Analysis of current economic conditions and policy
Imagine: US Effective Tariff Rates with Another $100 Billion Imports Covered
From Goldman Sachs, “How Easy Is It to Win a Trade War?” (Stehn/Hatzius) today:
24 thoughts on “Imagine: US Effective Tariff Rates with Another $100 Billion Imports Covered”
Moses Herzog
Those Goldman guys sure know how to break things down don’t they?? (When they’re not being predatory to their own customers’ trades). Always remember kids, stay away from the “white shoe” firms. Or as some of the smarter investment Jedi say “Stay away from the Goyim side of the force”.
I’m assuming the rest of the paper is “premium content”?? If anyone can put a link up that doesn’t get them in trouble legally, would love to see it. This request coming from the guy who still hasn’t read the GS paper Menzie was benevolent enough to put up yesterday. But I would appreciate it.
Here is a site that those who are not Trump fans might take an interest in. Or maybe even Republicans who like to “stay woke” (isn’t that what the kiddies say now??) would want to read. There is a podcast, and even better yet there is an RSS feed (on the right side of screen with a dark grey link) that I will subscribe to right after I finish this comment. https://www.propublica.org/series/trump-inc
Benlu, the value of U.S. intellectual property rights is reflected in the U.S. leading the rest of the world combined in the Information and Biotech Revolutions in revenue and profit.
Benlu
Peak, Where is the link?
PeakTrader
Benlu, I had much better links years ago that listed the largest 500 global Information and Biotech firms by country, revenue, and profit. Over 50% were U.S. firms, and most of the 10 largest were American. I recall, seven of the top 10 biotech’s were American (although, Genentech was #2 after Amgen and was acquired by the Swiss), over 50% of the top 500 were American with a larger percentage in the top 100.
“I recall, seven of the top 10 biotech’s were American (although, Genentech was #2 after Amgen and was acquired by the Swiss)”
The Swiss multinational is called Novartis. Now Gilead is still U.S. based but very little of its profits stay here as they get routed to Bermuda via Ireland. Double Irish Dutch Sandwich. A tax evasion scheme that is WAY over PeakIgnorance’s feeble capabilities.
2slugbaits
PeakTrader Sorry, but your list is not about the number of patents, trademarks and copyrights. It’s about corporate size and profits. Not quite the same thing. In fact, not even close.
Of course most of the profits from your favorite companies get sourced in tax havens. Hey – you evade California sales taxes. They evade corporate profit taxes.
PeakTrader
American companies are my favorite companies.
The Liberal/Socialists you support in California are destroying people’s lives.
Tax collection is a criminal activity in California:
Around half of the world’s “Highly Cited Researchers” are based in the U.S., with the U.K. and China taking second and third place, respectively, according to a new report by Clarivate Analytics.
PeakTrader
The list (above) of high tech firms included older firms, like IBM and HP. My original list of global Information Age firms were firms started in the 1970s or later.
pgl
Nice as it makes my point that not all IP is created in the US. Of course a patent filing does not necessarily mean the IP has a lot of value. Yes I noticed where PeakIgnorance tried to claim it is the US companies that get all the profits but as usual he is wrong. And we do know that when a US based multinational is highly profitable – they park their profits in tax havens.
Ed Hanson
Menzie
Reading the small charts can be dangerous but I see effective tariff rate rising throughout the President Obama’s two terms. Am I reading the line correctly? And if so, would you explain it?
Ed Hanson: Changing composition and quantity of imports with constant tariffs could explain it; also (more likely) imposition of AD/CV duties.
Ed Hanson,
Thanks Menzie,
I will certainly take your word for it, but it would be helpful if you could either explain the formula for calculation of the US effective tariff rate or point to one. I searched and found nothing similar using those that title for the purpose of the charts.
Ed Hanson: The effective tariff rate was proxied by taking all customs tariff revenue, and dividing by total import value, as stated in the legend at the top of the right figure. This calculation is straightforward, except for what occurs under the proposed tariffs. Then one has to figure out how much tariff revenue would be collected; that in turn requires a stand on elasticities. Of all the estimates to worry about, I suspect this is the least controversial. (Note: don’t confuse with effective rate of protection).
Ed Hanson,
Thanks Menzie, that does help.
I could develop a formula, the simplest would use the new tariff rate on Chinese goods but that seems to be an unknown
So far public available news only state 50 billion in goods and then 100 billion in goods would be subject to tariffs.
But what rate? If a tariff rate is so large that it stop importation of the 50B and the 100B, then because these new tariff are only on these Chines goods, the effective rate remains approximately unchanged. So Stehn/Hatzius must have used a Chinese goods tariff which only diminished the value of those imports.
So anyway this long winded post results in a question, Menzie, do you have any thoughts on the actual tariff rate on those affected Chinese goods?
Ed Hanson: The 301 tariffs were at 25% for the first $50 billion. In other words, interestingly enough, these were not tariffs sufficiently high to be prohibitive (so that there would be “water” in the tariff rates, to use old lexicon). This was also remarked upon in the context of the 232 tariffs. That’s why I said there had to be an assumption made about the price elasticity of demand (and how much incidence, per my discussion earlier about terms of trade effects).
Ed Hanson,
Good, go with 25%. First back of the envelope. Assume Chinese goods and services total imports to US – 500 billion, total international g&s imports to US – 3000 billion. Assume that exceptions to new steel and aluminum tariffs mostly to our biggest importers has made that negligible in effective rate.
(150 x 25% + 2850 X 2.5%) / 3000 = effective rate = 3.6% {billions US$)
Reasonably close to above chart. Somehow I think a 1.1% effective rate increase is not a big deal, nor 33 billion more to treasury, The real problems remains bilateral between the US an China and the specific companies involved in the import and export.
Ed Hanson: In the absence of vertical specialization/global value chains, yes. A 25% tariff will induce large adjustment costs, and increase costs substantially as production fragmentation declines, or certain links in the chain shift to much higher cost economies.
Ed Hanson,
Again Menzie,
The adjustment due to the 25% tariff is limited to the transactions between the US and China. And of course, it goes without saying the adjustment cost will be generally higher for those producers who chose to be dependent on the other country’s consumption., and smaller for the producer which traded more globally. None of this should effect trade between the ROW and the US or ROW and China, except make it grow. What happens to price is depends more on other factors. In other words, because the change in effective tariff rate does not effect the ROW, the idea that it goes up has little if any pertinence.
One other note, the it is quite possible the outcome will be lower tariffs from China, IP protection in China that is demonstrable not just promised, and reduced dumping. That would not just mean a win for the US but also for China. After all free(r) trade, the sooner than later of liquidation of surplus and poor performing asset, such a steel over-capacity, and other’s increase respect for China for treating IP protection to international norms are good things. As I said, that would be at least as great for China, as can be imagined for the US.
Those Goldman guys sure know how to break things down don’t they?? (When they’re not being predatory to their own customers’ trades). Always remember kids, stay away from the “white shoe” firms. Or as some of the smarter investment Jedi say “Stay away from the Goyim side of the force”.
I’m assuming the rest of the paper is “premium content”?? If anyone can put a link up that doesn’t get them in trouble legally, would love to see it. This request coming from the guy who still hasn’t read the GS paper Menzie was benevolent enough to put up yesterday. But I would appreciate it.
Moses, MMMMMM???? Goyim? Bernie Madoff??? MMMMM????
Here is a site that those who are not Trump fans might take an interest in. Or maybe even Republicans who like to “stay woke” (isn’t that what the kiddies say now??) would want to read. There is a podcast, and even better yet there is an RSS feed (on the right side of screen with a dark grey link) that I will subscribe to right after I finish this comment.
https://www.propublica.org/series/trump-inc
Also, here is a great “New Republic” story, which shows you some of the Russian criminals Trump likes to launder blood-stained money for, when he’s not bribing porn stars’ silence.
https://newrepublic.com/article/143586/trumps-russian-laundromat-trump-tower-luxury-high-rises-dirty-money-international-crime-syndicate
World Intellectual Property Indicators 2016
http://www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2016.pdf
Benlu, the value of U.S. intellectual property rights is reflected in the U.S. leading the rest of the world combined in the Information and Biotech Revolutions in revenue and profit.
Peak, Where is the link?
Benlu, I had much better links years ago that listed the largest 500 global Information and Biotech firms by country, revenue, and profit. Over 50% were U.S. firms, and most of the 10 largest were American. I recall, seven of the top 10 biotech’s were American (although, Genentech was #2 after Amgen and was acquired by the Swiss), over 50% of the top 500 were American with a larger percentage in the top 100.
Anyway, here’s a incomplete list:
https://www.statista.com/study/40521/top-100-tech-companies-global/
“I recall, seven of the top 10 biotech’s were American (although, Genentech was #2 after Amgen and was acquired by the Swiss)”
The Swiss multinational is called Novartis. Now Gilead is still U.S. based but very little of its profits stay here as they get routed to Bermuda via Ireland. Double Irish Dutch Sandwich. A tax evasion scheme that is WAY over PeakIgnorance’s feeble capabilities.
PeakTrader Sorry, but your list is not about the number of patents, trademarks and copyrights. It’s about corporate size and profits. Not quite the same thing. In fact, not even close.
Here’s some info on biotech firms:
https://www.thebalance.com/ranking-the-top-biotech-countries-3973287
Of course most of the profits from your favorite companies get sourced in tax havens. Hey – you evade California sales taxes. They evade corporate profit taxes.
American companies are my favorite companies.
The Liberal/Socialists you support in California are destroying people’s lives.
Tax collection is a criminal activity in California:
http://adrianvanceshow.blogspot.com/2014/01/normal-0-false-false-false.html?m=1
https://mobile.the-scientist.com/article/50965/clarivate-ranks-most-cited-researchers-of-2017
Around half of the world’s “Highly Cited Researchers” are based in the U.S., with the U.K. and China taking second and third place, respectively, according to a new report by Clarivate Analytics.
The list (above) of high tech firms included older firms, like IBM and HP. My original list of global Information Age firms were firms started in the 1970s or later.
Nice as it makes my point that not all IP is created in the US. Of course a patent filing does not necessarily mean the IP has a lot of value. Yes I noticed where PeakIgnorance tried to claim it is the US companies that get all the profits but as usual he is wrong. And we do know that when a US based multinational is highly profitable – they park their profits in tax havens.
Menzie
Reading the small charts can be dangerous but I see effective tariff rate rising throughout the President Obama’s two terms. Am I reading the line correctly? And if so, would you explain it?
Ed
Ed Hanson: Changing composition and quantity of imports with constant tariffs could explain it; also (more likely) imposition of AD/CV duties.
Thanks Menzie,
I will certainly take your word for it, but it would be helpful if you could either explain the formula for calculation of the US effective tariff rate or point to one. I searched and found nothing similar using those that title for the purpose of the charts.
Ed
Ed Hanson: The effective tariff rate was proxied by taking all customs tariff revenue, and dividing by total import value, as stated in the legend at the top of the right figure. This calculation is straightforward, except for what occurs under the proposed tariffs. Then one has to figure out how much tariff revenue would be collected; that in turn requires a stand on elasticities. Of all the estimates to worry about, I suspect this is the least controversial. (Note: don’t confuse with effective rate of protection).
Thanks Menzie, that does help.
I could develop a formula, the simplest would use the new tariff rate on Chinese goods but that seems to be an unknown
So far public available news only state 50 billion in goods and then 100 billion in goods would be subject to tariffs.
But what rate? If a tariff rate is so large that it stop importation of the 50B and the 100B, then because these new tariff are only on these Chines goods, the effective rate remains approximately unchanged. So Stehn/Hatzius must have used a Chinese goods tariff which only diminished the value of those imports.
So anyway this long winded post results in a question, Menzie, do you have any thoughts on the actual tariff rate on those affected Chinese goods?
Ed
Ed Hanson: The 301 tariffs were at 25% for the first $50 billion. In other words, interestingly enough, these were not tariffs sufficiently high to be prohibitive (so that there would be “water” in the tariff rates, to use old lexicon). This was also remarked upon in the context of the 232 tariffs. That’s why I said there had to be an assumption made about the price elasticity of demand (and how much incidence, per my discussion earlier about terms of trade effects).
Good, go with 25%. First back of the envelope. Assume Chinese goods and services total imports to US – 500 billion, total international g&s imports to US – 3000 billion. Assume that exceptions to new steel and aluminum tariffs mostly to our biggest importers has made that negligible in effective rate.
(150 x 25% + 2850 X 2.5%) / 3000 = effective rate = 3.6% {billions US$)
Reasonably close to above chart. Somehow I think a 1.1% effective rate increase is not a big deal, nor 33 billion more to treasury, The real problems remains bilateral between the US an China and the specific companies involved in the import and export.
Ed
Ed Hanson: In the absence of vertical specialization/global value chains, yes. A 25% tariff will induce large adjustment costs, and increase costs substantially as production fragmentation declines, or certain links in the chain shift to much higher cost economies.
Again Menzie,
The adjustment due to the 25% tariff is limited to the transactions between the US and China. And of course, it goes without saying the adjustment cost will be generally higher for those producers who chose to be dependent on the other country’s consumption., and smaller for the producer which traded more globally. None of this should effect trade between the ROW and the US or ROW and China, except make it grow. What happens to price is depends more on other factors. In other words, because the change in effective tariff rate does not effect the ROW, the idea that it goes up has little if any pertinence.
One other note, the it is quite possible the outcome will be lower tariffs from China, IP protection in China that is demonstrable not just promised, and reduced dumping. That would not just mean a win for the US but also for China. After all free(r) trade, the sooner than later of liquidation of surplus and poor performing asset, such a steel over-capacity, and other’s increase respect for China for treating IP protection to international norms are good things. As I said, that would be at least as great for China, as can be imagined for the US.
Ed