Category Archives: Trade wars

HOW GOES THE WAR: PROFMEX™

Drs Olga Lazin and JAMES W WILKIE discuss PROFMEX ™ Material. We are social scientists focusing on Free trade blocs.

PROFMEXjust got on our Book Reading Coffee table news about defunct NAFTA. Here is our analysis of Paul Krugman’s OPINION today in the NYT: feb 12, 2019

Proof that The American Consumers, not foreigners, are paying the Trump tariffs! #the truth, #PROFMEX

By Paul Krugman opinion Columnist

President Trump spoke about trade with China at a cabinet meeting last month. CreditSarah Silbiger/The New York Times

Say this for Donald Trump: He’s provided us with many iconic quotations, which will surely be repeated in histories and textbooks for decades if not generations to come. Unfortunately, they’ll be repeated because they are extremely clear examples of bad ideas, idiotic at best.

In economics, the line you hear most is Trump’s declaration that “trade wars are good, and easy to win.” Coming in second is his assertion that “I am a Tariff Man,” coupled with the claim that foreigners pay the tariffs he has been imposing. Consumers lost.

Now, that last claim is something you can test. Over the course of 2018 Trump imposed tariffs on about 12 percent of total U.S. imports, and many of those tariffs have been in effect long enough that we can get the first read on their consequences.

How Goes the Trade War?

Consumers, not foreigners, are paying the Trump tariffs. by PAUL KRUGMAN

FACT_CHECKING tells us that the New York Federal Reserve released a paper, “The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bills, BUT instead, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall.

How did they get this result? The U.S. government collects data on the prices and quantities of many categories of imports. Many of these categories faced new tariffs, but many others didn’t. So you can compare what happened to the tariffed imports to the de facto control group of untouched imports; this tells you the impact of the tariffs.

Under Trump’s vision, in which foreigners would have paid the tariffs, what you would have expected to see is falling prices for tariffed goods, offsetting the tariff, so that consumer prices didn’t change. What you actually see, however, is no visible effect of the tariffs on import prices. So foreign suppliers don’t seem to have absorbed any of the tariffs, which were fully passed on to consumers; tariff-inclusive prices (Figure 1) have risen by the full amounts of the tariffs._____end.

VIDEO of Professor JAMES WALLACE WILKIE, at 83 years old, and Dr Olga M. Lazin on YOUTUBE, Jim’s channel james wilkie:

AND NOW THE HILARIOUS article by TUROW, I totally enjoyed:

I LOVE DAILY PNUT”s TUROW: “I spent eight years at a federal prosecutor, between 1978 and 1986, and in the 33 years since I have practiced as a criminal defense lawyer. The criminal bar is a small world, where there is frequent comic relief embodied in many appropriate sayings. One of my favorites is, “For the jury, it’s always opening night.” That means that the strategies and memes that get repeated in trial after trial, and the dynamics that we see all the time when human beings misbehave, are unfamiliar to the public who don’t realize they are watching a drama as ritualized and predictable as Kabuki.

That has been my view of the testimony before Congress last week of Michael Cohen about President Donald Trump, as well as Trump’s response. All I can say is that it might be opening night for the American people, but for those of us who inhabit this milieu, it’s all familiar and comes with predictable results.

Without trying to inalterably conclude that the principals in the current drama fit into these roles, the standard routine of criminal cases is that the government starts investigating someone whom they regard as a big-time malefactor, who we’ll call, for convenience and because it reflects the prosecutors’ views, “Big Scumbag.” As the government begins turning over rocks, they soon identify a confederate of Big Scumbag whose behavior is not all that much better, who we’ll call “Smaller Scumbag.” Because traditional criminal process logic, and the federal sentencing guidelines, reward cooperators with less prison time, Smaller Scumbag decides to tell what he supposedly knows about Big Scumbag.

At trial, Big Scumbag’s defense lawyers rip apart Smaller Scumbag:

“Q. You are a liar, aren’t you?“

  1. Yes, I am.“
  2. You are a crook, aren’t you?“
  3. Yes, I am.”

But prosecutors invariably win these cases. Why? Because they always make two big points to the jury in closing arguments.

“First,” the prosecutors say, “Smaller Scumbag is a scumbag. He is a liar and a crook. But you don’t need to take only his word for what he is saying. We wouldn’t ask you to believe someone like that on his own. He has a lot of corroboration. Look at all these documents, and the other witnesses who bear out exactly what Smaller Scumbag is saying.

“Second,” says the prosecutors, “we didn’t pick Smaller Scumbag as a witness. Big Scumbag did. Of course, we as prosecutors would like our witnesses all to be nurses and teachers and clergy-persons, people of unquestionable character. But you don’t find the members of criminal conspiracies in a convent. Criminals associate with other criminals to carry out their crimes. Who picked Smaller Scumbag to hang around with? Big Scumbag. Big Scumbag wants to tell you what a terrible person Smaller Scumbag is. And he’s right. But Big Scumbag worked with Smaller Scumbag for a decade. What does it tell you about Big Scumbag that he spent 10 years in the company of somebody he now tells you is an obvious liar and a crook? Either Big Scumbag is blind and naïve. Or he wanted to work with somebody like Smaller Scumbag, because—trumpets blare—Big Scumbag is a big scumbag! 

It works every time.

When Michael Cohen says the following, there are some rock certainties

“In July 2016, days before the Democratic convention, I was in Mr. Trump’s office when his secretary announced that Roger Stone was on the phone. Mr. Trump put Mr. Stone on the speakerphone. Mr. Stone told Mr. Trump that he had just gotten off the phone with Julian Assange and that Mr. Assange told Mr. Stone that, within a couple of days, there would be a massive dump of emails that would damage Hillary Clinton’s campaign. Mr.Trump responded by stating to the effect of “wouldn’t that be great.”

You can stake your life that the FBI and federal prosecutors have gotten all the phone records and testimony from Trump’s assistant that will back up what Cohen is saying. Cohen would never risk another prosecution for lying if there was any credible evidence to contradict him. ‘You don’t just have to take his word.’

So, much as Trump wants to dismiss Cohen as a “rat” and a “liar,” he’s stuck with the predictable and always devastating response: Trump picked him. Trump hired Michael Cohen as Executive Vice President and Special Counsel for the Trump Organization and after a decade of having Cohen work for him, Trump cannot maintain that he was unaware of all the unsavory things Cohen did, the threats and payoffs that were routine parts of his job. The checks are right there in black and white, showing that while Trump was in the White House he reimbursed Cohen for paying off Stormy Daniels. What does it tell you about Donald Trump that this was the company he was keeping, that his lawyer was Michael Cohen, that his campaign chair was an inveterate crook and convicted felon like Paul Manafort?

Cue the trumpets.”

Scott Turow is the author of ten bestselling works of fiction, including IDENTICAL, INNOCENT, PRESUMED INNOCENT, THE BURDEN OF PROOF, and the forthcoming, THE LAST TRIAL. His books have been translated into more than forty languages, sold more than thirty million copies worldwide, and have been adapted into movies and television projects. Follow him on Twitter @scottturow.

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Figure 1CreditAmiti et al (2019)

Figure 1CreditAmiti et al (2019)

These price hikes led to substantial changes in behavior. Imports of the tariffed items fell sharply, partly because consumers turned to domestic products, but also in large part because importers shifted their sourcing to countries that aren’t currently facing Trump tariffs. For example, a number of companies already seem to have begun buying goods they previously bought from China from Vietnam or Mexico instead.

These changes in behavior are the key to the paper’s conclusion that the tariffs have made America poorer.

Consider the following example: pre-tariff, the U.S. imports some good from China that costs $100. Then the Trump administration imposes a 25% tariff, raising the price to consumers to $125. If we just keep importing that good from China, consumers lose $25 per unit purchased – but the government raises an extra $25 in taxes, leaving overall national income unchanged.

Sign up for Frank Bruni’s newsletter

Get a more personal, less conventional take on political developments, newsmakers, cultural milestones and more with Frank Bruni’s exclusive commentary every week.SIGN UP

Suppose, however, that importers shift to a more expensive source that isn’t subject to the tariff; suppose, for example, that they can buy the good from Vietnam for $115. Then consumers only lose $15 – but there is no tariff revenue, so that $15 is a loss for the nation as a whole.

But what if they turn to a domestic supplier – say, a U.S. company that will sell the product for $120. How does this change the story?

Here the crucial thing is that producing a good domestically has an opportunity cost. The U.S. is near full employment, so the $120 in resources used to produce that good could and would have been employed producing something else in the absence of the tariff. Diverting them into producing what we used to import means a net loss of $20, with no revenue offset.

By the way, in practice any manufacturing jobs added by the Trump tariffs are probably offset by losses of other manufacturing jobs. Partly that’s because most of the tariffs are on intermediate goods – inputs into production, so that job gains in, say, steel are offset by losses in autos and other downstream sectors. Beyond that, the tariffs have probably contributed to a rising dollar, which makes U.S. exports less competitive.

Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.

Now, the numbers aren’t that big. The new paper puts the net welfare loss at $1.4 billion a month, or $17 billion a year; that’s less than 0.1 percent of U.S. GDP. But winning it isn’t. And the numbers could get a lot bigger if the trade war expands, say with a “national security” tariff on European cars.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

President Trump spoke about trade with China at a cabinet meeting last month.CreditSarah Silbiger/The New York Times

President Trump spoke about trade with China at a cabinet meeting last month.CreditCreditSarah Silbiger/The New York Times

Say this for Donald Trump: He’s provided us with many iconic quotations, which will surely be repeated in histories and textbooks for decades if not generations to come. Unfortunately, they’ll be repeated because they are extremely clear examples of bad ideas.

In economics, the line you hear most is Trump’s declaration that “trade wars are good, and easy to win.” Coming in second is his assertion that “I am a Tariff Man,” coupled with the claim that foreigners pay the tariffs he has been imposing.

Now, that last claim is something you can test. Over the course of 2018 Trump imposed tariffs on about 12 percent of total U.S. imports, and many of those tariffs have been in effect long enough that we can get a first read on their consequences.

On Saturday economists from Columbia, Princeton, and the New York Federal Reserve released a paper, “The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall.

How did they get this result? The U.S. government collects data on the prices and quantities of many categories of imports. Many of these categories faced new tariffs, but many others didn’t. So you can compare what happened to the tariffed imports to the de facto control group of untouched imports; this tells you the impact of the tariffs.

Under Trump’s vision, in which foreigners would have paid the tariffs, what you would have expected to see is falling prices for tariffed goods, offsetting the tariff, so that consumer prices didn’t change. What you actually see, however, is no visible effect of the tariffs on import prices. So foreign suppliers don’t seem to have absorbed any of the tariffs, which were fully passed on to consumers; tariff-inclusive prices (Figure 1) have risen by the full amounts of the tariffs.

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The New 30-Something

Figure 1CreditAmiti et al (2019)

Figure 1CreditAmiti et al (2019)

These price hikes led to substantial changes in behavior. Imports of the tariffed items fell sharply, partly because consumers turned to domestic products, but also in large part because importers shifted their sourcing to countries that aren’t currently facing Trump tariffs. For example, a number of companies already seem to have begun buying goods they previously bought from China from Vietnam or Mexico instead.

These changes in behavior are the key to the paper’s conclusion that the tariffs have made America poorer.

Consider the following example: pre-tariff, the U.S. imports some good from China that costs $100. Then the Trump administration imposes a 25% tariff, raising the price to consumers to $125. If we just keep importing that good from China, consumers lose $25 per unit purchased – but the government raises an extra $25 in taxes, leaving overall national income unchanged.

Sign up for Frank Bruni’s newsletter

Get a more personal, less conventional take on political developments, newsmakers, cultural milestones and more with Frank Bruni’s exclusive commentary every week.SIGN UP

Suppose, however, that importers shift to a more expensive source that isn’t subject to the tariff; suppose, for example, that they can buy the good from Vietnam for $115. Then consumers only lose $15 – but there is no tariff revenue, so that $15 is a loss for the nation as a whole.

But what if they turn to a domestic supplier – say, a U.S. company that will sell the product for $120. How does this change the story?

Here the crucial thing is that producing a good domestically has an opportunity cost. The U.S. is near full employment, so the $120 in resources used to produce that good could and would have been employed producing something else in the absence of the tariff. Diverting them into producing what we used to import means a net loss of $20, with no revenue offset.

By the way, in practice any manufacturing jobs added by the Trump tariffs are probably offset by losses of other manufacturing jobs. Partly that’s because most of the tariffs are on intermediate goods – inputs into production, so that job gains in, say, steel are offset by losses in autos and other downstream sectors. Beyond that, the tariffs have probably contributed to a rising dollar, which makes U.S. exports less competitive.

Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.

Now, the numbers aren’t that big. The new paper puts the net welfare loss at $1.4 billion a month, or $17 billion a year; that’s less than 0.1 percent of U.S. GDP. But winning it isn’t. And the numbers could get a lot bigger if the trade war expands, say with a “national security” tariff on European cars.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

Follow The New York Times Opinion section on FacebookTwitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman

On Saturday economists from Columbia, Princeton, and the New York Federal Reserve released a paper, The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bills, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall.

How did they get this result? The U.S. government collects data on the prices and quantities of many categories of imports. Many of these categories faced new tariffs, but many others didn’t. So you can compare what happened to the tariffed imports to the de facto control group of untouched imports; this tells you the impact of the tariffs.

Under Trump’s vision, in which foreigners would have paid the tariffs, what you would have expected to see is falling prices for tariffed goods, offsetting the tariff, so that consumer prices didn’t change. What you actually see, however, is no visible effect of the tariffs on import prices. So foreign suppliers don’t seem to have absorbed any of the tariffs, which were fully passed on to consumers; tariff-inclusive prices (Figure 1) have risen by the full amounts of the tariffs.

Editors’ Picks

We Love to Be Smushed

‘Hillbilly Elegy’ Had Strong Opinions About Appalachians. Now, Appalachians Return the Favor.

The New 30-Something

Figure 1CreditAmiti et al (2019)

Figure 1CreditAmiti et al (2019)

These price hikes led to substantial changes in behavior. Imports of the tariffed items fell sharply, partly because consumers turned to domestic products, but also in large part because importers shifted their sourcing to countries that aren’t currently facing Trump tariffs. For example, a number of companies already seem to have begun buying goods they previously bought from China from Vietnam or Mexico instead.

These changes in behavior are the key to the paper’s conclusion that the tariffs have made America poorer.

Consider the following example: pre-tariff, the U.S. imports some good from China that costs $100. Then the Trump administration imposes a 25% tariff, raising the price to consumers to $125. If we just keep importing that good from China, consumers lose $25 per unit purchased – but the government raises an extra $25 in taxes, leaving overall national income unchanged.

Sign up for Frank Bruni’s newsletter

Get a more personal, less conventional take on political developments, newsmakers, cultural milestones and more with Frank Bruni’s exclusive commentary every week.SIGN UP

Suppose, however, that importers shift to a more expensive source that isn’t subject to the tariff; suppose, for example, that they can buy the good from Vietnam for $115. Then consumers only lose $15 – but there is no tariff revenue, so that $15 is a loss for the nation as a whole.

But what if they turn to a domestic supplier – say, a U.S. company that will sell the product for $120. How does this change the story?

Here the crucial thing is that producing a good domestically has an opportunity cost. The U.S. is near full employment, so the $120 in resources used to produce that good could and would have been employed producing something else in the absence of the tariff. Diverting them into producing what we used to import means a net loss of $20, with no revenue offset.

By the way, in practice any manufacturing jobs added by the Trump tariffs are probably offset by losses of other manufacturing jobs. Partly that’s because most of the tariffs are on intermediate goods – inputs into production, so that job gains in, say, steel are offset by losses in autos and other downstream sectors. Beyond that, the tariffs have probably contributed to a rising dollar, which makes U.S. exports less competitive.

Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.

Now, the numbers aren’t that big. The new paper puts the net welfare loss at $1.4 billion a month, or $17 billion a year; that’s less than 0.1 percent of U.S. GDP. But winning it isn’t. And the numbers could get a lot bigger if the trade war expands, say with a “national security” tariff on European cars.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

Follow The New York Times Opinion section on FacebookTwitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman