Howdy folks. Yesterday President Trump announced “reciprocal” tariffs on almost every country in the world. Make no mistake, these tariffs are large. We’re using quotation marks around “reciprocal” because the tariff rates announced did not match up at all with any country’s actual tariffs imposed on American goods.
Instead, the tariff calculations were based on trade imbalances rather than actual rates. The administration tried to dress up the calculation with additional parameters, but those parameters canceled out. (Also, an elasticity of 4?!)
What is the administration thinking? Is it a negotiating tactic? If so, we doubt they have clear grievances with every single country on the list. Commerce Secretary Lutnick says employment is going to go up. We’ll see.
What can Congress do about it? They could vote to take away tariff authority. Senators Grassley (R) and Cantwell (D) have introduced legislation to have unilateral tariffs expire if not approved by Congress.
We discuss the reconciliation and the Senate’s budget resolution. Romina Boccia sums up our thoughts. No the current policy baseline, no to raising deficits even more.
When it comes to what to extend in the TCJA, Danny and Josh Rauh say extend the stuff that leads to growth, skip the parts that are mostly just spending via the tax code.
We recount the two conferences we hosted at Hoover last month, one from the Fiscal Policy Initiative and one from the Healthcare Policy Working Group. The former was depressing (a debt crisis is a real possibility!) and the latter was full of fun healthcare reform options.
Finally, we’ve just put a poll in the field about the Tax Cuts and Jobs Act that we should be able to discuss in two weeks. How much does the American public know what’s in it and what do they think about it? Stay tuned for an episode that covers the results.
What’s in the Episode
[0:40] - Trump’s tariff announcement
[2:06] - Danny talks about how border adjustment taxes are accounted for with the tariffs
[3:43] - The tariffs announced are actually based on trade imbalances, not tariff rates
[5:00] - Real world tariff rates versus alleged tariff rates
[6:50] - If you get the tariff revenue, then you aren’t helping out domestic manufacturers
[10:28] - Even if they go away, they will have long negative effects
[11:30] - What is the administration actually trying to achieve with the tariffs?
[14:14] - What can Congress do about these tariffs?
[15:29] - How bad does it have to get for the GOP to turn on Trump’s tariffs?
[17:33] - What should the Federal Reserve do in response?
[18:55] - How would we know if tariffs have a negative effect?
[21:46] - Discussing the Senate budget resolution
[26:00] - Why adopting the current policy baseline is a terrible idea
[29:00] - What we’re looking for when it comes to TCJA extensions and what Congress should consider extending
[31:30] - Hoover hosted two conferences from our Fiscal Policy Initiative and our Healthcare Policy Working Group
[34:21] - A lesson on state abuse of Medicaid provider taxes
[36:22] - Upcoming poll of the American public on the Tax Cuts and Jobs Act, following up on our tariff poll
[37:09] - Veto of the week: “Experience has shown that the trade of the East is the key to national wealth and influence. The opening of China to the commerce of the whole world has benefited no section of it more than the States of our own Pacific Slope.”
[38:22] - Send us your feedback or policy questions by emailing feedback@584vetoes.com or finding me on Twitter @TomVChurch
Share this post