Post #2114: Wherein I ‘splain the Trump tariff formula.

Posted on April 5, 2025

 

That economy/tariff formula thingy.

People are completely misinterpreting that Trump tariff formula.

Allow me to ‘splain it to you.

Source:  Snopes.

 


What is that thing:

Legal issues aside — and I sure as hell hope there are some — this is a tariff formula that can be made permanent.  It can be updated periodically without requiring additional intervention by The President.  He can just state that (e.g.) this levy will be updated annually, or every N years.

It’s not a description of reality.  It’s not intended to be.

It is not a prediction of what will happen if such a tariff were imposed.  Or a realistic model of any import-export market or market for such goods in general.

Again, it’s not intended to be.

What is that formula is, is, it’s a proposed policy going forward:   If I’ve read it all correctly it says you propose to:

Raise (your citizens’s) prices for foreign goods (from a country) in proportion to (half) that country’s goods-trade surplus with the U.S.

(Half is not shown above, but was deduced — see Snopes for attribution (reference Snopes).  (Plus  some minimum of base rate of, I think, 10%.  Or something.  Everybody pays the vigorish, some pay more.)

We can debate the many, many drawbacks of tariffs set in this fashion.  And should.

Particularly because the penguins have revealed to me how they can update this from year to year with little effort.


Penguins mean permanence, you fools!

 

Here’s how I can see how Norfolk Island got into this. I’m making all this up, yet I’ve been there, data-wise, myself.

The Trump administration likely inherited the Norfolk Island error from whatever actual Federal Government accounting data source they used.  The explanation I heard is that this is most likely keyboard input error driven by drop-down lists.  They thought they clicked one of the many Norfolks that have ports, but (say once per 10K clicks) mistakenly hit Norfolk Island instead.  (Though, why that would be a choice on the menu, I do not know.)

The Liberal Media seem to be laughing at this (totally harmless) error in the tariffs as-published.

Nobody seems to realize that, once you adopt that formula as the basis, then as long as those underlying government accounts get updated over time (and they do), then you can automatically update your tariffs.

You can now easily make this permanent, with no additional effort on the part of The President.

(Except in times of Additional Emergency, as-declared by said President.)

So this becomes the baseline tariff.

For-ev-er.


The hhhpt test, or check now for a sharp inhation of breath.

Arguably the best piece of advice I got, starting out as an independent consultant, was couresy of Jon Gabel, who gave me the following advice on setting your hourly rate.  What he termed the hhhpt test.  If you mention your hour rate to a prospective client, and you do not hear a sharp intake of breath, then you have set it too low.

Permanent, large, arbitrary tariffs on goods, that only go away if the U.S. balances its trade separately with each and every country, individually.

Phhht.


The added policy wrinkle of feasible permanence.

My unfortunate task is to point out what this policy does.

If you can argue that the tariffs are permanent, then you can use that money to make your tax cuts for the wealthy permanent.

And if you succeed in doing that, then you effectively substitute sales tax for income tax.

And that, my friends, is a long-cherished policy goal of the American right.

I don’t agree with it.  I think it’s a pity they have to burn down the economy trying to achieve it this way.

But the bottom line, if successful, will be a partial substitution of sales taxes for income taxes.  Compared to an alternative world where enough Republican members of the Congress can’t stomach increasing the national debt in order to extend the Trump tax cuts, this allows them to get closer to the goal of eliminating income tax entirely, by using taxes on goods to offset the lost taxes on income.


Lipstick on a pig, or have you noticed the global trade war that hasn’t broke out?

At the end of the day, those Greek letters are just lipstick on a pig.  Meaning, I’m not even going to get into all the reasons economists and business people think this is bad, bad policy.  Zero doubt that this is a pig of a policy.  I mean, WSJ, “dumbest trade war in history” and all that.

But have you noticed the global trade war that hasn’t broken out?  How nobody is copying us, in the sense of enacting tariffs against all of their neighbors.  You can easily miss that through US-centric reporting.  But, e.g., the Chinese have not imposed additional tariffs on Canadian goods.  Nor vice versa.

Instead, all the tariff action has been countries reacting (appropriately) to U.S. tariffs.  What you have not seen is countries then going off to have their own tariff wars against their own neighbors.

So, if you want a quick reality test on how smart this tariff policy is?

Look at how many countries are following in our footsteps.

Nobody.  This is so insanely stupid that nobody is following our lead.

Let’s hope we eventually take a clue from that.