Tariffs are 40 times less than sales tax

 

tariff cost 2018A whole LOT of news stories talk about adverse impacts of the 2018 “trade war” with China on U.S. consumers, and also how businesses will “suffer”.  We throw a fresh light on these two issues.

IMPACT ON CONSUMERS

US consumers spend 12 trillion dollars a year.  That’s 12,000 billion.  Not all of it is subject to sales tax, but if it were, and the rate were 8% as where I live, that would be around 960 billion dollars.  The TOTAL value of a 10% tariff on 250 billion of Chinese imports is 25 billion dollars.  This is one 40th of the sales tax.  Consumers aren’t actually going to notice.  They give 15 times that much to charity.

IMPACT ON BUSINESSES

Some businesses will be adversely affected.  Let’s establish that up front.  Nearly every research paper on cooperation since the 1980s has found that “tit-for-tat” is the most common reliable cooperation strategy.  Only a few strategies undermine it.  A good many papers study the “costs” of tit-for-tat.  The costs are the punishment of non-cooperators.  If someone doesn’t cooperate, then you get into the “tat” phase where you don’t cooperate with them, and this costs both of you.

But if you aren’t willing to suffer the short term loss, then the other side will continue to take advantage of you until you are bankrupt and their slave.  Hundreds of papers have shown this.  The idea there is some magic negotiating bullet that will produce cooperation without willingness to suffer costs of punishing the other side is a utopian fantasy which does not exist in the actual world, outside of ultra-liberal think tanks and dreamy Christmas movies.

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5 thoughts on “Tariffs are 40 times less than sales tax

  1. Or new trading partnerships are established leaving some previous ones out . New markets and expanding — most US companies have saturated the US markets and are expanding abroad

    A smaller percentage of the monies parked off shore have been repatriated than projected with the tax cut

    The US ‘s isolationist policy and reduction of aid coupled with support of right wing regimes may have a deleterious effect economically

    Empirically, US tariffs have never worked as intended even when the other partners needed our products

    As recall that approx 80% of the US GDP is comprised on Services and the US consumer spending accounts for a similar percentage of US GDP

    Supply chains are international in scope — auto, electronic , tech — one only need to look at the canceled plants for US and the BMW plant In Greenville SC for adverse effects of our trade policies which are being conducted by whim

    In considering you math, the trade deficits are not a major factor – stealing intellectual property is
    This also may lead to different geo-political alliances such as the one being created between China and Russia for a more “desirable “ world .

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