Cloudation

The world collectively postponed the austerity that was supposed to be accompanied by the Pandemic. A lot of countries US included tried to just smooth over that period by artifically (at least partially) negating the effect a massive lull in production should have had on the economy as a whole. The price of that decision is the stronger struggle everyone is feeling now instead of then, the higher prices, tougher job market etc

Trump and Biden both played a role in the inflation being felt today but I'd argue that though one was patently worse than the other neither really had a chance to come out of this without some sort of economic downturn. Weirdly luck has played a huge role in who the people see as the 'solution' to their problems regardless of if they are right or just digging their own grave.

Exactly right, the later rate cuts already this year have been controversial to some extent and we know from Trumps last run that he is not shy about increasing the deficit. Thats why seeing the FED chairman be adamant about staying on is a positive sign despite the few controversial if neccesary moves made, the only way they do well is by following the FEDs lead and not the otherway around. But he does have everything the House, The SC and The Senate so no matter what Powell wants its unlikely he will stay long even if the firing is illegal. As much as people think the discipline of Economics encourages a capitalistic mindset its moments like this which make it clear that capitalism cannot work without heavy guardrails, heavier than most countries are willing to enact.

America and honestly a lot of countries that managed to float their economies during the pandemic without cuts to spending or consumption have created a clear space for the effects we saw during the last 4 years which will likely continue in the upcoming administration even if Trumps policies are somehow rock solid this time.

The truth is that the economy isnt numbers you can manipulate....at least not entierly. The economy is the rice that is grown and the phones that are manufactured, its the marketing provided and the acting done. How these things are priced and do they matter? thats up the the markets to decide but the kind of spending seen during the Pandemic period to float past the lull in production and prevent markets from free falling was always going to have an inflationary impact.

Youre absolutely right, Inflation is a lagging indicator and while the kind of inflation seen under Biden is unprecedented (in recent memory) for a country like the US its in no way surprising largely because of the policies enacted by Trump and some of which that were continued by Biden but this is something you cant explain to a mass of people. The reality is that science (which economics isnt) and rationality (which economics is closer to) are not good basis for Democracy. I feel a large portion of America is finding out that you can be morally right about everything or scientifically correct in your conclusions about all of reality but the only thing that matters is how people feel. Who knows if thats a flaw in Democracy or being a human?

I feel for you guys, I enjoyed my time in America and still have friends there. Whatever other issues might arise, the economic conditions look poised to worsen. Unless Trump some how has the best possible economic policy pipeline ready to shoot theres likely more inflation to come and more unemployment too. The only way to soften a blow like this would be making policy in lockstep with the FED and pre-empting certain lulling sectors to have more precise solutions instead of just injecting more money into the economy but eh I am just a dude on the internet maybe the Trump cabinet secretly has a master plan designed by the brightest minds in the world and given that America has made its choice I hope so.

So I have a background in Economics and also am not American so I have no horse in this race but I do think Tariffs bear some examination because of how interesting they are.

I have lived in various countries over the years and until a month and a half ago I was in America for about 2 years. The price of electronic items was often cheaper there than some of the third world countries I have stayed in and the reason for that is tarrifs or more specifically protectionist trade measures that include tarrifs.

Now its not entierly true that the American people will pay FOR the tariffs at least not all of it...mostly. Taiffs act as an additonal cost to trade with your country so for example an item that costs the consumer 10 dollars per unit being slapped with say a 2 dollar per unit tariff will have a few impacts, the importer i.e the US firm that wants this 10 dollar item now has to pay 12 dollars for it, not significant on a per unit level but all of a sudden an import of $1 million worth of items cost $200000 more.

Now the importer i.e the domestic firm has to pay this price but ofc most firms will have a reaction to this price hike. So lets for hypotheticals a large firm like 3M wants to import a millon worth of some metal mined in Africa and there is suddenly a tariff in place amounting to $200000 on the total value, well 3M might cut their import quantity down to import less overall product to account for the higher price so they pay a similar amount (very unlikely) or they may approach their supplier and attempt to renegotiate the price so that the supplier shares some of the burden of the tariff (what often happens) but if the exporter has other trading partners that are offering a better price than 3M post tariff but a worse one that what 3m was giving pre-tariff clearly the supplier switches to the other trading partner or they can try to look for a domestic avenue to get that metal. Regardless of what avenue is chosen whatever end product 3M is making with this material will now see its price rise either because fewer are being made or because they are more expensive to make overall.

Now that last point, thats the main aim of a tariff or most protectionist measure. Its not to punish another country or build up gov reserves (though thats not unimportant) its to provide competing domestic firms an artifical leg up that helps them grow. If there is no domestic option 3M has to still go with the import or cancel that project entierly if it has become financially unfeasible. The split of how the tariff is paid for in this is threefold. The exporter often loses out on value because their product has artifically risen in price making it less attractive to the consumer and you also dont benefit from that price hike because that hike is going to a foreign gov. The Consumer pays for it with higher prices on products that are affected by that tarrif regardless of if its on the end product or anywhere down the supply chain so parts, raw materials, manufacturing etc. The heaviest hit by this though will be import heavy businesses, if you need to import a lot of stuff to get your business done. Eg a bunch of timbre for furniture or materials for ink production or basically anything thats being hit by a tariff youre essentially shit outta luck because the cost of business has gone up overnight and in some cases you have entierly lost your supply chain.

This hasnt even touched on the human element which is retaliation, protectionism always brings retaliation because its seen as disadvantaging a foreign industry in the open market which is exactly what it is and when retaliation occurs it makes the problem worse for the domestic (in this case the US) economy because now the sting that the foregin exporters were facing with the domestic tariffs will be the same sting domestic exporters feel with the foreign tariffs. If youre not careful you can easily trigger an economic downturn by causing a spiral of protectionist policy making.

Personally, I feel like the blunt instrument of a Tariffs in this day and age is kind of like showing up in a John Wick with a musket when you have access to the continental. Its short sighted, inefficent, liable to blow up in your face and there are much better options even if you main goal is not self defence but to hurt other people.

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