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by bonzini
443 days ago
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> This will inoculate the economy against external supply chain shocks How so? There's hardly enough unemployment and there's also no incentive towards increasing the number of immigrant workers. Either suppliers eat the cost of the tariffs as the US administration says, or they don't and then everything becomes more expensive, but either way you have the exact same supply chain. |
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(1) Much like a carbon tax, when the economy becomes accountable for an externality (risk in this case, rather than carbon) it is priced in at every level, ending with consumers, whose demand is price-sensitive. Not all consumer goods of the same class will be impacted equally, creating a natural price advantage.
(2) Once the economy adjusts to these new risk-adjusted prices, POTUS can always offer clemency for specific goods and industries to respond to global supply shocks, providing a large buffer for the now-adjusted American consumer.
(3) Narrowly: it is exceedingly unlikely we won't see production onshoring in any capacity like you suggest. Economic analysis of the first-term Trump tariffs, for example, did indeed find production onshoring.