[bruce511]

Like most things in life, tarifs can be used well, or used badly.

Canada's Dairy Tariff is specifically designed to protect a specific local industry, which exists, is of national interest to keep, and which could come under threat from cheap alternatives imported from abroad. It's specific, targeted, and serves a valuable purpose. They have been in place a long time, and provide a stable trading environment making the future easier to predict.

Trumps tarrifs are the complete opposite. He could have done tarifs well, but he's lazy and so opted for "easy" instead. By tarrifing countries you mix all industries together.

For example coffee. The US imports 99% of their coffee. The local coffee industry is tiny, and limited to Hawaii. There's no national interest, no local jobs, nothing. Tariffing coffee just makes it more expensive.

No one is planting coffee trees. Partly because the US has the wrong climate, but also because growing new trees (or building a factory) takes years, and a lot of investment. That means confidence that the situation today will last long enough to get a return.

In truth the tarrifs seldom make it past the weekend, or a couple weeks, then they're suspended. The administration openly admits they're negotiating "trade deals". So, I can't invest anything based on current tarrifs because they're very impermanent.

This nonsense is not about whether tarifs are good or bad. This is about how they gave been done (which is epically badly, and stupidly.)

On the upside a generation of future kids will learn about this, and how doing the right thing badly is worse than doing nothing at all.

[eru]

> Like most things in life, tarifs can be used well, or used badly.

I've yet to see a good use of tariffs.

[acdha]

The most common one is protecting defense-related industries: for example, things like steel, weapons, and automakers are protected in most countries which have them because in the event of a war governments want to have domestic industrial capacity. Microprocessors have gotten a lot of attention here and I think software isn’t far behind, too.

You might not agree with that politically but I think the logic is defensible and discussion should be around the bigger picture of what else is done to support key industries or the rate structure rather than whether it should exist conceptually.

[eru]

The government could directly pay for domestic industrial capacity, if they want that. Recipients would get money for capacity, not for actual output. (And no tariffs would be necessary.)

Below is a sketch of a keyhole solution to this problem, that would be cheaper than tariffs and cause less disruption to the overall economy:

Recipients could prove that they have capacity either directly by just pointing to their output. Or if they want to claim standby capacity and want to get paid for that one as well, there would be randomised drills every so often where the government asks industry to produce a large quantity of the relevant items on short notice. Anyone who fails would forfeit a huge bond.

To give more details: suppose we want to make sure there's enough capacity to produce one million artillery shells per year. The government would auction off the capacity obligations to the lowest bidders. Companies that already produce the relevant items anyway would presumably have lower costs in fulfilling these obligations, thus they would be the primary bidders. But there might be some companies who operate purely on standby and don't keep a production running.

Being subject to a randomised production drill would be a huge expense, even if the government pays for the output, because of all the fixed costs you have in actually turning on unused capacity, even if only for a short time. But if the drills are truly randomised, insurance companies would really love to insure against them to spread out the load. Insurance companies could also insure against failing the challenge, and that would turn the insurers into private sector inspectors, because they'll want to make sure they don't undercharge companies for the risk of failing to meet their obligated capacity.

(See https://en.wikipedia.org/wiki/Catastrophe_bond for why randomised risks that are independent of the state of the general economy are so beloved by investors.)

If there's not much domestic production, then keeping standby capacity would be more expensive for the companies and thus for the government. Conversely, paying for standby capacity is a subsidy for the fixed costs of the relevant industries. (However it's a very targeted subsidies, because it goes to the lowest cost bidder. It's not sprinkled indiscriminately like a watering can.)

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About defense related tariffs: putting tariffs on your closed allies like Canada and the rest of NATO doesn't make any sense. Steel produced in Canada is as good as steel produced in the US when it comes to defense. (Actually, it's a bit better in some respects, because Canadian steel workers don't have nearly as much political clout in the US as American workers and unions, thus the administration can't be blackmailed and coerced by them as easily.)

Even worse: the US administration allegedly wants to pivot to containing PR China and protecting Taiwan. Putting a 32% tariffs on Taiwan itself and 24% on key regional ally Japan is rather counterproductive.

But I think we both agree that Trump's tariffs were and are stupid, and we are discussing the best case for tariffs here.

So in the best case, it would still be silly to put defense-motivated tariffs on your closest allies.

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Another addendum: the mechanism described in the first part might not work so well for software, because it's not standardised and has practically only fixed costs, no variable costs.

However, you could address that with other customised policy. Eg requiring open source software (especially when it's bought from overseas), and looking for specialised mechanisms for locals to demonstrate maintenance skills on standby or so.

[johnnyanmac]

The US has (has?) a huge tarriff, something like 200%, on Chinese EV's. This in theory would be good because it gives American manufacturers a chance to catch up and giving them a huge advantadge for selling to American customers.

in practice, it didn't work because the US really can't decide where it wants to go with EV's. Fighting over standards, some trying to keep holding things back to sell ICE vehicles, etc. Inflation also didn't help, so a lot of cars just blew up in cost. So because of the indeisive industry, the tarriff is just a safeguard instead of an opportunity.

[eru]

> This in theory would be good because it gives American manufacturers a chance to catch up and giving them a huge advantadge for selling to American customers.

That's the tired old 'infant industry argument'. It's just as bad now as it always has been. Compare also Brazil's ill-fated attempt at creating a home-grown computer industry.

> in practice, it didn't work because the US really can't decide where it wants to go with EV's. Fighting over standards, some trying to keep holding things back to sell ICE vehicles, etc.

I'm not sure who you mean by 'the US'? Producers and consumers of EVs should make their choices.

> Inflation also didn't help, so a lot of cars just blew up in cost.

Inflation is a general rise of the price level. If both input costs and prices you can charge to customers go up in proportion, inflation doesn't make a difference. Just like moving from metres to yards doesn't make the distance between London and Paris larger.

[worik]

Any Canadians here to comment on the milk tariff policies?

I have spent ten days of my life in Canada and I learnt of the tariffs by news reports concerning people driving to USA, loading up on milk, coming home.

Tariffs are not always stupid. But in most cases there is a better alternative.

E.g. Canada could subsidise domestic milk producers. (We used to do that in New Zealand)

There is a lot of nonsense talked about economics ("tariffs always bad" is an example) because there are strong incentives at work for the actors. It makes it very difficult for policy makers to have good, responsive, effective economic policy.

Money and politics? What could go wrong....

[bruce511]

Naturally individuals can cross the border and get cheaper stuff. But in the grand scale of things, that's irrelevant.

IMO tarifs are preferable to subsidies. Subsidies encourage over production, plus still places the industry at risk. Tarifs just incentivize purchasing local. Plus for whatever revenue there is, it's an income to govt coffers. Whereas a subsidy is an expense. And ultimately the cost is born by the consumer of that product, not the wider tax base.

So, well targeted, it's a more effective tool than a subsidy, and much less prone to waste or corruption.

Put another way, a tarrif is much cheaper than a subsidy (and tarrif makes for a better outcome.)

[growlNark]

> Subsidies encourage over production

That's largely acceptable, and certainly preferable to underproduction, for resources that we simply can't do without. Dairy was (and still is) considered one of those resources as a superfood. Now maybe milk might not hold up anymore as being so critical to childhood nutrition (though I'm skeptical), but I think the reasoning behind it makes sense.

> Tarifs just incentivize purchasing local.

Sure, they also incentivize not eating. But commodification of basic resources is nothing new to americans, I suppose.

Some things are worth everyone pitching in for. Tariffs place the burden of living here on the individual. I don't really see any benefit from this.... fuck local businesses if they can't compete. The entire pitch of living here is that we'll let the market determine every aspect of our lives; why would we not double down when it came to letting businesses fail?

[throw0101d]

> E.g. Canada could subsidise domestic milk producers. (We used to do that in New Zealand)

Like the US does? Isn't that just a race to the bottom then?

The Canadian supply management system means that those that purchase milk pay the amount needed to keep the Canadian dairy industry afloat. If you don't buy milk you don't pay.

With subsidies everyone pays, regardless of whether you use the product(s) or not.

Of course subsidies make the price cheaper, which helps with cost of living, which can be quite progressive (and often children are the ones that drink the most milk).

Further, the US subsidies milk even though its consumption has been falling for decades:

* http://www.ers.usda.gov/amber-waves/2022/june/fluid-milk-con...

Which solution is better / "best"? I don't know.

(Am Canadian.)

[3vidence]

The supply and purchase of Dairy in Canada is centralized through the government.

Government sets a supply goal and buys that amount from farmers and then resells to the grocers / public.

It's been this way for a long time. The tarrifs are there to control for a case of oversupply in the market, but I also seem to remember that those supply targets haven't actually been met in a single year so the tarrifs effectively don't apply.