Facts On Tariffs
The Market Ticker - Cancelled - What 'They' Don't Want Published
Login or register to improve your experience
Main Navigation
Sarah's Resources You Should See
Sarah's Blog
Full-Text Search & Archives
Leverage, the book
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. For investment, legal or other professional advice specific to your situation contact a licensed professional in your jurisdiction.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility; author(s) may have positions in any firm or security discussed here, and have no duty to disclose same.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must be complete (NOT a "pitch"), include full and correct contact information and be related to an economic or political matter of the day. Pitch emails missing the above will be silently deleted. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2024-11-07 14:16 by Karl Denninger
in 47 , 702 references Ignore this thread
Facts On Tariffs *
[Comments enabled]

One common refrain: They're inflationary.

That's a lie and any economist who says that knows he or she is lying.

This is math, not politics.

Let's definite this: A tariff is a tax on an imported good or service.  It thus does indeed raise the price of said good or service by the amount of the tariff.  This is easily understood and weaponized by the liars in the media and economic profession.  The media may not know the facts but all economists do.

In fact a tariff is exactly neutral to inflation as a whole.

Why?

Let's take an example.

There is a thing that has a price of $1,000 at the dock coming into the US.  The US Government slaps a $1,000 tariff (100%) on it, so now the cost at the dock is $2,000.  Assuming the business passes that through and neither attempts to profit from or absorb it, that is, they take no deliberate action to attempt to exploit it or be damaged by it, the entire $1,000 shows up on the shelf price.

That sounds inflationary.

It isn't.

Why not?

Because all inflation is caused by the emission of credit, and the US Government is running a fiscal deficit -- that is, emitting credit.  This is the infamous (and true) Milton Friedman statement: "Inflation is always and everywhere a monetary phenomena."

So where does the $1,000 go?

It goes directly to the Federal Government and reduces inflation generated by the federal government's deficit spending by the exact same amount the price increase at the consumer increases it.

Right as I write this CNBC is lying to you -- and the Press is about to do it too with their "questions" for Powell.

Again: Tariffs are a zero when it comes to inflation -- they neither help or hurt it as a function of imposing and collecting them because there is exact balance, to the penny, of both inflationary and deflationary forces.

HOWEVER, to the extent a tariff incentivizes jobs and production to come back to the United States they are deflationary and benefit consumers by lowering inflation pressure in that producing a good or service in the United States instead of overseas means all of the tax revenue generated by the activity happens here in the United States and tax revenue of course decreases the deficit and thus drives inflation down.