In the current discourse, there seems to be some amnesia with respect to when tax cuts occurred, why they occurred, and how they affected Federal budget deficits. Here is some data (read comments to this post).
The Budget Deficit Outlook, Post-TCJA and Omnibus Budget
Relative to before.
Source: CBO, Budget and Economic Outlook, April 2018 via Kaplan/NYT.
these estimates include macro feedback effects (i.e., dynamic scoring). So much for tax cuts paying for themselves (if anybody ever really believed that).
Are Soybean Tariffs Irrelevant?
I’ve seen the argument that China’s tariffs on soybeans will have no effect because the soybeans will be relabeled so that US soybeans go to Europe, and soybeans that previously went to Europe go to China, evading Chinese tariffs on US soybeans. John Cochrane makes this point. This seems to have surface appeal in a world where transport costs are zero, and there are no set-up costs to establishing new trading links. Still, I sensed that this conclusion must rest on some assumptions, including for instance infinitely elastic supply. I decided to investigate further.
What’s the End Game?
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:
Is There a Pattern? Trade Sanctions on China
From Bloomberg:
In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs.
Some Thoughts on Chinese Tariffs on US Exports: Tariff Incidence, Value Added, Exchange Rates
Reader Bruce Hall, opining on the impact of mooted Chinese tariffs on US hog and soybean exports.
As with pork, it looks as if the cost of food is going down for Americans as the Chinese bury their citizens in food price increases.
July Soybean Futures as of Noon, Today
Thanks, Trump!
Source: ino.
“Parts of floor polishers of subheading 8479.89.20; parts of carpet sweepers”
That’s HTS code 84799041, on the Section 301 hit list released today. Mr. Trump has the thanks of a grateful Nation for stopping intellectual property theft in this important category.
The entire list is here.
There’s a 30 60 day consultation period. Since around $50 billion of goods is targeted, China will likely impose proportional measures if and when retaliation occurs.
