Despot kingdoms don’t use tariffs to influence foreign actors they are a direct measure to control and extort domestic entities. It’s a highly illegal policy and I am not planning on seeing a dime of the money owed to me and my company. Robbery.
Sorry to hear about the impact on your business. The argument I hate the most about tariffs is that it is used to "influence other countries to change behavior". Supporters continue to suggest that is the reason for tariffs, but then also say it is to bring manufacturing back home, or to raise revenue.
I have been telling students that tariffs are a regressive tax (a sales tax) being used to replace a progressive tax (income tax), so as to shift part of the tax burden from the rich to the middle and lower class. Is that wrong? A tariff is rather like a Value Added Tax (VAT), only solely on imported goods. Before the 16th Amendment was passed in 1913, tariffs were the main way the federal government funded itself.
We just started our lessons on taxes in principles, and we'll get to tariffs soon. This was the first time that I've seen students really perk up when a new topic was introduced.
Please talk about progressive vs. regressive taxes and a tariff or VAT compared to an income tax in terms of ease of avoidance, administrative cost and relative burden between, say, the top 10% of income-earners and the bottom 50%. It would also help to point out how the income of those demographics have changed over, say, the last 100 years. Sorry, but the real important stuff is in these details.
The question I have had on my mind... was this intentional? Secretary of Commerce, Howard Lutnick, is the brain behind the tariff operations. I remember reading a Wired article months ago about the investment firm he used to chair, and now his two sons run it, Canton-Fitzgerald. The firm allowed bets on the tariffs being struck down in court and purchased the tariff refunds from the treasury. So the sons stand to make an ungodly amount of money from this.
Given that we only know the cost to the Importer of Record, the imperfect pass-though of tariffs is a difficult calculation. Liberation Day had one set, Memorandums of Understanding created a second tariff rate and finally negotiated deals set "final rates" which leaves us needing a log of pass-through regressions to understand the costs.
Throw in domestic firms that took advantage of competitive spillover or suffered input cost increases and there's another mess to sort.
Firms that have sued will need to recover their costs of litigation?
Politicians throw out $1300 theoretical refund checks but can't explain specific damages versus a smoothed average of impact.
*Tariffs have always been "Societal Loss" and we're now trapped explaining to the public Marginal Social Cost and Marginal Private Costs.
Lary, your comments to the Decode Econ posts have become something I look forward to. Thank you for always adding a new perspective and continuing the conversation. I appreciate it. I also learn from your comments.
Yeah it is odd right. Because even if the business get a refund the consumers who had to pay higher prices as a result is once again holding the bag. This is exactly what shooting from the hip policy causes a massive disconnect and the people who are most at risk losing the most as well.
We just started discussing incidence of taxation last class. This is does such a great job breaking down the topic. Just added a link to my Canvas pages. Thanks for putting these out Abdullah!
As long as you promise to read and engage with the content, I promise to do my darnedest to write articles that help make economics more relevant to learners, educators, and the broader business community.
Despot kingdoms don’t use tariffs to influence foreign actors they are a direct measure to control and extort domestic entities. It’s a highly illegal policy and I am not planning on seeing a dime of the money owed to me and my company. Robbery.
Sorry to hear about the impact on your business. The argument I hate the most about tariffs is that it is used to "influence other countries to change behavior". Supporters continue to suggest that is the reason for tariffs, but then also say it is to bring manufacturing back home, or to raise revenue.
I have been telling students that tariffs are a regressive tax (a sales tax) being used to replace a progressive tax (income tax), so as to shift part of the tax burden from the rich to the middle and lower class. Is that wrong? A tariff is rather like a Value Added Tax (VAT), only solely on imported goods. Before the 16th Amendment was passed in 1913, tariffs were the main way the federal government funded itself.
We just started our lessons on taxes in principles, and we'll get to tariffs soon. This was the first time that I've seen students really perk up when a new topic was introduced.
Everyone loves the tariff discussion these days. It is a good way to be relevant in the classroom. That is our thing, Dr. Wooten, being relevant.
Please talk about progressive vs. regressive taxes and a tariff or VAT compared to an income tax in terms of ease of avoidance, administrative cost and relative burden between, say, the top 10% of income-earners and the bottom 50%. It would also help to point out how the income of those demographics have changed over, say, the last 100 years. Sorry, but the real important stuff is in these details.
The question I have had on my mind... was this intentional? Secretary of Commerce, Howard Lutnick, is the brain behind the tariff operations. I remember reading a Wired article months ago about the investment firm he used to chair, and now his two sons run it, Canton-Fitzgerald. The firm allowed bets on the tariffs being struck down in court and purchased the tariff refunds from the treasury. So the sons stand to make an ungodly amount of money from this.
https://finance.yahoo.com/news/trump-secretary-silent-sons-poised-213852683.html
https://www.wired.com/story/cantor-fitzgerald-trump-tariff-refunds/
Yes, I read the same thing. Our administrators are playing both sides of the bet.
Given that we only know the cost to the Importer of Record, the imperfect pass-though of tariffs is a difficult calculation. Liberation Day had one set, Memorandums of Understanding created a second tariff rate and finally negotiated deals set "final rates" which leaves us needing a log of pass-through regressions to understand the costs.
Throw in domestic firms that took advantage of competitive spillover or suffered input cost increases and there's another mess to sort.
Firms that have sued will need to recover their costs of litigation?
Politicians throw out $1300 theoretical refund checks but can't explain specific damages versus a smoothed average of impact.
*Tariffs have always been "Societal Loss" and we're now trapped explaining to the public Marginal Social Cost and Marginal Private Costs.
Lary, your comments to the Decode Econ posts have become something I look forward to. Thank you for always adding a new perspective and continuing the conversation. I appreciate it. I also learn from your comments.
Please!
Really appreciate your insight on every post. I learn something new every time I open the comment section. Thank you for your continued engagement.
Yeah it is odd right. Because even if the business get a refund the consumers who had to pay higher prices as a result is once again holding the bag. This is exactly what shooting from the hip policy causes a massive disconnect and the people who are most at risk losing the most as well.
We just started discussing incidence of taxation last class. This is does such a great job breaking down the topic. Just added a link to my Canvas pages. Thanks for putting these out Abdullah!
As long as you promise to read and engage with the content, I promise to do my darnedest to write articles that help make economics more relevant to learners, educators, and the broader business community.
Deal!