Trump supporters, how do you square this?

[thedukeofearl]

How the US is destroying young people's future

In a scorching talk, marketing professor and podcaster Scott Galloway dissects the data showing that, by many measures, young people in the US are worse off financially than ever before. He unpacks the root causes and effects of this "great intergenerational theft," asking why we let it continue...

www.ted.com

High cost of living prices perhaps are a bit bothersome and responsible

Wages do not reflect the rising prices

Owning a home these days is beyond the reach of the average person

Of course, the billionaires are laughing all the way to the bank and beyond

 

[thedukeofearl]

We Are Entering the $40 for a Six-Pack of Corona Era of American History​

The threatened tariffs would affect large swaths of U.S. trade. Goods valued at more than $1.5 trillion move among the three North American nations, while the United States and China exchange about $600 billion worth. U.S. imports from Mexico include cars, machinery, electrical equipment, food and beer. Canada supplies oil and gas, machinery and parts and much else. The United States relies on China for electronics, particularly phones, along with toys, furniture and plastics. Economists warn that tariffs could affect grocery prices, which were a key election issue. Mexico supplied more than half of U.S. fresh fruit imports in 2022, according to the Agriculture Department.

The above is from my favorite political writer: Charles P Pierce

Drug Cartels will Not be affected by proposed Taffifs, but the cost of living will rise for certain

There will still be plenty of Fentanyl go around

 

[#1DieHardHawk]

Regarding the estate tax, I would say that the issue is a bit more nuanced than a simple tax or no tax.

IMHO, the "Estate" should include the deceased and any nuclear family components, therefore (unless otherwise laid out in the will), moneys that go to spouse and/or children should be treated as if they were going to the deceased before he/she died. Much like liquidating an LLC, any "gains" should be taxed at the applicable capital gains rate, but money that already has been taxed should be left alone.

Same with giving your spouse a gift. IIRC, the IRS stipulates that a one-time gift up to a certain amount is not considered "income," but outside of that, any money or gifts above a certain value are considered taxable income. This is classic government overreach and over-taxation, and flies directly in the face of the "community property" definitions as applied to divorce settlements ("What's mine is yours...").

Regarding tariffs, as with the IRS and taxes, I'm certainly no expert, but I find the whole debate interesting.

Economists have a tendency to crunch numbers without taking into account variables - for example, cutting taxes results in "X" amount of lost revenue compared to "Y" amount of spending, resulting in a net financial impact.

Historically, however, administrations that cut taxes often triggered increased government revenue due to an expanding tax base (diminished tax burdens resulting in increased job growth and increased individual spending - ergo, increased number of people paying taxes and increased gains from sales taxes). Calculating lost revenue strictly by Xs and Os can be misleading. The Kennedy and Reagan administrations both cut income taxes, and tax revenues went up, not down. The problem is that our elected officials can't resist the temptation to concomitantly increase spending as well...

Yes, certainly in the short term, it would appear that tariffs would have a significant negative impact on consumer prices, essentially acting as a "tax." However, what if a short-term pain turns into a long-term gain? Both China and Mexico have a lot to lose if they play hardball and don't acquiesce. If tariffs force countries to stop currency manipulation, techo theft, undercutting prices by utilizing slave labor, etc., the end result of leveraging those tariffs could very well pay off big in the future, especially for an American labor force that isn't given a level playing field.

Also, we need to keep in mind that many of the goods (not all certainly) can be obtained at least temporarily from other countries with fairer trade practices, i.e., Taiwan, Korea, The Netherlands, Singapore and the Norwegian countries. Ramping up trade agreements with other countries, while working on regaining energy independence would put tremendous pressure on our current trade partners, China in particular.

 

[Westernhawk]

Regarding the estate tax, I would say that the issue is a bit more nuanced than a simple tax or no tax.

IMHO, the "Estate" should include the deceased and any nuclear family components, therefore (unless otherwise laid out in the will), moneys that go to spouse and/or children should be treated as if they were going to the deceased before he/she died. Much like liquidating an LLC, any "gains" should be taxed at the applicable capital gains rate, but money that already has been taxed should be left alone.

Same with giving your spouse a gift. IIRC, the IRS stipulates that a one-time gift up to a certain amount is not considered "income," but outside of that, any money or gifts above a certain value are considered taxable income. This is classic government overreach and over-taxation, and flies directly in the face of the "community property" definitions as applied to divorce settlements ("What's mine is yours...").

Regarding tariffs, as with the IRS and taxes, I'm certainly no expert, but I find the whole debate interesting.

Economists have a tendency to crunch numbers without taking into account variables - for example, cutting taxes results in "X" amount of lost revenue compared to "Y" amount of spending, resulting in a net financial impact.

Historically, however, administrations that cut taxes often triggered increased government revenue due to an expanding tax base (diminished tax burdens resulting in increased job growth and increased individual spending - ergo, increased number of people paying taxes and increased gains from sales taxes). Calculating lost revenue strictly by Xs and Os can be misleading. The Kennedy and Reagan administrations both cut income taxes, and tax revenues went up, not down. The problem is that our elected officials can't resist the temptation to concomitantly increase spending as well...

Yes, certainly in the short term, it would appear that tariffs would have a significant negative impact on consumer prices, essentially acting as a "tax." However, what if a short-term pain turns into a long-term gain? Both China and Mexico have a lot to lose if they play hardball and don't acquiesce. If tariffs force countries to stop currency manipulation, techo theft, undercutting prices by utilizing slave labor, etc., the end result of leveraging those tariffs could very well pay off big in the future, especially for an American labor force that isn't given a level playing field.

Also, we need to keep in mind that many of the goods (not all certainly) can be obtained at least temporarily from other countries with fairer trade practices, i.e., Taiwan, Korea, The Netherlands, Singapore and the Norwegian countries. Ramping up trade agreements with other countries, while working on regaining energy independence would put tremendous pressure on our current trade partners, China in particular.

Thanks for the great, thought-provoking post.
With regard to tariffs, I have not read that they were a "net positive" in any case, short-term or long-term. I appreciate that they could theoretically put pressure on trading partners in the long term, and I hope that is the case, given the fact that in the short term, consumer goods will definitely increase in cost.

The issue with tariffs is that they may affect the middle and lower classes more significantly, as they purchase many of the same consumer goods that the rich folks purchase. This seems to be counter to what people believed they were voting for this time around (cheaper groceries and commonly purchased items).
I chose a very right-leaning website to illustrate, here:
https://www.heritage.org/trade/commentary/how-tariffs-and-regressive-trade-policies-hurt-the-poor

Also, your comments about administrations that reduce taxes need context. Decreases in taxes across the board may stimulate growth and increase the overall tax base, but that isn't what the Trump administration plans to do, from what I read.

The new tax plan will be a big advantage for those making over $400,000 per year (the top 5%). It will benefit the top 1% even more. If you make a modest income, tax decreases will be very small or zero.

https://itep.org/a-distributional-analysis-of-donald-trumps-tax-plan-2024/

So, as I put the tax plan and the tariff plan together, it means that the very wealthy will continue to separate themselves from the common folk, and the middle class will continue to struggle with costs outpacing their net earnings. The very wealthy (like the guy running DOGE), know that this plan will work very well for that small group of people.

Lastly, I predict (not really that hard to predict with the tax breaks for the upper incomes), that the deficit will absolutely skyrocket in the coming four years. Both wings of big government probably have it wrong.

Read: Harris bad, Trump worse (for federal deficit). Here's a non-partisan link about this:

https://www.pbs.org/newshour/politi...d-increase-under-harris-but-surge-under-trump

 

[CP87]

Hard to disagree with much of anything in that video.

I think all of the messed up stuff he is talking about is why people gravitate towards Trump...in the hope that someone from outside of the system will shake things up. I think that is reasonable, except I think Trump is a shameless grifter (others obviously disagree).

 

[CP87]

Regarding the estate tax, I would say that the issue is a bit more nuanced than a simple tax or no tax.

IMHO, the "Estate" should include the deceased and any nuclear family components, therefore (unless otherwise laid out in the will), moneys that go to spouse and/or children should be treated as if they were going to the deceased before he/she died. Much like liquidating an LLC, any "gains" should be taxed at the applicable capital gains rate, but money that already has been taxed should be left alone.

Same with giving your spouse a gift. IIRC, the IRS stipulates that a one-time gift up to a certain amount is not considered "income," but outside of that, any money or gifts above a certain value are considered taxable income. This is classic government overreach and over-taxation, and flies directly in the face of the "community property" definitions as applied to divorce settlements ("What's mine is yours...").

Regarding tariffs, as with the IRS and taxes, I'm certainly no expert, but I find the whole debate interesting.

Economists have a tendency to crunch numbers without taking into account variables - for example, cutting taxes results in "X" amount of lost revenue compared to "Y" amount of spending, resulting in a net financial impact.

Historically, however, administrations that cut taxes often triggered increased government revenue due to an expanding tax base (diminished tax burdens resulting in increased job growth and increased individual spending - ergo, increased number of people paying taxes and increased gains from sales taxes). Calculating lost revenue strictly by Xs and Os can be misleading. The Kennedy and Reagan administrations both cut income taxes, and tax revenues went up, not down. The problem is that our elected officials can't resist the temptation to concomitantly increase spending as well...

Yes, certainly in the short term, it would appear that tariffs would have a significant negative impact on consumer prices, essentially acting as a "tax." However, what if a short-term pain turns into a long-term gain? Both China and Mexico have a lot to lose if they play hardball and don't acquiesce. If tariffs force countries to stop currency manipulation, techo theft, undercutting prices by utilizing slave labor, etc., the end result of leveraging those tariffs could very well pay off big in the future, especially for an American labor force that isn't given a level playing field.

Also, we need to keep in mind that many of the goods (not all certainly) can be obtained at least temporarily from other countries with fairer trade practices, i.e., Taiwan, Korea, The Netherlands, Singapore and the Norwegian countries. Ramping up trade agreements with other countries, while working on regaining energy independence would put tremendous pressure on our current trade partners, China in particular.

Oren Cass makes this argument:

Making The Case For Trump’s Tariffs

From tariffs to tax cuts, President-elect Donald Trump promises he'll revitalize the United States economy. Economist Oren Cass runs the conservative think tank American Compass, which aims to emphasize the importance of family, community and industry to the nation's prosperity and liberty. Cass...

www.pbs.org

 

[CP87]

Thanks for the great, thought-provoking post.
With regard to tariffs, I have not read that they were a "net positive" in any case, short-term or long-term. I appreciate that they could theoretically put pressure on trading partners in the long term, and I hope that is the case, given the fact that in the short term, consumer goods will definitely increase in cost.

The issue with tariffs is that they may affect the middle and lower classes more significantly, as they purchase many of the same consumer goods that the rich folks purchase. This seems to be counter to what people believed they were voting for this time around (cheaper groceries and commonly purchased items).
I chose a very right-leaning website to illustrate, here:
https://www.heritage.org/trade/commentary/how-tariffs-and-regressive-trade-policies-hurt-the-poor

Also, your comments about administrations that reduce taxes need context. Decreases in taxes across the board may stimulate growth and increase the overall tax base, but that isn't what the Trump administration plans to do, from what I read.

The new tax plan will be a big advantage for those making over $400,000 per year (the top 5%). It will benefit the top 1% even more. If you make a modest income, tax decreases will be very small or zero.

https://itep.org/a-distributional-analysis-of-donald-trumps-tax-plan-2024/

So, as I put the tax plan and the tariff plan together, it means that the very wealthy will continue to separate themselves from the common folk, and the middle class will continue to struggle with costs outpacing their net earnings. The very wealthy (like the guy running DOGE), know that this plan will work very well for that small group of people.

Lastly, I predict (not really that hard to predict with the tax breaks for the upper incomes), that the deficit will absolutely skyrocket in the coming four years. Both wings of big government probably have it wrong.

Read: Harris bad, Trump worse (for federal deficit). Here's a non-partisan link about this:

https://www.pbs.org/newshour/politi...d-increase-under-harris-but-surge-under-trump

If we give Trump enough credit to be playing 3D chess, greater income inequality is one of the best predictors of authoritarian movements, especially if you can seize control of the media apparatus to help demagogue "others" as the source of the problem. I don't give him that much credit, though.

 

[#1DieHardHawk]

Thanks for the great, thought-provoking post.
With regard to tariffs, I have not read that they were a "net positive" in any case, short-term or long-term. I appreciate that they could theoretically put pressure on trading partners in the long term, and I hope that is the case, given the fact that in the short term, consumer goods will definitely increase in cost.

The issue with tariffs is that they may affect the middle and lower classes more significantly, as they purchase many of the same consumer goods that the rich folks purchase. This seems to be counter to what people believed they were voting for this time around (cheaper groceries and commonly purchased items).
I chose a very right-leaning website to illustrate, here:
https://www.heritage.org/trade/commentary/how-tariffs-and-regressive-trade-policies-hurt-the-poor

Also, your comments about administrations that reduce taxes need context. Decreases in taxes across the board may stimulate growth and increase the overall tax base, but that isn't what the Trump administration plans to do, from what I read.

The new tax plan will be a big advantage for those making over $400,000 per year (the top 5%). It will benefit the top 1% even more. If you make a modest income, tax decreases will be very small or zero.

https://itep.org/a-distributional-analysis-of-donald-trumps-tax-plan-2024/

So, as I put the tax plan and the tariff plan together, it means that the very wealthy will continue to separate themselves from the common folk, and the middle class will continue to struggle with costs outpacing their net earnings. The very wealthy (like the guy running DOGE), know that this plan will work very well for that small group of people.

Lastly, I predict (not really that hard to predict with the tax breaks for the upper incomes), that the deficit will absolutely skyrocket in the coming four years. Both wings of big government probably have it wrong.

Read: Harris bad, Trump worse (for federal deficit). Here's a non-partisan link about this:

https://www.pbs.org/newshour/politi...d-increase-under-harris-but-surge-under-trump

It's definitely complicated and well above my knowledge and pay-grade.

Just as with any "non-progressive" tax structure, the "tax" effect of tariffs no doubt will disproportionately impact low and middle level wage earners that by definition spend a larger proportion of their income on basic necessities. I'm sure there are some creative ways to mitigate the impact but no measure will be perfect.

We'll see how it plays out, but if the end result is a fairer, more level, trade playing field, less American jobs being exported, increased domestic production of goods, intellectual property protections, etc., etc., those very same sectors may reap significant benefits. The question will be whether Trump can sell the American public on the concept of "no pain, no gain." We also have to keep in mind that's it's quite plausible that there is a significant bluff element to much of this, particular in regards to Canada.

I share the concern about the increased wealth gap, and view the expanding gap between CEO and front-worker incomes over the past several decades as an especially disturbing trend.

Tax codes will always be a precarious balance between maximizing government revenue in a fair fashion while incentivizing growth, entrepreneurship and spending. I haven't looked into the details of what Trump has planned but did find the concept of enacting selective tariffs intriguing, but only within the context of spending reductions and elimination of waste. While we're at it, the next steps should include barring of earmarks and institution of term limits.

You may find this article interesting. Many of the proposals in combination with tax cuts are interesting:

Tax reforms to raise revenue efficiently and equitably

In this analysis, Wendy Edelberg, Elizabeth Lee, Sara Estep, Madison Bober highligh a selection of policy proposals from The Hamilton Project’s 2020 book titled Tackling the Tax Code: Efficient and Equitable Ways to Raise Revenue.

www.brookings.edu

 

[#1DieHardHawk]

If we give Trump enough credit to be playing 3D chess, greater income inequality is one of the best predictors of authoritarian movements, especially if you can seize control of the media apparatus to help demagogue "others" as the source of the problem. I don't give him that much credit, though.

Sounds a little like what was happening the last four years in regards to the woke agenda.....

 

[PCHawk]

I think all of the messed up stuff he is talking about is why people gravitate towards Trump...in the hope that someone from outside of the system will shake things up. I think that is reasonable, except I think Trump is a shameless grifter (others obviously disagree).

I think it's entirely possible he's a shameless grifter. I just think there's no chance at all with someone the established politicians are ok with having in office, and it's abundantly clear they don't want Trump in. I will say with Mitch McConnell hanging around it's already unlikely Trump will be allowed to make a difference. I get how some people will view that take as an excuse for when Trump doesn't succeed, but we needed the momentum of a complete overhaul and got the exact opposite. If Trump really wants to fix Wahington, it won't be easy.

 

[Fryowa]

Thanks for the great, thought-provoking post.
With regard to tariffs, I have not read that they were a "net positive" in any case, short-term or long-term. I appreciate that they could theoretically put pressure on trading partners in the long term, and I hope that is the case, given the fact that in the short term, consumer goods will definitely increase in cost.

The issue with tariffs is that they may affect the middle and lower classes more significantly, as they purchase many of the same consumer goods that the rich folks purchase. This seems to be counter to what people believed they were voting for this time around (cheaper groceries and commonly purchased items).
I chose a very right-leaning website to illustrate, here:
https://www.heritage.org/trade/commentary/how-tariffs-and-regressive-trade-policies-hurt-the-poor

Also, your comments about administrations that reduce taxes need context. Decreases in taxes across the board may stimulate growth and increase the overall tax base, but that isn't what the Trump administration plans to do, from what I read.

The new tax plan will be a big advantage for those making over $400,000 per year (the top 5%). It will benefit the top 1% even more. If you make a modest income, tax decreases will be very small or zero.

https://itep.org/a-distributional-analysis-of-donald-trumps-tax-plan-2024/

So, as I put the tax plan and the tariff plan together, it means that the very wealthy will continue to separate themselves from the common folk, and the middle class will continue to struggle with costs outpacing their net earnings. The very wealthy (like the guy running DOGE), know that this plan will work very well for that small group of people.

Lastly, I predict (not really that hard to predict with the tax breaks for the upper incomes), that the deficit will absolutely skyrocket in the coming four years. Both wings of big government probably have it wrong.

Read: Harris bad, Trump worse (for federal deficit). Here's a non-partisan link about this:

https://www.pbs.org/newshour/politi...d-increase-under-harris-but-surge-under-trump

Tariffs are a whole different animal and we could actually start a new thread as big as that topic is. Coincidentally a huge part of my job is dealing with tariff-affected products. Where I work we have a mix of imported components and sellable goods coming from China primarily, then India, then Vietnam, and the smallest portion of our imports comes from Canada. The Canadian stuff is barely 6 figures over a fiscal year, but the China product is upper 8 figures.

The 10% Trump installed years ago did absolutely nothing, and the increase to 25% he put in place shortly after did nothing either. Unless you count inflating end user prices as doing something.

The problem with tariffs is that after a very short period of time they just become permanent price increases that no one pays any mind to...

We have five main liaisons/brokers that we use in China, and I happen to be the "guy" at my company who manages the workings, really boring stuff but part of that includes quote and cost analysis trickling into our pricing on the outgoing side here in the states. When Trump put the first 10% in effect we tasked our importers with providing us their declared cost on the affected items and to my (somewhat) surprise, they readily provided it. I should back up and explain for folks who don't know, these tariffs are based on declared cost of the exporter, not the selling price. If you put it on the selling price there's a whole bunch of accounting monkey business that can go on in addition to the monkey business they already do...

So, if I buy a widget from China for $20, the tariff isn't applied to the $20 number. It's applied to the seller's cost declared on that item. Cannot stress that enough. If they declare their cost is $14 and there's a 10% tariff in effect, the additional cost to us (importer) is $1.40. That $1.40 would be added to our $20 we already pay. The reason I bring this up is that even though I hate tariffs, there is a (mostly leftist) contingent out there saying that if we put a 25% tariff in place, those goods will increase by 25% to consumers. That is wacko and those people do not now how finance and commerce work at all.

Anywhoo...the problem is that these tariffs, like I mentioned, have no intended effect because like any other cost increase we pass most of it on down the line and it just becomes inflation at some point. We pay the tariff when we import, the we pass it to OEMs, they pass it to distributors, they pass it to dealers, and dealers pass it to end customers. There's nothing at the end of the line that itemizes it and makes it jump out to anyone that, "Hey, this $1,500 price hike since last year on your equipment is due to tariffs..." So it gets ignored and just becomes inflation.

Also, I want to say that the soap box screamers yelling about how this is only hurting end-users are full of shit. We all get hammered by it because yes, we pass it on, but we also share it with everyone. For example...lets say Trump puts in place a 25% additional tariff in place and to maintain our margins at my company, we have to hit customers with a 15% price increase. If you've ever been in business you know that's pretty frickin big in the manufacturing chain. So what happens is our customer says, "Fryowa Inc., there's no way I can do 15%, I'll go out of business, man..." So we say, "Ok, we'll share the burden with you buddy, we'll only do 12.5%, but I need you to give us hard POs in place for the next 12 months and agree to a higher minimum quantity..." and the deal gets done. It's more complicated than that but you get the idea. And then they do that all the way down the chain. The tariffs hit EVERYONE. They erode everyone's margins and don't do anything to solve any problems.

For you wack jobs out there thinking this is going to help get fentanyl off the streets or all of a sudden create a bunch of jobs...did it happen when Trump did the first 10%? Did it happen when he bumped it to 25%? Nope. Nada. You know what we did when it happened? We started methodically shifting what production we could to India and Vietnam.

We are members of some really good consortiums in the Midwest and when this initially happened the first go-round there were companies out there that thought they'd handle it to their customers with a surcharge, so they could be transparent and show their customers what their cost increases really were and hopefully ease the pain etc. Meh...nice idea but it didn't work for any of them and within a few months they all had egg on their faces. You know what a buyer does when he/she sees a surcharge as a separate line item on a PO? If they're doing their jobs correctly they're constantly asking and hassling the seller as to when that surcharge is going away or being reduced. It's right in their face everytime reminding them. Surcharges are intended to be either 1) temporary or 2) variable. These tariffs are neither temporary nor variable in the short term. They are just going to be inflationary, permanent price increases that never go away.

You think if China complies with all of Trump's demands (don't worry, they won't), Trump is all the sudden just going to shut off a 65% tariff and make Chinese goods cheap again, losing all that tax money? Get. F*cking Real. You can't put this genie back in the bottle after you let it out.

 

[CP87]

Sounds a little like what was happening the last four years in regards to the woke agenda.....

I get what you are saying, but that was.a social pressure, not a governmental pressure. No one was threatening to pull FCC licenses, and there was no politically aligned billionaire suggesting he might buy dissenting media outlets and turn them into his own personal mouthpieces. I anticipate the argument that there was correspondence between government and major social media platforms around subjects such as COVID-19 and election related misinformation...we can reasonably discuss whether that crosses a line. But that is orders of magnitude different from some of what is currently being floated.

 

[CP87]

I think it's entirely possible he's a shameless grifter. I just think there's no chance at all with someone the established politicians are ok with having in office, and it's abundantly clear they don't want Trump in. I will say with Mitch McConnell hanging around it's already unlikely Trump will be allowed to make a difference. I get how some people will view that take as an excuse for when Trump doesn't succeed, but we needed the momentum of a complete overhaul and got the exact opposite. If Trump really wants to fix Wahington, it won't be easy.

The left will have their Trump soon. I think it could have been Bernie in 2016...the Venn diagrams of Trump and Bernie supporters was surprisingly overlapped. I think many would rally around a charismatic, pragmatic, populist with progressive economic ideas and a disdain for elites. But most people like that would either be disgusted by the notion of holding that office, or they would not have the resources to upset the machine they are fighting against. But if you could convince someone like Scott Galloway, or Jon Stewart, to run, with the backing of some tech billionaires, it would take off.

 

[CP87]

Tariffs are a whole different animal and we could actually start a new thread as big as that topic is. Coincidentally a huge part of my job is dealing with tariff-affected products. Where I work we have a mix of imported components and sellable goods coming from China primarily, then India, then Vietnam, and the smallest portion of our imports comes from Canada. The Canadian stuff is barely 6 figures over a fiscal year, but the China product is upper 8 figures.

The 10% Trump installed years ago did absolutely nothing, and the increase to 25% he put in place shortly after did nothing either. Unless you count inflating end user prices as doing something.

The problem with tariffs is that after a very short period of time they just become permanent price increases that no one pays any mind to...

We have five main liaisons/brokers that we use in China, and I happen to be the "guy" at my company who manages the workings, really boring stuff but part of that includes quote and cost analysis trickling into our pricing on the outgoing side here in the states. When Trump put the first 10% in effect we tasked our importers with providing us their declared cost on the affected items and to my (somewhat) surprise, they readily provided it. I should back up and explain for folks who don't know, these tariffs are based on declared cost of the exporter, not the selling price. If you put it on the selling price there's a whole bunch of accounting monkey business that can go on in addition to the monkey business they already do...

So, if I buy a widget from China for $20, the tariff isn't applied to the $20 number. It's applied to the seller's cost declared on that item. Cannot stress that enough. If they declare their cost is $14 and there's a 10% tariff in effect, the additional cost to us (importer) is $1.40. That $1.40 would be added to our $20 we already pay. The reason I bring this up is that even though I hate tariffs, there is a (mostly leftist) contingent out there saying that if we put a 25% tariff in place, those goods will increase by 25% to consumers. That is wacko and those people do not now how finance and commerce work at all.

Anywhoo...the problem is that these tariffs, like I mentioned, have no intended effect because like any other cost increase we pass most of it on down the line and it just becomes inflation at some point. We pay the tariff when we import, the we pass it to OEMs, they pass it to distributors, they pass it to dealers, and dealers pass it to end customers. There's nothing at the end of the line that itemizes it and makes it jump out to anyone that, "Hey, this $1,500 price hike since last year on your equipment is due to tariffs..." So it gets ignored and just becomes inflation.

Also, I want to say that the soap box screamers yelling about how this is only hurting end-users are full of shit. We all get hammered by it because yes, we pass it on, but we also share it with everyone. For example...lets say Trump puts in place a 25% additional tariff in place and to maintain our margins at my company, we have to hit customers with a 15% price increase. If you've ever been in business you know that's pretty frickin big in the manufacturing chain. So what happens is our customer says, "Fryowa Inc., there's no way I can do 15%, I'll go out of business, man..." So we say, "Ok, we'll share the burden with you buddy, we'll only do 12.5%, but I need you to give us hard POs in place for the next 12 months and agree to a higher minimum quantity..." and the deal gets done. It's more complicated than that but you get the idea. And then they do that all the way down the chain. The tariffs hit EVERYONE. They erode everyone's margins and don't do anything to solve any problems.

For you wack jobs out there thinking this is going to help get fentanyl off the streets or all of a sudden create a bunch of jobs...did it happen when Trump did the first 10%? Did it happen when he bumped it to 25%? Nope. Nada. You know what we did when it happened? We started methodically shifting what production we could to India and Vietnam.

We are members of some really good consortiums in the Midwest and when this initially happened the first go-round there were companies out there that thought they'd handle it to their customers with a surcharge, so they could be transparent and show their customers what their cost increases really were and hopefully ease the pain etc. Meh...nice idea but it didn't work for any of them and within a few months they all had egg on their faces. You know what a buyer does when he/she sees a surcharge as a separate line item on a PO? If they're doing their jobs correctly they're constantly asking and hassling the seller as to when that surcharge is going away or being reduced. It's right in their face everytime reminding them. Surcharges are intended to be either 1) temporary or 2) variable. These tariffs are neither temporary nor variable in the short term. They are just going to be inflationary, permanent price increases that never go away.

You think if China complies with all of Trump's demands (don't worry, they won't), Trump is all the sudden just going to shut off a 65% tariff and make Chinese goods cheap again, losing all that tax money? Get. F*cking Real. You can't put this genie back in the bottle after you let it out.

You have probably seen discussion of tariffs and domestic washing machine manufacturers:

Trump’s Previous Tariffs Foreshadow the Economic Harm of Latest 10% Tariff Proposal

What can Former President Trump’s previous tariff efforts tell us about his most recent proposal for a 10 percent tariff on all imports? That each job saved would come at a severe cost to consumers and taxpayers.

taxfoundation.org

In short, the tariffs alone are very likely not to achieve their intended goal. I am starting to buy the argument that targeted tariffs combined with policy boosting domestic industries does have merit. But, I am just an idiot trying to make some sense of the world while holding just a sliver of the necessary information, so I really appreciate the insights of others on this board.

 

[CP87]

This has been a remarkably civil discussion for well over 500 posts. We disagree, often vehemently, and there are areas where no consensus is possible. But there is also a lot of area of agreement. Happy Holidays, y'all.

 

[PCHawk]

The left will have their Trump soon. I think it could have been Bernie in 2016...the Venn diagrams of Trump and Bernie supporters was surprisingly overlapped. I think many would rally around a charismatic, pragmatic, populist with progressive economic ideas and a disdain for elites. But most people like that would either be disgusted by the notion of holding that office, or they would not have the resources to upset the machine they are fighting against. But if you could convince someone like Scott Galloway, or Jon Stewart, to run, with the backing of some tech billionaires, it would take off.

I've heard things about Bernie being the choice of the left in 2016 but they bypassed him and installed Hillary. I have no idea how or if it's even true. Do you know anything about that?

 

[Westernhawk]

Tariffs are a whole different animal and we could actually start a new thread as big as that topic is. Coincidentally a huge part of my job is dealing with tariff-affected products. Where I work we have a mix of imported components and sellable goods coming from China primarily, then India, then Vietnam, and the smallest portion of our imports comes from Canada. The Canadian stuff is barely 6 figures over a fiscal year, but the China product is upper 8 figures.

The 10% Trump installed years ago did absolutely nothing, and the increase to 25% he put in place shortly after did nothing either. Unless you count inflating end user prices as doing something.

The problem with tariffs is that after a very short period of time they just become permanent price increases that no one pays any mind to...

We have five main liaisons/brokers that we use in China, and I happen to be the "guy" at my company who manages the workings, really boring stuff but part of that includes quote and cost analysis trickling into our pricing on the outgoing side here in the states. When Trump put the first 10% in effect we tasked our importers with providing us their declared cost on the affected items and to my (somewhat) surprise, they readily provided it. I should back up and explain for folks who don't know, these tariffs are based on declared cost of the exporter, not the selling price. If you put it on the selling price there's a whole bunch of accounting monkey business that can go on in addition to the monkey business they already do...

So, if I buy a widget from China for $20, the tariff isn't applied to the $20 number. It's applied to the seller's cost declared on that item. Cannot stress that enough. If they declare their cost is $14 and there's a 10% tariff in effect, the additional cost to us (importer) is $1.40. That $1.40 would be added to our $20 we already pay. The reason I bring this up is that even though I hate tariffs, there is a (mostly leftist) contingent out there saying that if we put a 25% tariff in place, those goods will increase by 25% to consumers. That is wacko and those people do not now how finance and commerce work at all.

Anywhoo...the problem is that these tariffs, like I mentioned, have no intended effect because like any other cost increase we pass most of it on down the line and it just becomes inflation at some point. We pay the tariff when we import, the we pass it to OEMs, they pass it to distributors, they pass it to dealers, and dealers pass it to end customers. There's nothing at the end of the line that itemizes it and makes it jump out to anyone that, "Hey, this $1,500 price hike since last year on your equipment is due to tariffs..." So it gets ignored and just becomes inflation.

Also, I want to say that the soap box screamers yelling about how this is only hurting end-users are full of shit. We all get hammered by it because yes, we pass it on, but we also share it with everyone. For example...lets say Trump puts in place a 25% additional tariff in place and to maintain our margins at my company, we have to hit customers with a 15% price increase. If you've ever been in business you know that's pretty frickin big in the manufacturing chain. So what happens is our customer says, "Fryowa Inc., there's no way I can do 15%, I'll go out of business, man..." So we say, "Ok, we'll share the burden with you buddy, we'll only do 12.5%, but I need you to give us hard POs in place for the next 12 months and agree to a higher minimum quantity..." and the deal gets done. It's more complicated than that but you get the idea. And then they do that all the way down the chain. The tariffs hit EVERYONE. They erode everyone's margins and don't do anything to solve any problems.

For you wack jobs out there thinking this is going to help get fentanyl off the streets or all of a sudden create a bunch of jobs...did it happen when Trump did the first 10%? Did it happen when he bumped it to 25%? Nope. Nada. You know what we did when it happened? We started methodically shifting what production we could to India and Vietnam.

We are members of some really good consortiums in the Midwest and when this initially happened the first go-round there were companies out there that thought they'd handle it to their customers with a surcharge, so they could be transparent and show their customers what their cost increases really were and hopefully ease the pain etc. Meh...nice idea but it didn't work for any of them and within a few months they all had egg on their faces. You know what a buyer does when he/she sees a surcharge as a separate line item on a PO? If they're doing their jobs correctly they're constantly asking and hassling the seller as to when that surcharge is going away or being reduced. It's right in their face everytime reminding them. Surcharges are intended to be either 1) temporary or 2) variable. These tariffs are neither temporary nor variable in the short term. They are just going to be inflationary, permanent price increases that never go away.

You think if China complies with all of Trump's demands (don't worry, they won't), Trump is all the sudden just going to shut off a 65% tariff and make Chinese goods cheap again, losing all that tax money? Get. F*cking Real. You can't put this genie back in the bottle after you let it out.

Thank you. This was a really helpful post and I learned a few things. Appreciate it.

 

[Westernhawk]

It's definitely complicated and well above my knowledge and pay-grade.

Just as with any "non-progressive" tax structure, the "tax" effect of tariffs no doubt will disproportionately impact low and middle level wage earners that by definition spend a larger proportion of their income on basic necessities. I'm sure there are some creative ways to mitigate the impact but no measure will be perfect.

We'll see how it plays out, but if the end result is a fairer, more level, trade playing field, less American jobs being exported, increased domestic production of goods, intellectual property protections, etc., etc., those very same sectors may reap significant benefits. The question will be whether Trump can sell the American public on the concept of "no pain, no gain." We also have to keep in mind that's it's quite plausible that there is a significant bluff element to much of this, particular in regards to Canada.

I share the concern about the increased wealth gap, and view the expanding gap between CEO and front-worker incomes over the past several decades as an especially disturbing trend.

Tax codes will always be a precarious balance between maximizing government revenue in a fair fashion while incentivizing growth, entrepreneurship and spending. I haven't looked into the details of what Trump has planned but did find the concept of enacting selective tariffs intriguing, but only within the context of spending reductions and elimination of waste. While we're at it, the next steps should include barring of earmarks and institution of term limits.

You may find this article interesting. Many of the proposals in combination with tax cuts are interesting:

Tax reforms to raise revenue efficiently and equitably

In this analysis, Wendy Edelberg, Elizabeth Lee, Sara Estep, Madison Bober highligh a selection of policy proposals from The Hamilton Project’s 2020 book titled Tackling the Tax Code: Efficient and Equitable Ways to Raise Revenue.

www.brookings.edu

While I have my doubts, I HOPE that the long term hypothesis of leveling the playing field comes true, considering the very real short term problems (that are well documented in this thread).

I grew up in central Iowa, and like many small towns in the midwest, the manufacturing base has been hollowed out over many decades. I believe this to be a root cause of rural misery, and not the social "window dressing" wedge issues our politicians peddle. If manufacturing never moved overseas and to Mexico, would rural America have the same troubles with poverty, addiction, declining education, and the like? I wonder...

Have a great holiday everyone, and beat the Fuskers.

 

[Fryowa]

While I have my doubts, I HOPE that the long term hypothesis of leveling the playing field comes true, considering the very real short term problems (that are well documented in this thread).

I grew up in central Iowa, and like many small towns in the midwest, the manufacturing base has been hollowed out over many decades. I believe this to be a root cause of rural misery, and not the social "window dressing" wedge issues our politicians peddle. If manufacturing never moved overseas and to Mexico, would rural America have the same troubles with poverty, addiction, declining education, and the like? I wonder...

Have a great holiday everyone, and beat the Fuskers.

If production had never moved overseas we wouldn't be a country right now. Our standard of living would be stone age in comparison. There's absolutely no way you can come within the same solar system price wise, tariff or no tariff.

Take a regular old 2" ball coupler like you find on any trailer out there in the US. 2 5/16", what have you, I don't care. There is not a single one made in the United States in the last 20 years. Zeeee-row. The reason is because that fully assembled, Chinese coupler is made over there with 100% Chinese materials, components and labor. They pay some 14 year old girl with no shoes, no safety glasses, and no hearing protection about four bucks an hour to stand in a factory with no heat for 12 hours pushing a button on a stamping machine. They sell that coupler in Menards or online for $18.99 shipped to your door and an American one would cost you $100.00 Same story for every manual labor job over there. No insurance, no benefits, no profit sharing, no employees programs, no nothing. I've been to Guangzhou 3 times in the past 10 years, and I swear on my dead mother's life that's no exaggeration. The first factory we toured (we have proprietary machine dies that we come check on and do testing every few years, and while we're at it guys like me go along to see the business side) had people burning pallets in barrels like you see homeless people standing around in movies.

To do the same thing over here you'd have to pay a union guy $35 an hour plus overtime, plus insurance, plus insurance on your factory, plus unemployment insurance, and so on, and that isn't even getting into all your overheads that are exponentially higher here.

Without China we wouldn't exist the way we are. Take a look around you right where you sit and try to find anything made here. You're clothes from head to toe, your phone, computer, silverware, dishes, picture frames, TV, light fixtures in your living room, your curtains, your shoes, your gloves, your Christmas tree, the Hawkeyes stocking hat you love, the bluetooth speaker you listen to podcasts on, the treadmill you use in the morning...none of it made here. 98% China with a small smattering of India and Taiwan.

People are just completely blind to the way the world works.

 

[CP87]

I've heard things about Bernie being the choice of the left in 2016 but they bypassed him and installed Hillary. I have no idea how or if it's even true. Do you know anything about that?

Yeah, there was some stuff from the leaked DNC communications about party leaders greasing the skids for Clinton behind the scenes. There were definitely some young men (Bernie Bros) who basically swore off the Democratic party after that came out.