Thanks Rory. It will be on Briefing for Britain, but they can be very slow at putting things on the site which is why I am trying to develope a substack.
Unfortunately the editor I used to write for at the Telegraph was moved to a non-economic section. But even he only wanted 1000 words and this is about 2500.
If you have a connection to the senior editors at the Telegraph or the Spectator, please introduce me. Or better still, just send it too them and give them my contact details.
Catherine is by a considerable distance the best essayist on anything trade related.
However I am skeptical about the assertion: "Increasing tariffs would only cause inflation if the US imported everything it consumes - which it doesn’t." This is not binary, some prices will go up and while the impact may be less severe than most pundits are predicting it is not zero either.
If the money supply is stable or matches grow then their won’t be inflation.
There wasn’t in Trumps’s first term when he added 25% tariffs on Chinese goods. (graph below - big rise in inflation happened under Biden who also increased the tariffs on China as well as pumping money into the economy.) Without increased money supply people do have to choose between buying the new iPhone or paying the rent. (In the UK it is a choice between ‘heating or eating’ as our tariffs and VAT have always made iPhones much more expensive than in the US.)
The colossal QE and consequent explosion in money supply during Biden's term did cause a great deal of inflation. However we can not say that Trump's tariffs on China did not cause inflation, only that inflation was muted (CPI rose about 10%) during his tenure despite there being no QE and only modest money supply growth. The strength of the US Dollar will have mitigated for example. There are many constituent parts to price formation.
Assuming people won't buy smartphones because they are more expensive is beyond tenuous.
People will have to choose what to spend their money on, unless they have an increased amount of money to spend. They may be able to demand higher wages, they may not. If not, prices will be discounted to move stock. Traffis are only on the import price - so for most consumer goods the tariff is not as much as the rent, wages, taxes and profits of the retailer.
Although there will also be ways to circumvent the tariffs - I predict US airports will soon resemble UK airports which are really duty-free shopping malls with airports attached.
Catherine this is , by far, the best analysis I have seen of this whole "Tariff war" . Please try to get this in the broader press.
Thanks Rory. It will be on Briefing for Britain, but they can be very slow at putting things on the site which is why I am trying to develope a substack.
Unfortunately the editor I used to write for at the Telegraph was moved to a non-economic section. But even he only wanted 1000 words and this is about 2500.
If you have a connection to the senior editors at the Telegraph or the Spectator, please introduce me. Or better still, just send it too them and give them my contact details.
I know Derrick has some media contacts, but I haven't seen him on X for ages.
Catherine is by a considerable distance the best essayist on anything trade related.
However I am skeptical about the assertion: "Increasing tariffs would only cause inflation if the US imported everything it consumes - which it doesn’t." This is not binary, some prices will go up and while the impact may be less severe than most pundits are predicting it is not zero either.
If the money supply is stable or matches grow then their won’t be inflation.
There wasn’t in Trumps’s first term when he added 25% tariffs on Chinese goods. (graph below - big rise in inflation happened under Biden who also increased the tariffs on China as well as pumping money into the economy.) Without increased money supply people do have to choose between buying the new iPhone or paying the rent. (In the UK it is a choice between ‘heating or eating’ as our tariffs and VAT have always made iPhones much more expensive than in the US.)
The colossal QE and consequent explosion in money supply during Biden's term did cause a great deal of inflation. However we can not say that Trump's tariffs on China did not cause inflation, only that inflation was muted (CPI rose about 10%) during his tenure despite there being no QE and only modest money supply growth. The strength of the US Dollar will have mitigated for example. There are many constituent parts to price formation.
Assuming people won't buy smartphones because they are more expensive is beyond tenuous.
People will have to choose what to spend their money on, unless they have an increased amount of money to spend. They may be able to demand higher wages, they may not. If not, prices will be discounted to move stock. Traffis are only on the import price - so for most consumer goods the tariff is not as much as the rent, wages, taxes and profits of the retailer.
Although there will also be ways to circumvent the tariffs - I predict US airports will soon resemble UK airports which are really duty-free shopping malls with airports attached.