Personal Wealth Management / Expert Commentary

Trump's Tariffs

There has been recent talk on tariffs. Tariffs are always bad economics, but these tariffs aren’t nearly big enough to cause too much trouble relative to the size of the global economy. The totality of both US tariffs imposed on foreign and retaliatory tariffs imposed on the US come to amounts that are 15-20% of the tariff-able total. This gets you to a total tariff of about $100 billion dollars, which is a tax that some government will collect. This is way too small to have a real impact on an $80+ trillion global economy. Is it bad? Yes! Is it a negative? Yes. But, it’s a small negative.

Transcript

0:08
There's been way too much made about tariffs--
0:10
Tariffs are always bad economics,
0:13
tariffs aren't good,
0:14
tariffs are bad.
0:16
But these tariffs aren't nearly big enough,
0:20
and they're too easily substitutable
0:23
for them to cause very much trouble
0:25
relative to the size of the global economy.
0:28
The way to see that
0:29
is to think of these in terms of what they are,
0:32
the totality,
0:33
both U.S. tariffs imposed on foreign,
0:35
and retaliatory, imposed back on U.S.,
0:39
which come to, then,
0:42
amounts that are 15 to 20% of the tariffable total,
0:50
which gets you to a total tariff of about $100 billion,
0:55
which is tax
0:56
that some government will collect.
0:59
That's what it is.
1:00
It's tax that some government will collect.
1:02
When you get right down to that,
1:03
$100 billion global-tax increase
1:07
isn't really enough to cause a big problem
1:11
in what's an $80-trillion global economy.
1:14
It's way too small.
1:15
Is it bad? Yes.
1:17
Is it a negative? Yes.
1:18
But it's a small negative,
1:19
and it's even smaller than that,
1:21
because so much of this
1:24
is what can easily be substituted.
1:27
For example, on the one hand,
1:29
the Chinese tariffs against American soy beans
1:34
get sold through a broker to some foreign country,
1:38
like, let's say, to make up an example,
1:40
the Netherlands,
1:41
who turn around,
1:42
and for a brokerage commission,
1:44
but only a brokerage commission, that would be less than 1%,
1:47
sell it back to China.
1:49
Once you put something on a ship on the water,
1:53
it's cheap to move it almost anywhere,
1:55
and then other, of course,
1:57
is that automobile tariffs,
1:59
which are much discussed,
2:01
the American autos sold into China,
2:04
are not all,
2:05
but are almost all manufactured in America
2:08
by European manufacturers,
2:11
who will instead sell from Europe into China,
2:14
and then from America into Europe.
2:16
These tariffs will be much smaller
2:18
than anything anyone talks about,
2:20
which is one of the reasons
2:21
that, since they've been announced,
2:23
the stock market's
2:24
been pretty much doing nothing but going up.

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