I love this term and I’m stealing it without apology.
Haha go ahead. I did make it up, but I also very much doubt I’m the first to refer to this phenomenon this way.
Well being a tariff-free zone is just one small facet of the EU’s reason for being. The tariffs on non-EU countries are not that high in most cases anyway (e.g. less than 2% on average for US goods; someone slipped with the sharpie (as well as brain and reality) when drawing up Trump’s table).
But yes, I expect we’ll see even freer trading between former US allies. What will be interesting will be the attitude to China and the rest of Asia. I still think it’s politically untenable to lift pressure on China, but certainly some will be calling for it.
I also love this term: this is exactly what it is, a series of folk beliefs about economics. (I say this as a folklorist.)
This probably belongs here, too:
The trade agreement that allowed companies like Shein and Temu to ship direct-to-customer from China are about to take a big hit.
Key points (from the article):
The EU’s reason for being is sure not to impose tariffs on other countries. The tariffs on US products (and Canada’s, and the UK’s too, for that matter), for instance, are below 3%. How the fool in the White House came up with the number he quoted yesterday is a mistery.
Paul Krugman tries to explain:
The posts before that one and after that one are worth reading too. Crazy stuff, fractally stupid, deeply incompetent. Sad times!
The DJI is down 1550. Not a record drop but bad.
It’s sort of levelling out now, I suspect in part because there’s always a suspicion Trump will reverse himself.
Other indexes are all down as well.
It’s actually not a mystery, they’ve actually published their “formula” themselves.
It’s not a mystery, it’s just really, really stupid.
But if you unpick the formula above it boils down to simple maths: take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.
Except for the VIX (CBOE Volatility Index) otherwise known as the “Fear Index”. It’s up almost 7%.
It seems like the only way to make money in the market is to play contrarian. Shorting the US economy, as it were.
Wow, I had no idea the the University of American Samoa has an economics department or that its alumni fill the Council of Economic Advisors.
Go Land Crabs!
Jesus H. Christ.
As the economy dies a death by a thousand pinches.
The soft shell inherit the Earth.
Paul Krugman has the formula on his substack:
I do not understand the math of the formula, but that’s apparently OK:
I agree that this is a brilliant coining. Got a link?
Here it is. Search actually came through this time.
I see Eswatini (formerly Swaziland) gets 10% whereas Lesotho gets 45 to 50%.
These two barely function as countries.
Lesotho’s primary export is water, to South Africa. Eswatini has roughly nothing to contribute to the global economy, except labour, (and cannabis) again to South Africa.
I mean, this is not plausibly anything but performative racism.
Sorry if this has already been asked but what is the prediction that tariff money will actually come rolling in and boost the US government’s coffers?
I totally understand how these tariffs will affect the American consumer. But is the understanding that trade will continue on as normal and those extra dollars we pay for everything due to tariffs will be turned over to the government? Or is the understanding that we will stop buying stuff and/or other countries will stop selling us stuff, and the amount of money coming in from tariffs won’t be significant?
I guess what I’m asking is will Trump be able to prove himself right by pointing to the US Tariff Fund and saying “Look at all this money we made!”? (regardless of how it got there, or what he plans to do with it)
I’d say that economic forecasts are divided. In the short-term, at least, companies will continue to import goods & materials to the US and pay the tariffs. That money will go the federal government. Those companies will almost certainly increase prices to offset the increased cost of importing the good/material. So inflation is the likely immediate result. The White House predicts they will bring in $600-$700B a year. Obviously two economists will give you three opinions about how accurate that number is.
In the intermediate term, it is possible that some goods that are no longer cost-competitive will no stop being imported. I suppose the companies importing those goods will either look for domestic (or other foreign) sources, or just go out of business if the losses are too big.
I guess the pipe-dream scenario is that somehow all of the companies that have outsourced production to Vietnam (for example) will decide instead to make their shoes in the US, with US labor laws, and US labor rates, and US environmental protections and all of those shoe-making jobs will pay so well that the US labor market will explode and the industrial middle class of the 1950s and 60s will come roaring back to life.
Most likely, I’d say, is that various side-deals will be made to exempt specific industries and/or companies from the new rates. Whenever Trump does something my first instinct is to look for opportunities for accumulating power and/or graft. Having the ability to add/remove/modify massive tariffs for any company/industry that is willing to play ball seems like a nice power for an autocrat to have…