...and America will bear the long term fruits of this policies...instead of giving the profits to China and Europe...
No it won't
what's the difference between tariffs and VAT?
Tariffs are payed by importers. VAT is payed by everyone, if a product is made in Ireland and exported to the US, the US importer pays VAT on it. If I buy the same product in Ireland I also pay VAT on. VAT applies equally to domestic and foreign products.
Of course they are a central component, they have to assume elasticity parameters….both instantaneous elasticities and mature elasticities.The assumptions will swing the model results. The higher the elasticities, the more the tariff's will cut imports if any of the tariff is passed to the consumer. But like most peddlers of models Wharton’s parameters are hard to find:
‘The search results discuss the Penn Wharton Budget Model's projections for tariff effects on GDP, wages, and federal debt, and they reference that "revenues include an estimate of how demand will respond to higher prices."2 However, the specific elasticity parameter or methodology used to model this demand response is not disclosed in these materials’
Not disclosed, but the results are disclosed. The only problem is, like the Global Warming models, the real world results don’t reflect the ongoing claims. Inflation has not increased and GDP has not dropped.
LOL the Global Warming models are wrong are they. Do you want to ask any A.I tool of your choosing to list off Global Warming models that have been proven to be highly accurate by any chance.
But back to the Peen Wharton model. Inflation has not increased?. Here's the thing Penn Wharton didn't make any claims about inflation and as for GDP growth they didn't say it would drop, they said or that GDP wouldn't continue to grow but in 30 years time GDP will have grown by 6% less than it otherwise would have thanks to Trump's tariffs..
Once again we come back to the same place, a model can be made to project any outcome….reality is the test.
I’m reminded of the hundreds of Fed economists who couldn’t project the coming rampant inflation under Biden, even though there were all sorts of post Covid bottlenecks and profligate spending by the administration.
Translation, I'll believe the models, experts and economists when it suits me and dismiss them when it doesn't.
Here’s a simple way of looking at it. Add the cost of the tariff to the item and it’s now 15% more expensive. Ignore for the moment that very little actual inflation has been measured. For almost any product, there is a domestic substitute that is now 15% cheaper….which for many items would swing the buying decision.
Except Moz is now ignoring import competition elasticity. It's been observed that when a foreign product is tariffed the domestic alternative also increases in price because with weaker competition the domestic producers are free to raise prices without fear of losing market share. This has been observed multi times in the past when the US put tariffs on steel in 2002 and 2018, on washing machine in 2018 (dryers also became more expensive despite no tariffs placed on them due to domestic producers gaining increased pricing power in the market) and on tires in 2009.
So what does the foreign manufacturer do, accept his demand is 30% less than before. Or does he try to save some of that volume. He could go to other markets, but that will likely require price decreases as well.
The first thing any businessman, perhaps not any economist, will do, is lean on his suppliers. And if he does he will get concessions, which together with the concessions which the economics suggest he should also make, will pay for a good portion of the tariff.
Foreign producers have responded in numerous ways. Some have decreased prices partially absorbing the cost of the tariff, this is usually less than half of the full tariff but almost never the full amount. The bulk of the tariff will be payed by the importer.
They are going to other markets, price cuts may or may not be required depending on the market but in some cases it will be more profitable for them than partially absorbing the cost of tariffs. Regardless if the tariffs are causing less demand for their products in the US they simply will look for alternative markets elsewhere. They don't have any other choice.
Some simply have to accept lower market share because they can't absorb any of the costs of the tariff as the products they are selling sell at too small of a margin.
Others move production to other countries with lower tariff rates or exemptions.
And in some cases when there is no domestic alternative the foreign producers do nothing. Sell as is and the importing country just has to accept higher prices.
The world as a whole is almost certainly in worse shape with higher tariffs as explained in comparative advantage theory. But there are winners and losers in every scenario and the US with it’s relatively small dependence on foreign trade and important, profitable domestic market will be a winner.
No one is predicting a long term win out of this for America. But also this zero sum view of the world where one side has to win and one side has to lose is not a good thing.
She left in January 2025 and now moved back to the USA on the quiet in January 2026.
Mike why do lie so much?. She want back to the US on a two week visit to see her family and then subsequently left again.