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rish
@rish
Democrats and Republicans fully differ on whether Trump’s tariff policies help or harm the economy if implemented like he says Anyone with good, informed takes on this?
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tyler ↑
@trh
I’m not a fan of them in general, but from what I understand the best case scenario is that while it makes foreign goods more expensive, if there are somewhat readily available domestic alternatives, then while it will increase prices, revenue stays “here”.
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Scott Kominers
@skominers
That's not even necessarily the case. If foreign-produced goods are cheaper to produce (+import) than domestic alternatives (which at some level has to be true given that we're importing them now), then their equilibrium market price will still be lower than the domestic goods', even though both of prices are higher than they were before. So it's just a straight loss for consumers. This isn't quite right, but an intuitive heuristic is to think of both the local and imported goods prices going up equally by the amount of the tariff -- the ranking of which price is higher/lower doesn't change, but both prices are higher than they were before.
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@trh
Thanks for the extra clarity! I didn’t have the phrasing for it — your heuristic is helpful — but tariffs have never made sense to me because the money has to come from somewhere. Even if a foreign producer were “tariffed” out of the market, there’s not a real incentive for domestic producers to price any lower than a fraction below the foreign producer+tariff price, right?
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Scott Kominers
@skominers
Exactly
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