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35% tariffs on BMW

By: Cactus Flower in ALEA | Recommend this post (0)
Tue, 17 Jan 17 8:21 PM | 58 view(s)
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Msg. 20704 of 54959
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Just a reminder about how these things work.

The US puts tariffs on imported European and Japanese cars. In response, the EU and Japan put them on imported American cars. So there's no international trade in cars. The only cars Americans can buy are made by US manufacturers. Other cars are priced out of the market. But American auto companies can no longer sell their cars outside the US either. So they must make their profits using expensive US labour off US purchasers, driving prices up.

Meanwhile, the Germans and Japanese don't put tariffs on cars exported back and forth between them and so secure the profits of the trade in cars made in low cost territories. In the long run, the US auto companies will end up uncompetitive.

Meanwhile, US auto jobs will increase. But other jobs - originally created by the money people used to save on cheaper cars - will be lost. Meaning the marginal benefit is non-existent.

Why do folks think Trump will succeed as an economist? We can already see he has no idea. He thinks tariffs generate a net benefit. Economic history provides many examples that the opposite is true.




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