedly not the stated aim) and not crashing the economy. Great job!
Conservatives have never been opposed to taxes, only stupid spending.
Industry didn't leave the US in a day, it won't come back in a day.
Are you offering a solution?
In the housing construction industry prices are up and the c
The biggest part of this stupidity is that the rise in food prices etc could have been avoided with an immigrant labor force, who will do the jobs that ‘native Americans’ (I hate that term) simply won’t do.
Also, all this ‘pledging’ stuff is total crap. If anyone thinks these companies are going to follow up on their pledges, you’re brainless.
The scariest things the administration has done has expanded the role of AI. Look what this will do to middle class jobs. The genie is out of the bottle.
The article answers both questions in detail. Try reading it first.
exactly. so we don't have money to keep anything afloat. according to the govt officials, not even to properly fund snap medicare or medicaid which is pennies compared to pentagon. and yet... where is all this "trillions of revenue" we keep hearing about ?
Great article and analysis. The one thing missing though is that we live in a dynamic world, so just because the previous 3 or 9 months have been, the next 9 or 12 months could be different. What I mean is strategies will change and work arounds found.
Tariffs are definitely a great tool to create manufacturing and industrial production, but to do so the US govt. can't rely exclusively on the private sector benevolence to onshore production. In this sense the current administration doesn't seem to have a well thought out plan beyond introducing tariffs. Tariffs ought to be accompanied by measures to support domestic investment and entrepreneurship, better still if paid for by the revenue generated by said tariffs.
Still, nice to read good analysis of what's happening in the real world vs the doom-mongering predictions of vested interests.
1. No economist predicted 100% passthrough.
2. Short run and long run tax incidence are different. Foreign firms may be willing to eat some of the tariffs now (ie: lower their prices so that exports to the US remain competitive), while they see how long this lasts. They won't do it forever, because their margins are only so big. Something that can't go on forever won't.
3. Reducing demand for foreign goods will push up the US dollar and make US exports less competitive. Oops.
4. Even if that weren't true, "don't buy US" is becoming a thing, everywhere. Ask US border towns how things are going.
But hey, you do you.
The author is engaging in magical, white hat thinking to “prove” a point. Two quarters of tariff effect is too short a time frame to “prove” anything. All I can say is I’ll put my money on US consumers paying more. No such thing as a free lunch.
Yup, there is no free lunch. As Oren argues, there is no such thing as "free" trade. We all pay for it. 50 years of free trade policy have eliminated our industrial base and created massive dependencies on other nations. Real wage growth has been flat for 50 years... it stopped growing after we started eliminating tariffs. America built its massive wealth on tariffs much higher than we have now from 1789 to after WWII.
A lot of debatable definitions, measures and hyperbole.
Thing is, even before Trump, we weren’t living in a free trade world. China, Japan, Korea, the EU and assorted other players were imposing massive tariffs on American goods, pirating American designs, and outright denying market share to American exporters in their own domestic markets (e.g. American beef exports to the EU). So they were playing a hard mercantilist game and netting huge profits.
Most of these, obviously TDS based, comments amount to either I'm going to ignore the facts you presented or, so what if Trump is right so far he won't be for long and even if he is it won't make any difference!
Trump imposed tariffs for a very good reason which was to stop the hollowing out of US industry which had reached the point where our industrial base could no longer even support our shrunken military while we are under grave threat from enemies, particularly China. Do all you scoffers have any answer for this?
So far what Trump has done is obviously working and you just hate him so much you won't allow yourself to see it's working. Wake up.
Who pays tariffs? The answer lies in who the government actually collects them from: the importers. Whether the importers pass those along to consumers is up to them and market dynamics. We may still see that happen, and already are in some markets.
To make your diagnoses hold up, one or both of two things have to happen: either foreign exporters have to lower their prices, or they suffer from reduces sales. Data from the government indicates that pre-tariff prices, those upon which the tariff is calculated, have not fallen. So, your observation must be due to a drop in sales. Yet, you never mention that.
In no case, however, does a foreign company hand over cash to the government, so they are NOT paying tariffs. If the exporter is also the importer, such as Toyota bringing in a car to sell, the import side still pays the tariff on this side of the supply chain.
As a recovering libertarian, tariffs are an issue that I've completely come around on. If our global competitors are going to treat trade policy as a geopolitical wedge, then we *must* do the same. The Clinton-inspired "free trade" of the 90s and onward has been nothing short of a disaster for Americans. It's just the trust game over and over. If one party's playing high trust constantly and the one's defecting constantly, at some point you have to recalibrate your strategy.
Remember half of consumption in the US is by the wealthiest 10%. Personally, all my biggest expenses are things from the US, taxes, insurance, gas, food. The working class only needs so many large screen TVs and iphones.
“Retail pass-through” is the % of tariff cost that hits the shelves via consumer prices in 6 months, nothing about who pays at the border.
In fact the very paper you’re using actually makes positive reference to Amiti, Redding & Weinstein’s 2018-2019 analysis from the first administration that found that substantially all the tariffs are paid by importers.
Aka us.