Realistically, it’s almost certain that the whole purpose of tariffs was to try and replace the income tax (especially the capital gains tax) with a some form of sales tax.
Basically, you off-shift the responsibility of paying taxes from the wealthy to the poor and middle class.
The rate at which you need to tax imports to achieve wage parity between the US and Southeast Asia (China, Taiwan, Vietnam, etc.) is around 900%. A good visual that I’ve seen are charts on the allocation of funds when you track where the money goes that you pay for your cup of coffee:
Trump’s tariffs of 15-50% appear to be intended to try and achieve a low enough rate of inflation that it comes in just under the panic line, as a proof of concept about the feasibility of continuing to raise tariffs by small increments over the course of a decade or two, until income and capital gains taxes can be eliminated.
Of course, it wouldn’t work like that. If there were 900% tariffs, whatever could shift to the US would shift, so we would get no tariff money on those goods. We would be a much poorer country, since we would be making stuff we’re not efficient at making at the expense of the high-value stuff we’re good at.
I know I’m preaching to the choir here, but the idea is ridiculous.
Common sense (as well as knowledge about economics) says the opposite and so does data, in regard to wages. Immigration crackdown leads to worker shortage, and worker shortage leads to higher wages.
From 2019 to 2023, farm wages (adjusted for inflation) grew at a rate of 2.1 percent a year, almost twice the rate seen in the three decades from 1990 to 2023. Such a rapid increase is consistent with recent producer surveys showing that workers were harder than usual to find.
Except that the opposite is true. The immigration crackdown reduces the ability of farm workers to bargain for wages, and makes it easier to steal their wages. Because the option to go to the law has been removed. The fact that they are cracking down in “illegal” immigration doesn’t mean it isn’t still happening. They are still here, just hiding better and with fewer options in the legal economy, and more vulnerable to exploitation.
Which means in plain Engish that trump is making it more and more attractive to hire illegals, because they are defensless, and less and less attractive to hire real salt of the earth redneck Americans, the ones who voted for him, it seems, or so the argument goes, because they are not worth the trouble. The poor stay poor, the rich get rich. Right?
American farmers can’t hire enough people. They depend on foreign workers, many undocumented, who are being scared away by ICE raids. Labor costs are way up and some farms are going under. But while President Trump is putting up barriers for companies to hire foreign software engineers and medical professionals, Trump officials want to make it easier and less expensive for farms to hire foreign workers.
(Bolding mine.)
It has gotten bad enough that Trump had to issue a regulation to artificially lower wages for visa holders, since farmers are forced to pay higher wages to their usual workers.
In October, the Trump administration issued a federal regulation lowering the wage rate for H-2A visa holders and allowing employers to charge them for housing.
That is in response to an increase in labor costs because of the crackdown.
Another article on the Trump administration trying to fight against increasing labor costs:
And the videos are corroborating this. Wages are not naturally decreasing because of the crackdown; they are getting higher, which is why the Trump administration is stepping in to counter it. The crackdown itself is not lowering wages. I think you’re misinterpreting the situation, either that or not communicating your point very well.
And yet, the opposite is happening. Because he has scared off undocumented workers, he is trying to remove protections for the documented immigrants on visa programs, and allowing farmers to charge them for places to stay, and pay them less than usual. Now that ICE has dried up the “illegal” workers, he wants to exploit the legal ones.
What I heard around here is that they are trying to offer more flexible schedules, and somehow being a bit more appreciative, as an alternative to the last resort of paying higher wages.
Temporary workers would be an even less likely last resort because by the time they get up to speed, they are gone.
I think the same — money amounts not changing — may be happening on the price side, with wholesalers and retailers not wanting to be the first in the area to raise them.
This can only work for a bit. Eventually the economy will take a bigger and clearer hit, but so far there is no recession.
What will not happen is more good jobs for long-time citizens. More likely there will be fewer good jobs for them because with fewer immigrants to manage, you need fewer managers, accountants, etc.
Big picture : everyone benefits if people do what they are best at. If I’m good at raising cattle and you’re good at growing corn, it’s foolish for both of us to raise cattle and corn - we should each do our best thing and trade.
Even if person A is better than B at both raising cattle and corn, A and B both benefit if A does what he’s comparatively better at (if A is 20% better than B at raising corn, and 10 times better at raising cattle, any time he spends on raising corn is a waste for A and B, and any time B spends on cattle is a waste for A and B). This is classic free market economics - the thing that Trump is pretending to support
I’ll admit that Adam Smith wasn’t envisioning that one country might be better at a thing because one had slave labor and the other has highly unionized labor with insurance plans, retirement plans, safety regulations, etc.
I could envision a world with some amount of trade blocks, that would prove a useful addendum to The Wealth of Nations, but I think we can all agree that this isn’t the topic of the day.
Comparative advantage tells us even more than this: Even if a country is more efficient in producing every single good, free trade with that country will improve the economic conditions on both sides.
This is a widely accepted principle, controversial only to morons like Trump.
I certainly agree that there are circumstances when tariffs are useful/necessary, and if Trump wants to use human rights abuses as a justification, that’s cool. But imposing the tariffs for those good reasons would still be a drag, not a benefit, to the economy
Between this tariff policy and his spoils system of government appointments, Trump is very much emblematic of a 19th century politician.
If so, It would seem to offer credence to the idea that he wants to eventually abolish the income tax. Not that I think Trump would be successful- the economy will bottom out long before he gets to implement many new ideas.
Hell, we may see a full scale reversal of the tariffs by the Supreme Court in just a few months - it’s a real stretch for even them to pretend that Trump economic policy (which vacillates as his mood changes) is based on actual executive power.
I also think he wants to sink boats to collect the insurance. If you look at the economy through the eyes of a scammer, not a legitimate businessman, it makes sense.
Just to set clear that while Adam Smith introduced the concept of absolute advantage, which suggests that a country should produce goods it can make more efficiently than others and trade for those it cannot, he did not explicitly define comparative advantage. His ideas laid the groundwork for later economists like David Ricardo to do so. Ricardo formalized the concept, emphasizing the benefits of trade based on opportunity costs.
Of course this is way above trump’s paygrade. It was so during his university years and much more so today, with his hereditary dementia setting in. Understanding something that includes the word “comparative” means by definition you have to look and bear in mind two things simultaneously. Well, that is difficult. For someone like him.
I think you hit the nail on the head. I have been thinking this before he finished TACOing on his first round of tariffs. Specifically:
But, not quite. It only is intended to eliminate the income tax for the most wealthy (by removing capital gains tax). That is, shift the tax burden from those with highest wealth to those who give it up their wealth the easiest, the middle class!
You see, the import duties do produce a lot of revenue. But, it raises the cost of not only the imported goods, but of the domestic good that compete with the imports. But, it takes a definite amount of time for those costs to work their way through the economy. My guess is that Trump is betting that “float” the economy sees before the increase costs hit will give him time to spread the “Good times are just around the cornor,” BS that the Hooverites sang.
It didn’t work, which is why he had to stop the economic reports from being published.
