Donald Trump NEVER liked ‘Experts’ that didn’t see thiongs ‘HIS’ way….
THAT has NOT changed on this...
The result from Trump’s misguided hammering of things WILL result in a LOT of LOST Money, Prestige and Political Power for an America that seems powerlesws against a criminal driving things in a ditch…
From the wording of Trump’s speech, one might assume that administration economists had devoted countless hours determining the various barriers to trade with the United States that individual countries enact. But then financial journalist James Surowiecki concluded that Trump’s retaliatory tariffs were based on a simple formula: a country’s trade deficit, divided by the country’s exports to the United States. “What extraordinary nonsense this is,” he posted on X.
Not so fast, tweeted deputy press secretary Kush Desai. “No we literally calculated tariff and non tariff barriers,” he posted, including a link to a post by the U.S. Trade Representative describing a mathematical formula using Greek letters.
USTR included citations to dense economic papers. So we reached out to the economists who were cited to see what they thought about the formula. They were unimpressed….
The Facts
The first clue that the USTR post was more spin than reality was that it cited a claim that we’ve debunked before — that 90,000 factories were lost after 1997. Trump used the same number in his speech, and it’s become one of the White House’s favorite talking points. But it’s a dubious number — about one-third of the so-called factories employed four or fewer people — and unworthy of being used in an official document.
The second clue was that, for all the fancy calculations, the formula showed that Surowiecki’s hunch was correct. Two key elements canceled each other — a figure for “trade elasticity” and a number for cost of tariffs to consumers. Trade elasticity attempts to measure how international trade responds to changes in trade barriers — like tariffs or transportation costs.
USTR cited a 2014 paper by Ina Simonovska and Michael E. Waugh that concluded the figure was 4 — half the level previously calculated. This meant the benefits of trade had been underestimated — something that might be news to Trump.
Then, USTR cited a 2021 study that looked at the impact of Trump’s tariffs on China and found, at least initially, that only 25 percent of the cost of the tariffs showed up in retail prices. Much of the rest of the cost was carried by retailers, meaning companies reduced their profit margins or they spread the hit across many goods that they sell, including nontariffed goods. (The paper noted that the report covered only 18 months of data and speculated that consumer prices might rise in the long term. The paper is yet another example of how Trump’s frequent claim that countries, not consumers, bear the cost of tariffs is false.)…
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“They pulled two numbers out of thin air that perfectly canceled each other out,” marveled Anson Soderbery, an economics professor at Purdue University whose 2018 paper on trade elasticity was cited as a source. “This type of reductionist analysis is very troubling” and “scares me.”
Soderbery said the White House failed to make a clear statement of policy goals or even a measurement for how to determine its policy was a success. In particular, the administration’s formula appears to take no account of what happens if countries retaliate or decide to buy fewer American products, he said….
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In principle, a tariff could lead to more savings and domestic investment if exchange rates respond favorably. That would reduce trade imbalances. But Trump’s tariffs are a blunt instrument with uncertain effects — and a sketchy mathematical formula to back it up….
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