The truth is that tariffs are still a small share of federal revenue. Customs duties, which include tariffs, have raised $108 billion so far this fiscal year. June was the highest monthly level so far, but even on an annual basis that’s about $300 billion a year. That’s not nothing, but it won’t balance a $7 trillion spending budget, despite Mr. Trump’s occasional suggestions that tariffs might offset the income tax.
Keep in mind that a tariff is a tax, and when you tax something you get less of it. One weakness of tariffs as a revenue vehicle is that they restrain trade in goods and thus can raise less revenue than anticipated on a static basis. That’s even more likely if a trade war dampens overall economic growth.
John Puri reports that “Trump’s tariffs are not going well.” A slice:
The Budget Lab at Yale updates its estimates of Trump’s second-term tariffs every few days — almost as often as he changes them. As of July 13, the average U.S. tariff rate on imported goods is now 20.6 percent, an increase of 18.2 points from before Trump took office. Even after import patterns shift in response to existing tariffs, the average effective rate will fall only to 19.7 percent, a 17.3 point increase, which is the highest since 1933.
Assuming that existing tariffs stay in effect for ten years, the Budget Lab projects that they will transfer nearly $3 trillion from American consumers and businesses to the federal government’s coffers. They increase consumer prices by 2.1 percent in the short run, costing the typical household almost $2,800 per year.
What’s his game plan? On Saturday, President Donald Trump threatened to impose 30 percent tariffs on Mexico and all European Union countries, for seemingly no reason whatsoever.
“Mexico has been helping me secure the border, BUT, what Mexico has done, is not enough,” Trump wrote in a letter to Mexico’s president. “Mexico still has not stopped the Cartels who are trying to turn all of North America into a Narco-Trafficking Playground.” (I suppose that’s a reason, but if his expectation was that Mexico could just stop cartels between April’s tariff announcement and now, that seems like an unrealistic goal.)
…..
But Mexico and the European Union together account for a full third of U.S. imports. And even if Trump perceives tariff levels as a useful foreign policy instrument when negotiating with Mexico and trying to reduce drug flow into the United States, it’s not clear why he’d be targeting Europe in much the same manner. What does he hope to get, exactly?
Trump’s tariff approach seems basically to be “flood the zone.” Flood the zone with chaos and constant changes, so nobody knows the current levels and so nobody can realistically plan for the future. The only certain thing is that the future will have less free trade: “Since Mr. Trump came into office in January, the average effective U.S. tariff rate has soared to 16.6 percent from 2.5 percent, according to tracking by the Budget Lab at Yale University, a nonpartisan research center,” per the Times.
Here’s the abstract of a new paper by Enghin Atalay, Ali Hortaçsu, Nicole Kimmel, and Chad Syverson: (HT Tyler Cowen)
We examine the recent slow growth in manufacturing productivity. We show that nearly all measured TFP growth since 1987—and its post-2000s decline—comes from a few computer-related industries. We argue conventional measures understate man- ufacturing productivity growth by failing to fully capture quality improvements. We compare consumer to producer and import price indices. In industries with rapid technological change, consumer price indices indicate less i
“Hundreds of ‘Alligator Alcatraz’ detainees don’t have criminal records.”
A penny for Mike Munger’s thoughts.
Public employees in Philadelphia got basically the same wage increase Mayor Cherelle Parker initially offered them, but their union, AFSCME District Council 33, stunk up the city first, with garbage workers going on strike for eight days. They shouldn’t have the power to do so, I argued in my latest piece for the Washington Post:
The union can ask whatever it wants. It shouldn’t expect 1.6 million people to wallow in filth because 10,000 of its members are upset with their compensation. Yet public-sector unions can’t help but impose upon the public, which is why they should not be allowed to collectively bargain in the first place.
That might sound like a radical position, but it’s the one that prevailed in the United States until the 1960s. President Franklin D. Roosevelt, who signed the National Labor Relations Act and was one of the strongest proponents of private-sector unions in American history, opposed public-sector collective bargaining in the strongest terms.
Read the whole thing here.
Arnold Kling offers further thoughts on political realism. A slice:
Meir Kohn says that there are two types of modern societies. There are commercial societies, in which decisions and norms emerge from win-win interactions. There are tribute societies, in which the rulers tell people what to produce and what to consume. He says that these two types have existed for a long time, and the names “capitalist” and “communist” are just recent labels for these older forms of social order.
The tribute society is what North, Weingast, and Wallis call the Natural State, or a limited-access order. It is stable because all of the organized groups with a capacity for violence are bought off by their share of the tribute extracted from the population. A commercial society is what NWW would call an open-access order. It is stable because everyone in the society has a stake in its perpetuation.
Of course, the theory of Public Choice tells us that there is a lot of tribute-collection going on in democracies. I think that the main difference with a limited-access order is that in an open-access order no one is automatically excluded from starting a business or forming a political party.
Here’s wisdom from Matthew Hennessey. A slice:
As someone who consumes a lot of news, I’ve had to train myself to tune out a steady stream of new nonsense. It’s a matter of professional hygiene. Certain names and narratives go right into the spam folder. Time is precious. Nobody has infinite powers of concentration. Without these filters in place, I’d be too mentally scattered to do my job—or any job.
Jeffrey Epstein tops my list of things not to think about. The guy was a conniving, perverted blackmail artist. That’s all anyone needs to know. It isn’t news that some people can’t resist a conspiracy theory. Sad, but not news.
Also not news: Airplane contrails, the benefits of vaccines, Bill Belichick’s young girlfriend and summer heat. We need not overextend ourselves trying to deconstruct the obvious. Sadly, we sometimes need to rouse ourselves to beat back stupidity.
