>To understand the harm Donald Trump has done with his tariffs on Canada and Mexico, here are four things you need to know:
>First, every tax on imports is also a tax on exports.
>The most popular beer in America is Modelo Especial, brewed in Mexico. Impose a 25 percent tariff on Modelo and sales will slide. So, too, will exports of the American barley that goes into Mexican beer. Mexico buys three-quarters of U.S. barley exports, almost all for brewing.
>Trump surrogates may promise you that by driving Mexican beer off of grocery shelves, Trump’s tariffs will increase sales of U.S. barley to U.S. brewers. That promise may even be substantially true. But that offer has fine print that barley growers will notice.
>Barley growers don’t care only about how much barley they sell. They care about the price at which they sell it.
>A tariff raises the price of both every imported good and every good that competes with imports. If the price of Modelo is pushed up, the price of American-brewed beer will rise as well. American beermakers are not operating a charity. The tariff on Modelo allows them to both increase their market share at Modelo’s expense and raise their prices enough to increase their margins at the consumers’ expense.
>But American consumers do not have infinite amounts of money. If they are paying more for beer, they have to make savings elsewhere. The result—and economists will prove this to you all day with facts and figures—is that prices in exporting sectors such as barley, and agriculture generally, will decline in proportion as prices in the importing sectors rise.
>This is why developing countries that tried, after 1945, to bulldoze their way to industrialization using high tariffs—Argentina under Juan Perón; India under Jawaharlal Nehru—ended up instead isolating themselves from world markets. The tariffs did allow them to make their own radio sets and cars, but at the price of lowering national incomes and so shrinking the domestic market for those radios and cars. And, of course, the protected radios and cars could not compete on global markets against the superior products of the countries that accepted world prices, such as Germany and Japan.
>Trump tariffs will be paid in the form of higher prices for imports and their substitutes, and lower profits and wages for everyone who works in export industries.
>Juliette Kayyem: Trump is threatening California in the wrong way
>Second, every product is also an input.
>When journalists write about tariffs, they look for everyday examples familiar to everyone, the way I just did with Modelo beer. Others will cite tomatoes or avocados, food items for which the cost of the tariff will be reflected in the price at the supermarket checkout. But the greatest harm done by tariffs is concealed in a way that prevents most of us from seeing the harm directly.
>The largest glassmaker in North America is a Mexican company, Vitro. It operates plants in the U.S. and Canada, but the center of its operations is Monterrey, Mexico.
>Very few of us buy big sheets of industrial glass. We do not see or care about the price. But we do care about the price of a new apartment. That apartment price depends on the cost of construction. Which depends on the price of the window systems that clad the apartment building. Which depends on the price of glass. Which Trump just raised by up to 25 percent.
>You may buy a little aluminum in the form of cans and other household products. But the main way you pay for aluminum is in the price of airline tickets. Put a tariff on aluminum, and aircraft prices rise. Inflate aircraft prices, and airline-ticket prices also rise. The traveler will not know why, and will be tempted to blame airline greed—and will find politicians ready to feed that grievance. Who will connect the surprise extra fee they have to pay to sit beside their child with a president’s decree against the cheaper Canadian aluminum that owes its price advantage to superabundant Quebec hydroelectric power?
Kasquede on
The reading and reading and reading everyday just makes me really fucking sad, dawg.
It’s not even been two weeks, y’know.
I just feel like I have to apologize to the world for whatever my countrymen do again. And again. And then some more. And really even if I mean the apologies (and I do), they’re just empty words because it’s going to get worse and worse, and I feel like I can’t really do much of a goddamn thing except try to watch it get worse from the other side of the tracks.
2 Comments
>To understand the harm Donald Trump has done with his tariffs on Canada and Mexico, here are four things you need to know:
>First, every tax on imports is also a tax on exports.
>The most popular beer in America is Modelo Especial, brewed in Mexico. Impose a 25 percent tariff on Modelo and sales will slide. So, too, will exports of the American barley that goes into Mexican beer. Mexico buys three-quarters of U.S. barley exports, almost all for brewing.
>Trump surrogates may promise you that by driving Mexican beer off of grocery shelves, Trump’s tariffs will increase sales of U.S. barley to U.S. brewers. That promise may even be substantially true. But that offer has fine print that barley growers will notice.
>Barley growers don’t care only about how much barley they sell. They care about the price at which they sell it.
>A tariff raises the price of both every imported good and every good that competes with imports. If the price of Modelo is pushed up, the price of American-brewed beer will rise as well. American beermakers are not operating a charity. The tariff on Modelo allows them to both increase their market share at Modelo’s expense and raise their prices enough to increase their margins at the consumers’ expense.
>But American consumers do not have infinite amounts of money. If they are paying more for beer, they have to make savings elsewhere. The result—and economists will prove this to you all day with facts and figures—is that prices in exporting sectors such as barley, and agriculture generally, will decline in proportion as prices in the importing sectors rise.
>This is why developing countries that tried, after 1945, to bulldoze their way to industrialization using high tariffs—Argentina under Juan Perón; India under Jawaharlal Nehru—ended up instead isolating themselves from world markets. The tariffs did allow them to make their own radio sets and cars, but at the price of lowering national incomes and so shrinking the domestic market for those radios and cars. And, of course, the protected radios and cars could not compete on global markets against the superior products of the countries that accepted world prices, such as Germany and Japan.
>Trump tariffs will be paid in the form of higher prices for imports and their substitutes, and lower profits and wages for everyone who works in export industries.
>Juliette Kayyem: Trump is threatening California in the wrong way
>Second, every product is also an input.
>When journalists write about tariffs, they look for everyday examples familiar to everyone, the way I just did with Modelo beer. Others will cite tomatoes or avocados, food items for which the cost of the tariff will be reflected in the price at the supermarket checkout. But the greatest harm done by tariffs is concealed in a way that prevents most of us from seeing the harm directly.
>The largest glassmaker in North America is a Mexican company, Vitro. It operates plants in the U.S. and Canada, but the center of its operations is Monterrey, Mexico.
>Very few of us buy big sheets of industrial glass. We do not see or care about the price. But we do care about the price of a new apartment. That apartment price depends on the cost of construction. Which depends on the price of the window systems that clad the apartment building. Which depends on the price of glass. Which Trump just raised by up to 25 percent.
>You may buy a little aluminum in the form of cans and other household products. But the main way you pay for aluminum is in the price of airline tickets. Put a tariff on aluminum, and aircraft prices rise. Inflate aircraft prices, and airline-ticket prices also rise. The traveler will not know why, and will be tempted to blame airline greed—and will find politicians ready to feed that grievance. Who will connect the surprise extra fee they have to pay to sit beside their child with a president’s decree against the cheaper Canadian aluminum that owes its price advantage to superabundant Quebec hydroelectric power?
The reading and reading and reading everyday just makes me really fucking sad, dawg.
It’s not even been two weeks, y’know.
I just feel like I have to apologize to the world for whatever my countrymen do again. And again. And then some more. And really even if I mean the apologies (and I do), they’re just empty words because it’s going to get worse and worse, and I feel like I can’t really do much of a goddamn thing except try to watch it get worse from the other side of the tracks.